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For three days rally attempts to push the market direction back to up have failed. This is continuing to create worse technical conditions for the overall stock markets. The continual attempts at rallying are being met by selling. The movement to the downside appears to be gaining more traction and it would appear the S&P will break and hold below the 200 day shortly.

While this is just an afternoon comment and I will keep my market direction outlook saved for after hours when I can compare the entire day, the same effect can be seen each day in the chart below. The oversold condition in the market is keeping hopeful investors waiting for a rally which may come but from lower levels. If the markets continue to keep the trend of these small failed rallies, the oversold conditions will evaporate and the market direction will push lower as more investors “give up”.

Market Direction and The Dow

If the DOW falls another 100 points in total over the next few days, the likelihood of their being new highs in the markets will become slimmer.

The chart below show the gradual deterioration in the Dow which is duplicated in all the indexes. Caution remains warranted and any bounce has to be suspect.

Market Direction Warrants Caution and Continuing To Raise Cash Levels

My strategy remains the same – raising more cash, closing profitable positions, rolling covered calls down at least 2 strikes and using both the SPY PUT trade and the Trading For Pennies strategy to earn profits. I am continuing to hold the DXD but I am not using a stop-loss.

market direction weakness

Weakness in the Dow Jones

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