The economic picture of the US Economy continues to be cloudy. It’s like a never-ending soap opera as some days the economic numbers show strength and improvement in the economy and other days statistics and numbers show the economy is weak and hanging by a thread. In what seems to be something of a paradox, today we got disappointing numbers on the economy but at the same time John Williams, president of the Federal Reserve Bank of San Francisco, indicated that the FED will consider stopping its monthly $85-billion bond purchases if the economy continues to improve. So obviously he feels things are improving and wouldn’t you know it, just as he thought things were getting better, the Weekly Initial Unemployment Insurance Claims jumped back up by 32,000 to 360,000 which is back above that 350,000 magic number for when the market direction moves lower. Then not to kick Williams’ comments down or anything but a report was released that showed since November most of the job gains are coming from fewer layoffs and not increased hiring. Exactly how not laying people off is considered employment when they are already employed seems to just add to the confusion about how these statistics are derived anyway.
Inflation Prospects – Where?
Then on the inflation front we heard that last month inflation fell due to a drop in gasoline prices. The consumer price index was down 0.4 percent in April. That means for the past 12 months inflation is up just 1.1 percent which is the smallest year-over-year increase in two and a half years. You would think this would have the market direction back up today because the Fed, if you recall, placed a target of 2 percent for inflation before easing up on the money pedal. So to date then it looks like the quantitative easing the Fed has done is not producing inflation. Strange, because everything I buy has gone way up from food to my latest home and auto insurance premium. My auto premium is up 15% and I have to tell you, I am so old I hardly drive anymore. Maybe that’s the problem! I need to drive more. On my policy I had to laugh because they made a mistake and showed my annual mileage at less than 1000 miles annually. Apparently they meant to input 10,000 miles which in itself is way too much anyway.
The Commerce Department reported that housing starts was at a seasonally adjusted annual rate of 853,000 in April which marked a 16.5 per cent drop from the March pace of 1.02 million. However applications for building permits rose 14.3 per cent to a rate of 1.02 million which is the highest in five years. So figure out those numbers? Talk about confusing!
Walmart Sales
Meanwhile Walmart sales climbed 1.1 percent in the latest quarter which management claimed was a result of the payroll tax increase, delayed tax refunds, bad weather and perhaps who knows what else. They then offered a profit outlook below analysts estimates and Walmart Stock fell about 2 percent to $78.50. I still think it is overvalued and I did not sell puts today.
Gold Drops Again
Gold meanwhile continued its bear market and fell another $9.30 to $1386.90 an ounce, but crude oil was up to $95.15 a barrel.
Market Direction Action – May 16 2013
The 1 minute chart below shows today’s market direction action on the S&P 500. The market direction was weak from the open but 4 times tried to rally through to continue the push in market direction higher. This failed and when the last breakout failed around 2:30, the S&P 500 market direction turned down and closed lower for the day. It was not much of a plunge but instead met the market direction outlook from yesterday which was for a weak but up market. 
Market Direction Economic News For The Week
Tomorrow we get to hear the leading indicators which I am quite interested in.
Market Direction Closing For May 16 2013
The S&P 500 closed at 1,650.47 down 8.31 points or most of yesterday’s rise. The Dow closed at 15,233.22 down 42.47 or not quite all of yesterday’s rise and the NASDAQ closed at 3,465.24 down 6.37 points but Apple Stock bounced back.
Market Direction Technical Indicators At The Close of May 16 2013
Let’s take a moment now and review the market direction technical indicators at the close of May 16 2013 on the S&P 500 and view the market direction outlook for May 17 2013.
For Momentum I am using the 10 period. Momentum is positive but back falling again.
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) issued a buy signal on April 26 and the signal remains valid. The signal reading yesterday was pushing higher but today the reading is slightly lower.
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 continuing to stay extremely overbought.
Rate Of Change is set for a 21 period. Rate Of Change took another jump today which often means a change tomorrow.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is extremely overbought and is signaling that the market direction is down.
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 and is signaling the market direction is down.
Market Direction Outlook And Strategy for May 17 2013
The market direction outlook for Friday is for another weak day but a continuing attempt to keep the market direction moving higher. That attempt almost worked today but the weakness was enough to push the market lower.
The market remains very overbought and a lot of the technical indicators are showing that the market direction is preparing to shift lower. This could increase volatility which would be good for my VIX Index Call Options which I bought earlier this week. However overall the market direction could be ready to pull back for a breather but in general the direction remains more up than down and trading the dips continues to be the best choice for any market direction shift lower at present. I have a lot of put options set to expire tomorrow. It should be an interesting day.
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