Market Direction Outlook For Feb 6 2013 – Cautiously Bullish

Market Direction today certainly did not follow my outlook for more weakness! The rally back was impressive although the Dow failed to close at 1400. Mind you 1400 is really more a symbolic number than a significant financial one.

Market Direction Action Feb 5 2013

Obviously a lot of investors felt that the selling yesterday was overdone. Despite the market direction closing yesterday on the lows of the day, the market bounced back today and as soon as the bounce started investors jumped back in, picking up stocks that had just been dumped yesterday. The ISM non-manufacturing index fell to 55.2 in January from 55.7 in December but since it topped expectations of a reading of 55 investors took heart. As well, yesterday’s European debt fears of spiking bond rates in Italy and Spain subsided today as it seems this was a short-lived affair.

Dell Stock rose 1.1% after it confirmed rumors that the company will be taken private at $13.65 a share. Yum Stock fell 2.9% following yesterday’s earnings and the news of an expected tough year for earnings out of China. But the big slide today was in McGraw-Hill stock that fell 10.7% today after yesterday’s decline following the US Justice Department charges of defrauding investors over ratings given to mortgage securities. BlackBerry stock rose another 6.3% after reports of strong demand from Canadian and UK wireless carriers. Whether this actually turns into consumers buying into BB10 may be another story on the roller coaster BlackBerry stock ride.

Market Direction Closings

Here are today’s market direction closings.

market direction closing Feb 5  2013

market direction closings Feb 5 2013

Market Direction Technical Indicators of Feb 5 2013

Let’s take a moment now and review the market direction technical indicators at the close of Feb 5 on the S&P 500 to see what they predict for tomorrow, Feb 6.

Market Direction Feb 05 2013

Market Direction Technical Indicators Feb 05 2013

For Momentum I am using the 10 period. Momentum is still positive and today’s market direction push back up has turned momentum higher. It’s not a big jump higher but it is higher.

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 which means yesterday’s sell signal remains valid. Another market direction up day should change that invalidate the sell signal.

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 but continues to remain ready to fall negative. If the market direction move higher does not follow through strongly tomorrow, the Ultimate Oscillator may continue weak.

Rate Of Change is set for a 21 period. Rate Of Change is still positive and has turned back up after yesterday’s big drop.

For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is once again overbought but it points back to more upside in market direction.

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 points to more upside in market direction for tomorrow.

Market Direction Outlook for Feb 6 And Strategy

The market direction outlook for Feb 6 is once again somewhat mixed although the bias is for more upside action. There continue to be warning signs including declining momentum, the Ultimate Oscillator and the sell signal from MACD. So with the outlook still somewhat mixed the best stance I believe is still being cautiously bullish. I am scaling into Put Selling positions and using dips like Monday to enter positions and then days like Tuesday to exit them. Market direction continues to point to higher prices but I prefer remaining cautious although any major move to the downside does not show up on any technical tools at this stage of the rally.

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