Market Direction today was disappointing. After such a big up day on Monday, the markets need follow through. It doesn’t matter whether the follow through is just up a few points, but it needs to show strength to confirm that yesterday’s move higher has staying power. Today’s market direction action continued to show lack of confidence as investors remain worried about the fiscal cliff, Europe and China.
On the other side of the picture HP has pretty well imploded at this point. As well Apple Stock closed down and Intel Stock fell further closing at $19.51 setting new 52 week lows. Yet the NASDAQ managed to post a very small market direction gain and its technical outlook is the same as the S&P500. This is a good sign for the NASDAQ and for the market direction continuing higher, in general.
Market Timing Technical Indicators
Despite the weakness in today’s market, the market timing technical tools are continuing to improve which is a good sign for market direction moving higher..
For Momentum I am using the 10 period. Momentum is still negative and today’s selling has turned it lower from yesterday but not low enough to convince me that the market direction outlook from yesterday has changed at all.
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 but it is rapidly pulling higher. If the market direction can move higher from here MACD will turn positive and issue a buy signal. This will be an important signal worth watching and acting on.
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 when determining market direction.
The Ultimate Oscillator is positive today despite the selling. There remains enough strength in this climb in the Ultimate Oscillator to push it further into positive territory. Presently the Ultimate Oscillator is signaling market direction is up.
Rate Of Change is set for a 10 period. Rate Of Change is still negative but it is up significantly from yesterday. If there had been less selling the Rate Of Change indicator would have turned positive today and also signaled market direction up.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is continuing to point to higher prices late this week and possibly into next. It too is still signaling market direction up.
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 confirming the Slow Stochastic. It is showing real strength in a short-term movement for market direction to be higher. Much of that strength came in the last few minutes of trading today which pushed the Fast Stochastic into a more bullish signal.
Market Direction Technical Outlook
Today’s downside market direction action has not broken the market direction uptrend that started yesterday. The market direction uptrend remains intact and the market timing technical indicators I use are clearly moving in the right direction. MACD remains the key to this uptrend. If it turns positive then the market direction uptrend should last longer and possibly push to the 50 period Moving Average which is where I believe the rally may end.
Market Direction Chart of the Dow Jones
The Dow Jones market direction closed down slightly today and remains below the 200 period moving average. The 200 period is within striking distance and could be crossed as soon as tomorrow. Today’s action may seem a bit bearish but another day below the 200 period can help to build additional support. The selling today though where at one point the Dow was down 80 points shows how nervous investors are and also is a warning that this is just a rally in market direction.
Market Direction Outlook And Strategy
The fiscal cliff has many investors and businesses deeply concerned. US companies are slashing investment plans at the fastest pace since 2008 and some are announcing layoffs again. If you recall the market timing system based on the US Initial Unemployment Insurance Claims, an increase in unemployment is not positive for stocks. As well, Bernanke’s comments today, about the Fed not being able to assist in softening the fiscal cliff didn’t help stocks and of course Greece is back in the news as is France and Europe in general. It is obvious to all that Greece will not meet their targets or any of the targets set by the ECB or the IMF yet it looks like further bailouts will continue.
Meanwhile housing starts in October rose 3.6 per cent over revised figures for September which beat analysts targets. Building permits were down slightly by 2.7% after an incredible 30% rise in September from the same period a year prior.
All of these statistic show that the US economy is certainly not collapsing but is showing signs of stress. My strategy has not changed at all. I continue to watch for Put Selling opportunities but until the market direction changes and we see higher highs and higher lows in the stock market, this market direction rally is nothing more than a short-term rally which means that cash should be raised and for those holding positions like my friend William with his Market Direction Portfolio, use a stop-loss.
The Trader’s Almanac indicates that the week before Thanksgiving the Dow has been up 15 of the last 18 years, but historically it was profitable for investors to be long stocks going into Thanksgiving and exiting stocks the week after.
This is a short week with a long weekend and often that is bullish for stocks especially at this time of year. Technicals still show that Market Direction for tomorrow remains up.
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