FullyInformed.com

Market Direction Stuck In A Pressure Cooker

Jul 23, 2012 | Stock Market Outlook

In yesterday’s Market Direction outlook I discussed the weakness in stocks and how I expected Monday or Tuesday to be weak. I did not expect further deterioration out of Spain to cause such a plunge. The market direction going into Tuesday remains bearish and more market timing indicators are turning bearish after today’s sell off.

No SPY PUT Trade

There was no opportunity for a SPY {PUT Trade of any sizable profit. If you look at the S&P 500 chart for today you can see that the market gaped down at the open and set the low for the day at the open. From there the market direction was up all day.

I posted to my twitter account that if I did do any SPY PUT trade it would not be held overnight. Normally a big down day like the morning’s open is met with a bounce on the next day. However the market showed resilience as it climbed all day.

I watched for a 2:30 pm reversal which is quite common over the past several years, but the reversal was short and had little push to the downside. The market direction all day then was up. This is not the kind of day to be buying Spy Put Options for a trade.

Market Direction for July 23 2012

Market Direction was up all day after the morning plunge.

Market Direction Up

The strength exhibited by the markets after the plunge at the open, is not unexpected. There is a lot of bullish sentiment still with stocks. Presently many analysts and investors believe that within a few short weeks European leaders will be forced to follow the Federal Reserve’s lead and reduce interest rates to zero and print Euros. Fear of inflation among European leaders is high, but fear of a general stock market collapse and high unemployment is greater. If Europe should recapitalize their faltering banks you can expect the Euro to soar and the US Dollar to pull back. This will push US Stocks higher. That’s one theory any way.

But if the market direction continues lower and breaks 1325 I am anticipating that the recent rally is over and I will reassess market direction at that point.

Put Selling Small Quantities

Just to be conservative I am Put Selling just small quantities of put contracts on my stocks until the market direction is firmed up. I will be Put Selling in groups of 5 put options at a time.

Market Timing Indicators

The market timing indicators are turning bearish which is to be expected after such a down day.

Momentum which was still positive is now negative.

MACD Histogram is still positive but the divergence is continuing to erode. Another down day will turn this indicator negative.

The Ultimate Oscillator did not tumble too far today thanks primarily to the market direction moving higher all day after the opening plunge. The Ultimate Oscillator remains positive but is down slightly from Friday’s close.

Rate Of Change is still positive and like the Ultimate Oscillator, it is lower today but only slightly reflecting the rise of stocks during the day.

However the Slow Stochastic is solidly bearish. This means more than a day or two out that the market direction is being predicted as down.

The Fast Stochastic though is the most telling at this point. It is decidedly bearish with a %D at 81.37. Tomorrow should be another down day.

 

Market Timing Indicator for July 23 2012

Market Timing Indicators are turning bearish after the stock market's opening plunge. Market Direction is under pressure.

Market Direction / Market Timing Summary For July 23 2012

The VIX Index had a huge giant today, yet as the stock market climbed throughout the day the VIX Index pulled back. It closed far off the highs for the day but still up over 14% from Friday’s close. There is a lot of complacency among investors would could be a bad thing for stocks and market direction moving higher.

Three market timing indicators are bearish, but even the positive indicators are falling. At this point in market timing, the Fast Stochastic and Slow Stochastic are playing an important role in advising investors what to expect next. Both are indicating that market direction is down.

Search

Select to view all results...

Generic selectors
Exact matches only
Search in title
Search in content
Post Type Selectors

Recent Outlooks

Stock Market Outlook for Thu Mar 28 2024 – Choppy – Dips Likely – But Higher

Prior Trading Day Summary: On Wednesday investors returned and snapped up stocks that had drifted lower. The SPX bounced at the open and by the close it was up 45 points to close at 5248. The NASDAQ rose 83 points …

Morning Investing Strategy Notes for Wed Mar 27 2024

For FullyInformed Members the morning Investing Strategy Notes for Wed Mar 27 2024 discuss the outlook for Wednesday and comments on a possible correction and what it might entail. There are a number of trade ideas outlined including FedEx Stock …

Stock Market Outlook for Wed Mar 27 2024 – Unconfirmed MACD Down Signal

Prior Trading Day Summary: I lost my power shortly after the markets closed. Articles this evening will be shorter if I can post any. On Tuesday trading volume picked up as stocks fell for another day. The SPX closed near …

Morning Investing Strategy Notes for Tue Mar 26 2024

For FullyInformed Members the morning Investing Strategy Notes for Tue Mar 26 2024 discuss the outlook for Tuesday. As well there are comments on support levels to watch in the SPX for the week. There are a number of trade …

Stock Market Outlook for Tue Mar 26 2024 – Still Bullish

Prior Trading Day Summary: On Monday low trading volumes hindered the chance of a positive close. The SPX saw just 3.4 billion shares traded. This matches the volume on last Friday. While poor , it is also bullish as it …

Morning Investing Strategy Notes for Mon Mar 25 2024

For FullyInformed Members the morning Investing Strategy Notes for Mon Mar 25 2024 discuss the outlook for Monday and the shortened week ahead of the Easter holiday. There are a number of trade ideas outlined including FedEx Stock (FDX), Nike …

Stock Market Outlook for Mon Mar 25 2024 – Dip Likely But Higher Close

Prior Trading Day Summary: On Friday investors took profits ahead of the upcoming shortened Easter week with indexes sitting at all-time highs. On Friday the SPX closed down just 7 points to 5234. For the week the index was up …

Morning Investing Strategy Notes for Fri Mar 22 2024

For FullyInformed Members the morning Investing Strategy Notes for Fri Mar 22 2024 discuss the outlook for Friday. There are a large number of trade ideas outlined including FedEx Stock (FDX), Nike Stock (NKE), Lululemon Athletica Stock (LULU),  and more …

Stock Market Outlook for Fri Mar 22 2024 – Choppy – Dips Possible But Still Up

Prior Trading Day Summary: On Thursday all 3 indexes closed at new all-time highs for a second straight day. Volumes remained decent but stocks are seeing some selling as investors are taking a few profits with the indexes at new …

Morning Investing Strategy Notes for Thu Mar 21 2024

For FullyInformed Members the morning Investing Strategy Notes for Thu Mar 21 2024 discuss the outlook for Thursday following Wednesday’s FOMC interest rate decision and Fed Chair Powell’s news conference. There are a large number of trade ideas outlined including …

Stock Market Outlook for Thu Mar 21 2024 – Higher Still

Prior Trading Day Summary: On Wednesday the SPX, Dow Jones and NASDAQ indexes all closed at new all-time highs. Comments from Fed Chair Powell reaffirming 3 rate cuts in 2024 were still “on the table” was all that investors needed …

Morning Investing Strategy Notes for Wed Mar 20 2024

For FullyInformed Members the morning Investing Strategy Notes for Wed Mar 20 2024 discuss the outlook for Wednesday and the latest FOMC interest rate decision. There are also a number of trade ideas outlined including Chewy Stock (CHWY), SPY ETF, …

Stock Market Outlook for Wed Mar 20 2024 – All About The Fed – Bullish

Prior Trading Day Summary: On Tuesday the morning started with a dip down to 5131 but buyers were waiting for the dip and volumes picked up. Deep dips in a number of big caps like NVIDIA Stock (NVDA) found ready …

Morning Investing Strategy Notes for Tue Mar 19 2024

For FullyInformed Members the morning Investing Strategy Notes for Tue Mar 19 2024 discuss the outlook for Tuesday following Monday’s rally and before Wednesday’s latest FOMC interest rate decision. There are also a number of trade ideas outlined including Chevron …