Market Direction today was trying to push higher when at 2:30 Senator Reid stated his disappointment with the progress on the Fiscal Cliff talks. These types of events cannot be foreseen by anyone whether using market technical analysis or simply guessing what they think will come next. Politicians always speak out of turn and most fail to understand the implications of what they are saying. Reid’s comments were pointless at best. The talks will take a number of weeks. Was he expecting everything to be resolved within a couple of days? At the same time, the fact that the markets can fall on such a simple statement continues to show that it is fear which continues to drive market direction up and down.
The S&P 500 market direction closed at 1398.94, down 7.35 points or half a percent and the Dow was down 89.24 points or 0.7 percent. The NASDAQ held up the best, down just 8.99 points or 0.30 percent. The NASDAQ failing to decline in tandem with the Dow or the S&P is important today.
Meanwhile these types of events make for profitable opportunities. When I was watching CNBC and the market started to sell off I jumped into a Trading For Pennies Trades.
Economically home prices continued to rise in September for the 4th month with a 3 percent increase on average over 20 cities. As well the Conference Board’s consumer confidence index was up yo 73.7 from 73.1 in October. Bombardier Inc in Canada rose 8 percent on news it had signed a 7.8 billion deal with VistaJet for 142 aircraft but as always many of these contracts are never fulfilled and the deal ends up being a lot less. Research In Motion was trounced by 10 percent thanks to Morgan Stanley analysts who complained that RIM can no longer compete with Apple or Samsung no matter what RIM does.
Crude oil rose to $87.78 which is strange if the economy is sputtering world-wide. Gold fell $7.30 which personally I don’t find surprising or a cause for concern on the part of those who like to invest in gold. Hewlett-Packard fell another 3 percent today and Bank Of America fell 1.8 percent.
Today I want to look first at the S&P market timing technical indicators and then the NASDAQ market timing technical indicators to see what is happening with market direction.
Market Direction – Market Timing Technical Indicators S&P 500
For Momentum I am using the 10 period. Momentum is still positive but after two days of the market pulling back, Momentum is starting to fall.
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 continuing to move higher today, despite the selling. A buy signal was generated on Nov 21 and 23.
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 overbought but has fallen slightly from yesterday.
Rate Of Change is set for a 10 period. Rate Of Change is still positive.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is nearing overbought and is still signaling market direction 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 now signaling market direction as neutral.
Market Direction for the S&P 500 Nov 27 2012
After reviewing the S&P 500 market direction technical indicators the fast stochastic, momentum and ultimate oscillator are all signaling that the rally may be sitting with tougher resistance than previously predicted. While the general consensus remains for the market direction to move higher it is worthwhile to take a moment and study the NASDAQ market direction indicators as well and see if they confirm what the S&P 500 is signaling.
Market Direction Technical Indicators – The NASDAQ
Let’s see if the NASDAQ can assist in the outlook for market direction.
Momentum is positive but it is falling just like the S&P 500.
MACD is still climbing and has a very bullish 12.06 reading.
The Ultimate Oscillator is still very overbought but it has pulled back again today.
Rate Of Change is positive.
The Slow Stochastic is signaling market direction up and is more bullish than the Fast Stochastic.
The Fast Stochastic is also signaling market direction up but is not as bullish as the Slow Stochastic.
NASDAQ market direction technical indicators for Nov 27 2012
The NASDAQ is important since it lead the entire market recovery from the 2008 to 2009 bear market collapse. The Fast Stochastic was very bullish yesterday (Monday) but today the selling in the market has turned the Fast Stochastic down. You can see this in the chart above. Overall though the market direction outlook for the NASDAQ remains higher.
S&P 500 Market Direction Chart
The market direction chart for today is showing some signs of caution. The two days of pullbacks is beginning to show early signs of a rally top. After Friday’s big up day Monday really needed some follow through. We did not get that but instead today for much of the day the S&P had trouble moving higher as well. Even though Reid’s comments sank the market in the late afternoon, it was not rallying higher. This could easily be because of the overbought condition but it could also be early signs of a top.
The S&P 500 must break the 1430 level as the first step toward showing a market direction recovery higher. The 1430 level coincides with the 50 period moving average which I had expected this rally could reach. So far this rally has all the signs of a “dead cat bounce”. On a good note though the Lower Bollinger Band is flat and not falling which signals that there is still strength left in the present rally.
Market Direction Chart for S&P 500 for Nov 27 2012
Market Direction Outlook For Nov 28 2012
The market direction outlook for Nov 28 is still for a market direction move higher but with the above chart showing heavier resistance than expected and two days of difficulty pushing higher, caution is warranted by investors. I see no reason to close any open positions. I noted that Doug made changes to the market direction portfolio during the day. You can view his market direction changes through this link.
Market Direction outlook for Nov 28 2012 then is for the market direction to push higher but there are signs that caution is warranted. Market timing technicals still insist that market direction will be higher in upcoming days. It should be interesting to see if they are right.
Internal Market Direction Links