Market Direction Is Back To Up for Mar 27 2013

I heard some comments today on TV where some analysts called the market direction bizarre. Perhaps that might seem to some like a good word to describe the index. I think the Market Direction is behaving as expected since the S&P 500 continues to flirt with setting a brand new all time high. Obviously the bull market is strong but investors are jittery. On the one hand they want to be there for higher prices in stocks but on the other any hint of a possible correction and they want to be out. It’s a case of trying to “have your cake and eat it to.” It’s a tough strategy to fulfill but while investors jostle here and there, those of us into options are doing incredibly well in the present roller coaster market direction.

The continued see-saw effect keep the market makers on their toes and they are having to adjust put and then call premiums continuously to keep up with the constant change in the market direction. Nightmare for them because every penny counts, but wonderful for Put Selling and trading within the IWM ETF and the Spy Put Options.

Market Direction Action For Today

One of the more interesting pieces of news came from Buffett when Berkshire Hathaway Inc. said it would convert warrants into common shares, which could potentially make Berkshire one of Goldman Sachs’ largest investors. Berkshire Hathaway “A” shares rose 1.2 % while Goldman was up 0.3 %.

On economic news we had mixed reports on the US economy. U.S. home prices showed strength in January with the S&P/Case-Shiller home price index for 20 cities rising 8.1% over last year which was above expectations.

Meanwhile durable goods orders in February rose 5.7 % above expectations but analysts pointed out that if transportation orders were removed then durable goods fell half a percent missing expectations.

Finally the Conference Board’s consumer confidence index slumped to a reading of 59.7 which was down sharply from a revised reading of 68 in February and it was well below expectations.

Canada’s Big 6 Banks

In Canada, the Office of the Superintendent of Financial Institutions announced that Canada’s six biggest banks were identified as “domestic systemically important banks” meaning they are now classified as too big to fail. I always thought Canada’s 6 banks were too big to fail so this didn’t surprise me and obviously it didn’t surprise any investors as the bank stayed strong throughout the day and RY Stock and TD Stock both moved up 0.3 %.

Barrick Gold Stock

Finally just to mention that Barrick Gold Stock (ABX Stock) fell 1.1 % today. I will put an article shortly to explain my Put Selling strategy on ABX Stock. I am pretty bullish here on ABX Stock but more on that in a separate article.

Market Direction Closings

The S&P 500 closed at 1563.77, up 12.08 points and the Dow closed at 14559.65, up 111.90 points. The NASDAQ closed at 3252.48 up 17.18.

Market Direction Technical Indicators At The Close of Mar 26 2013

Let’s take a moment now and review the market direction technical indicators at today’s close on the S&P 500 and view the next trading day’s outlook.

Market Direction March 26 2013

 

For Momentum I am using the 10 period. Momentum is back positive and climbing following today’s big move higher in market direction.

For MACD Histogram I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) is still negative although not as low as yesterday and the sell signal remains active.

The Ultimate Oscillator settings are Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months.

The Ultimate Oscillator is still positive and is back climbing following yesterday’s pull back. While the move higher is modest it is still in the right direction.

Rate Of Change is set for a 21 period. Rate Of Change is still positive and continuing to push higher indicating that investors are buying into this push higher today.

For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is still signaling the market direction will be lower later in the week. Another up day though and the Slow Stochastic may give a buy signal.

For the Fast Stochastic I use the K period of 20 and D period of 5. These are not default settings but settings I set for the 1 to 3 month S&P 500 chart when it is set for daily. The Fast Stochastic is also overbought and signaling that the market direction is back to up. It also issued a buy signal today.

Market Direction Outlook And Strategy for Mar 27 2013

Yesterday the market direction technical indicators were split with 4 pointing to more weakness and only 2 pointing to the market pushing higher. In my comments yesterday I indicated that I would not be surprised if the market direction tried to push higher today and close off the lows for the day or in the green. I did not expect such a big rally, but just as we have seen in January, February and earlier this month, when the market direction looks finally set to pull back harder and put contracts bought outnumber calls on the market, the market direction pushes higher.

This must be frustrating to the bears and all those who cannot believe that the market direction can keep trying to move higher. I do believe we will see a correction in the markets, but I don’t think it will be right now. The market direction higher has shown amazing resilience against all kinds of odds and some difficult data and events. That is often the case though with bull markets. Once everyone is on board, that’s when it will be time to leave.

The market direction outlook for tomorrow then is for the market to try to put together some follow through. There are still doubters among the market direction technical indicators but right now Rate Of Change has led the way through much of this weak period. By staying sideways it has advised investors that while there has been weakness in the market direction, investors have been busy buying stocks using this weakness to load up. Therefore while the traders have been busy you can be sure that a lot of institutional investors have picked up shares of many stocks that pulled back. Market direction then remains higher and as before weakness is a chance to do more Put Selling. The cautious stance I returned to last week is ended and I will be applying more capital in the trades that are sure to present themselves ahead.

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