Market Timing / Market Direction Bounce In The Works?

Often a variety of events can affect market timing. Today the news was glum as most of the globes major stocks markets fell into bear territory. As well the news that Hong Kong is becoming the world’s major financial centre are wake up calls to the United Kingdom and Europe. However the very fact that Europe seems determined to take a slow as you go approach is doing nothing to help their status as eminent financial markets.

Yesterday unfortunately I was unable to post my market timing market direction outlook and couldn’t trade as I was busy with doctors yet again. It’s hard being old. However self-pity aside I added a new market timing indicator to help in spotting market direction trend changes. I have added the fast stochastic market timing indicator to my arsenal.

Market Timing / Market Direction for Dec 15 2011

Starting at the top of my chart I am showing the past two days so a comparison can be done. The first market timing indicator is rate of change and today’s reading is slightly better than yesterday’s although still not positive. However that said, you can see how the rate of change is flattening out which shows that the selling in the market is slowing and enough stocks are pulling themselves up that a bounce could be in the works.

Second Market Timing / Market Direction Indicator – MACD Moving Average Convergence / Divergence

Probably one of the best market timing indicators particularly for spotting overbought and oversold markets, MACD divergence is negative -1.95 which means that it does not support the little green we saw during today’s trading. However at -1.95 we are certainly not in serious selling territory yet.

Third Market Timing / Market Direction Indicator – Ultimate Oscillator

Any readers who frequent my site know that I love the Ultimate Oscillator. My settings are further down as I keep getting asked this all the time. The ultimate oscillator at 39.64 is still not fully oversold, but it is higher than yesterday’s reading, which could again lend support for a bounce higher.

Fourth Market Timing / Market Direction Indicator – Slow Stochastic

The fourth indicator, slow stochastic is lower than yesterday which would indicate that the market has lots of room to fall lower.

Fifth Market Timing / Market Direction Indicator – Fast Stochastic

The last and new addition is the Fast Stochastic. I added this because often it will spot the trend change before slow stochastic. Indeed it is reflecting that momentum to the downside is slowing which again could lead to a bounce.

Market Timing / Market Direction for Dec 15 shows a market perhaps ready for a small bounce.

Market Timing / Market Direction indicators for December 15 show that selling is slowing which could lead to a bounce.

Market Timing / Market Direction Indicator – Candlestick

Below is today’s candlestick for those investors who enjoy candlestick market timing indicators. Today’s candlestick is called a bullish harami HIGH WAVE. It is not confirmed yet though. Tomorrow needs to see an open higher than today’s low and a close higher than today’s close. That would confirm the signal and tell investors that the market is going to bounce higher.

Market Timing / Market Direction Candlestick For Dec 15 11

Market Timing / Market Direction Candlestick For Dec 15 11

My Market Timing Indicators

I get asked by dozens of emails daily what are the settings I am using for my market timing indicators. You have to understand that settings change with the market condition as I try to determine market direction. I make changes often to my settings as they change depending on whether I am using 1 week, or 1 month, 3 months or 6 months or longer to study a trend in either the market or individual stocks. Rate of change for example has many settings. You can read more about rate of change through this market timing link.

Market Timing / Market Direction Conclusion For Dec 15 2011

My indicators tell me this is a good time to start allocating capital back into selling puts on select large caps that I follow. I sold some Intel two days ago for Jan at the $21 strike but I could only do 10 puts for .25 cents. Meanwhile the market timing indicators are beginning to point to a market bounce which perhaps might take the market at least into Christmas. Wouldn’t that be nice! However there are not enough indicators that confirm the market direction change back to up, so the warning is to allocate a bit of capital, but be prepared that the market direction could continue lower.

However aside from market timing indicators above, there are many stocks that remain strong including JNJ Stock. MCD Stock, MSFT Stock, PEP Stock, KO Stock among others. This tells me that there remains strength in the market and enough interest among investors to possibly push the market back up.

1200 on the S&P marks an important technical support level. It is right below the 50 day exponential moving average which if the market can hold here might be enough to bring investors back into buying stocks. The problem I see, even if there is a move higher is stocks like KO and MCD and VISA and many others are already fairly high. Therefore I have no interest in selling puts at the money on those stocks but in keeping with my third article Teach The Bear New Tricks, Stock and Option Strategy this could be a good chance to earn a little extra income for Christmas through selling puts on these diversified large cap stocks. Meanwhile for my stocks where I am holding in the money covered calls, I have bought back a number of them that have generated decent profits and since my market timing indicators tell me there could be a bounce I am prepared to sell in the money calls once again, if the market direction changes and we bounce higher into Christmas.