Market Direction Signalled Down By Stochastic But Up By MACD Histogram

Market direction was largely dictated by two factors today. The first was Ben Bernanke and the second was the overbought condition within the overall stock market. These two impacted stock market direction. Meanwhile a number of stocks stood out today including JC Penny which fell dramatically on the news of their CEO leaving after less than a year and the continuing fall of Walgreens Stock which I wrote about in a strategy article today.

Why investors were expecting a lot out of the Fed Chief is beyond me. Bernanke’s wait and see approach would appear to be the best course at this time. With the European situation unresolved he may want to save his big guns for when they will have the most impact and that could be if Europe implodes.

Market direction today swung from up to down and closed just marginally down which was nice to see as it recovered from selling both at around 12:40 pm and again around 3:20 PM. All in all though it was a somewhat muted day on the stock markets and market direction in general was slightly bearish.

Market Timing Technical Indicators For June 20

There are a number of changes to the market timing technical indicators that are worth mentioning. Momentum definitely fell off today and much more than I would have expected.

On the other side of the market direction outlook was MACD which rose again today. With a reading of 7.11 it is starting to enter bullish territory and has called the market direction up swing from the start.

The Ultimate Oscillator surprisingly continued to rise into overbought territory with a reading of 68.33 which would indicate that market direction could still be at the pivot point and could swing lower and move out of overbought readings.

Rate of change is down only slightly from yesterday, which is a good sign after today’s selling.

Market Direction Down Signal From Slow Stochastic

Slow Stochastic market timing indicator however has given a market direction down signal. It is showing extremely overbought but with a reading of %K94.03 and %D 95.26 it is signalling that the stock market direction is changing to down. As the slow stochastic measures outlook beyond one or two days, this could indicate a move down late this week or into next.

Market Direction Down Signal From Fast Stochastic

To confirm this slow stochastic market direction down, the fast stochastic is also flashing the same down signal. Because the fast stochastic looks out only a day or two, its reading is also extremely overbought and clearly indicating the market will move lower over the next day or two.

Market timing indicators for market direction on June 20 2012

Market timing indicators are in general showing a market direction down as of June 20 2012 market close.

With both the Slow and Fast Stochastic market timing indicators shows market direction down, I would expect the stock market to have trouble rising over the next few trading sessions including into early next week unless something dramatic occurs on the weekend to help push stocks higher into Monday’s opening. Remember that a market direction down signal does not mean the market is going to fall hard. It may just stall here and test the 50 day moving average for a short time.

The next step will be to monitor the market timing indicators for any change in the market down signals. It is important to keep in context the MACD Histogram continuing to rise.

Market Direction Market Timing Signals Outlook

With the latest rally having brought the S&P back above the 50 day (period) moving average, it is not strange to see the market testing support at the 50 day. If it can hold the 50 day moving average, it will be significant for the market direction to continue higher. There are a lot of problems facing the market and investors which continues to keep me staying with the cautious bull strategy for now. Yet the MACD Histogram moving up in the face of the down signals from both the Slow and Fast Stochastic market timing indicators should make for an interesting trading session going into the last two days of the week. MACD may very well be telling us the market direction is up but not for the short-term, but for the mid-term. This is only a guess on my part and I have not proof of this based on the market timing technical indicators.

So by consensus the market direction will move lower over the next few trading sessions and I will be waiting for my put selling strategy to capitalize on any put selling opportunities that develop.

  • Nirmal

    Hi Teddi
    Could please tell me how can I replicate the chart you are displaying above.
    I also TD Waterhouse CHARTING SYSTEM.
    I have set up all your setting as far as I can make it out. (i.e remember)
    Is the above chart of SPY , for 1min. setting or 5 min. setting?
    TD Waterhouse has for 1 day chart -1 min,5min,15min,30 min and 1hr. choices.
    Which one do you use every day at the end ofthe day charting analysis?
    Thank you kindly.
    Nirmal

  • The market timing is always from the SPX (S&P 500). It is the end of day so I usually use a 3 month chart and what you are seeing in the market timing indiators are the past few days, not minutes, but days. Teddi