Market Direction Outlook For Nov 16 2012

Market Direction remains the single most important aspect in investing, but that is obvious to investors. Each night I take a moment out to look at the S&P 500 using my favorite technical indicators. If I notice something out of the ordinary I then compare these same technical indicators to the other two indexes to confirm what i have seen in the S&P 500 charts. The present stock market direction correction has the DOW down 8.5%, the S&P 500 also down 8.5% and the NASDAQ down 11.5%. There could though still be more room to fall. In an ongoing bull market a 10% correction is common so there is still room for more Market Direction downside in this correction.

Today though saw something different occur in market direction that we have not seen in the last few trading sessions. Today near the close investors bought shares rather than sold them. Let’s take a look at today’s Market Direction action.

Market Direction Action On Nov 15 2012

It was an interesting day as all three indexes displayed the same market direction patterns. They sold off into the lunch hour and then rallied into the mid afternoon only to sell off into the last half hour. Throughout the day the market direction continued to exhibit the pattern of lower highs even in an intraday chart.

Somewhat new today was that stocks, rather than closing on the lows, saw buyers step in and push Market Direction higher for the last half hour on all three indexes. So was this buying or short covering?  This has not been the case over the past few days as the sellers have repeatedly sold into the close which is a bearish signal.

Market direction Nov 15 2012

Market direction on Nov 15 2012 - 5 minute chart

Market Timing Technical Indicators For Nov 15 2012

To get a better idea as to what was going on, let’s look at the market timing technical indicators for today.

Momentum Market Timing Technical Indicator continued to push to the downside and does not show a pattern that would make me believe a market direction bounce is imminent.

MACD (Moving Averages Convergence / Divergence)  which was the first Technical Indicator to advise back on September 25 and 26 that the market direction had changed to down, is continuing to push into more negative readings.

The Ultimate Oscillator is extremely oversold but the readings were lower yesteday than they are today.

Rate Of Change Market Timing Technical Indicator is continuing to fall deeper into negative territory and continues to warn that more downside is ahead.

Slow Stochastic is extremely oversold but the readings still point to the possibility of lower market direction a few days out.

Finally Fast Stochastic Technical Indicator is in agreement with the Slow Stochastic as to market direction, however the Fast Stochastic D period is now reading just 5.16 while the K period is at 4.55. This would indicate that the market direction remains lower but the strength of the downside action in the markets is getting close to neutral.

The Market Timing Technical Indicators are still solidly bearish and the readings are extremely oversold. This almost always is followed by a market direction bounce higher. Whether we get that bounce tomorrow is tough to say, but I am continuing to hold my SDS and DXD shares although I have lightened up on them a bit over the past couple of trading sessions as I do believe the markets are overbought and could push higher. I believe any rise in the markets is simply a bounce and the correction will continue after the next bounce.

Market Direction Outlook For Options Expiry on Friday

I have been looking for a bounce up in market direction for a few trading sessions now and none have materialized. Instead there are small daily rallies that are sold into by investors. All the stock markets are exhibiting the same pattern of lower highs and lower lows which is bearish for stocks.

The Market Timing Technical Indicators are all still quite bearish but many are so oversold that a bounce should happen. For that to occur investors need to have the conviction to buy more stocks and push the market direction higher. That seems a tall order considering the present economic environment with the concern about the fiscal cliff and continuing negative action in the markets. I continue to remain cautious with market direction and trade my options to the downside.