Market Direction Outlook For Feb 28 2013 – Fed Juices Market Higher

Market Direction today was on fire. The comments from Fed Chairman Ben Bernanke juiced the markets. At some point investors will have to wonder how much more the Fed can do to keep pushing assets higher. Nonetheless today the Dow transports were up 3% and the Dow is less than 90 points away from its all time high from 2007. The S&P 500 is just as close. While it may be exciting for investors to see the market direction jump with such gusto, I believe caution has to be exercised. At some point the market direction will return to a more normal temperament but until then we have to trade what we see and that is presently a climbing market.

There is no real wall of worry here as the Fed chairman has given a clear signal that low interest rates and the Quantitative Easing programs are here to stay until “the economy heals” as Mr. Bernanke put it.

There is no need to go over the market direction action for today, as it was all up.

Market Direction Closings

The S&P 500 closed at 1515.99, up 19.05 points and the Dow closed at 14075.37, up 175.24 points. The NASDAQ closed at 3162.26.

Market Direction Technical Indicators At The Close of Feb 27 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 Feb 27 2013

 

For Momentum I am using the 10 period. Momentum is still negative but ready to turn back to positive.

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 signaling market direction is lower despite the big jump, but it did move higher.

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 now neutral so any buying tomorrow will turn it positive.

Rate Of Change is set for a 21 period. Rate Of Change is back positive on the market direction moving higher.

For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is somewhat oversold but it now signaling that the market direction is back to 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 no longer oversold and indeed it is showing that the market direction has shifted back to up as well.

Market Direction Outlook And Strategy for Feb 28 2013

The past two days has seen a complete reversal of the sell-off and today some of the move higher was caused by short sellers buying back their positions. The S&P 500 had the largest put positions since 2007 among traders. Losses will be high for those who thought the market was poised to pull back dramatically.

The market direction outlook is for some weakness but overall the market will want to continue to push higher now. There is a distinct belief among many investors that the market direction is being supported by the Fed policies and that would seem to be the case. However I have learned that it always pays to stay watchful. I still prefer my strategy of staying invested by cautious and selling puts against stocks that have dipped in value.

There is no doubt that this most recent sell-off was seen by many investors who had not got into the market at the start of January, as the best opportunity to get into the market. They took full advantage and are prepared to push stocks higher. I am glad to be along for the ride but through my strategies I don’t plan to hold positions for long. My strategy is short-term trades and closing for profits when they appear.

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