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My Market Direction outlook yesterday for the S&P 500 was for the markets to start weak and then move higher but trend sideways as the extreme overbought condition of the markets gets worked out. This means that opportunities here and there should be watched for, but I don’t believe there is any need to jump in with both feet. But then other than severe drops in the overall market direction, I have never felt it good to jump in with both feet. I prefer a slow and steady approach to committing capital to trades. That’s why I am always on the lookout for a good trade to apply my strategies to from simple Put Selling through the everything from the Cry Baby to the Shark Trading Options Strategy.

Today’s action is in line with what is to be expected.

Market Direction Action Intraday

Intraday the S&P 500 shrugged off the Apple Stock news and moved higher out of the gate. With the eye on the prize as it were the market direction moved higher quickly and hit 1500 which seemed to amaze the folks on CNBC who immediately talked about the “new bull” in equities. I wonder what happened to the old bull?

At 1500 the S&P pulled back. This is only natural as the market is very overbought and the advance decline line continues to point to a drag on the market. Meanwhile the pundits are back with their “surprise” announcement that the Dow Theory has issued a new buy signal. How can anyone invest based on these types of indicators? Isn’t this a little late to the party?

Market direction Jan 24 2013Market Direction intraday on Jan 24 2013

Market Direction And Earnings

Lots of stocks in the news, but I think a lot of investors are not aware of three important aspects of today’s markets.

1) Whenever analysts lower their expectations, stocks in general tend to beat those expectations. This past quarter is a good example. Of the stocks that have reported so far, 68% beat the earnings estimates while 16% missed them and 16% met them.

Statistics show that investors buy into the belief that companies are doing well based on how well companies do at beating estimates. Investors do not care that earnings estimates were lowered. Therefore with a full 68% of companies beating estimates, no matter how many times they have been lowered, the market direction is bound to push higher.

2) Market direction is influenced by many factors. Just because market direction is climbing steadily does not mean that all stocks have recovered. In fact, a lot of stocks have never recovered from the losses of 2008 to 2009. Instead other stocks in the index are pushing the indexes higher overall. A good example will be Apple Stock, in my opinion. The NASDAQ led the entire market recovery from the bear of 2008-09. That leadership through is ending as the likes of Apple Stock and Intel Stock are being beaten lower by stock holders. To my way of thinking I believe the financial sector and housing will take on that lead role and replacing the tech stocks leadership.

3) Last has to be that caution in investing is always warranted and that the best way to stay invested is to have solid profit-making strategies that can keep adding to a portfolio no matter what the market direction. In my portfolio for example, I don’t care how the market direction moves as I have strategies that work in any environment including sideways, but I always stay cautious. Investors need to focus on strategy and learn how to profit no matter what the market direction throws at them. This means if investors want to chase stocks like Netflix and the like, they should have no problem as long as they have in place strategies to protect themselves and profit when the trade turns one way or the other.

Market Direction Outlook Intraday

My outlook is the same. The market direction technical indicators are advising that the overbought condition has to be worked out before the market direction will push a lot higher. For that to happen the market can stay sideways for a couple of days. I expect the S&P will add a couple of points but to stay fairly flat as it did yesterday until the overbought condition is reduced. Once that happens I am expecting the market direction to resume its relentless move higher.

Internal Market Direction Links

Market Timing Articles Index

How I Use Market Timing

Understanding Short-Term Signals

Various Market Timing Systems

Market Direction Candlestick Daily View (Members only)

Market Direction Portfolio Ongoing Trades (Members only)

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