Market Direction Outlook For Jan 11 2013 – Overbought But Up

Market direction during the morning showed resilience as once the market pulled back, closed the morning gap but did not fall, buyers stepped in and moved the market direction back to up. The market closed at the highs for the day. Meanwhile Initial Weekly Unemployment Claims rose 4000 for the week to 371,000. The European Central Bank gave an encouraging outlook for Europe indicating that they expect the worst is over and the recession they are in will end by the first half of 2013. They keep key interest rates at 0.75 percent. Meanwhile Italian and Spanish bond yields are down considerably. Chinese trade was up around 14% another good sign but so was inflation,, moving higher than the government had expected.

Warren Buffett commented that the US Banking system was the best it has been in years and that drove Bank of America higher by 3.1 percent. For was up 2.7 percent after doubling its dividend and Nokia Stock moved 18.7 percent after it reported a recovery in fourth quarter-earnings, with its mobile phones showing its first profit in a year. Last, gold jumped $22.50 to $1678 an ounce.

Market Direction Closing Numbers

The S&P 500 closed at 1472.12, up 11.10 points or 0.8 percent and setting another new 5 year index high. The Dow closed up 0.6 percent at 13471.22 as it tacked on 80.71 points and the NASDAQ moved higher by 15.95 points to 3121.76.

Market Direction Chart Of S&P 500

Below is the latest Market Direction chart for the S&P 500 Stock Market Index. The market direction up has made a new 52 week high, but the 50 day moving average is still clinging to the 100 day which could signal some weakness ahead. The 50 day moving average needs to pull away and up from the 100 day to support a move higher in the market direction of the S&P 500.

Market Direction Chart Jan 10 2013

Market Direction Chart Jan 10 2013

Market Direction Technical Indicators Of Jan 10 2013

Let’s look at the technical indicators for Thursday Jan 10 and see what they are telling us about Friday’s market action.

Market Direction Technical Analysis Jan 10 2013

Market Direction Technical Analysis Jan 10 2013

For Momentum I am using the 10 period. Momentum is still solidly positive and it back climbing higher. Momentum did not waver earlier this week when the S&P 500 had two days of selling. It continued to point to a higher market and so far it has been right.

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 positive and is back climbing.

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 climbing back into extreme overbought territory.

Rate Of Change is set for a 21 period. Rate Of Change is still positive but is almost unchanged from yesterday being up just a small amount.

For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is extremely overbought and signaling that the market direction is still 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 also extremely overbought but is confirming the Slow Stochastic with a market direction up signal.

Market Direction Outlook And Strategy

The market direction outlook or Friday Jan 11 2013 is for the market to open higher than it closed and then pullback slightly before trying to rally higher into the close. There are enough overbought warnings that the market could pull back before resuming the market direction uptrend, but there is little reason at this point in the market for the market direction to change. For the market direction to move to back down, something larger must appear. This catalyst for lower prices could be lower December sales. We will find out more about that next week as Christmas sales figures are released.

There remains a lot of pessimism in the market from both investors and analysts. This is keeping a bullish sentiment alive in this rally as the market direction cautiously moves higher. Presently the main concern is the 50 day moving average has failed to pull away from the 100 day and continues to cling to it. To confirm the market direction is higher the 50 day needs to move up and away from the 100 day moving average.

Until then, market direction remains sideways to up while it struggles with a growing overbought issue which could see some stalling of this present rally.

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