Market Timing / Market Direction Sleep Before Christmas

Market timing indicators don’t always follow what I would think is happening in the market. Today is a good example. The S&P 500 opened higher and moved higher all day. It closed though NOT ON THE HIGHS. This isn’t too unsettling except for a couple of my market timing indicators are not confirming the rally like I would be;ieve they would. Today the market had a very nice move higher. Yet momentum is slowing and both the Russell 2000 and the S&P 500 show that they rate of change market timing indicator closed negative. The candlestick for today on both the Russell and the S&P were not as bullish as I would like. Perhaps this is just a lull in market direction before Christmas

Market Timing / Market Direction Charts For Dec 22 2011

The first chart we are going to look at is the S&P 500 market timing indicators. The chart below show that the rate of change which was positive yesterday turned back negative today. Now it’s not much of a negative move, at just -0.09 but the S&P 500 opened higher than yesterday’s close AND moved up all day and then closed just off the highs of the day. I have written a paragraph below discussing the rate of change market timing indicator from today. It is rather interesting so you may want to scan it after reviewing the other market timing indicators below.

Today MACD is positive. Not wildly positive considering the point swing in the market this week. I would have thought based on past moves when the market direction changed to up that MACD would be around 3.50, but instead it is at 1.35.

The Ultimate Oscillator, one of the best market timing indicators is up again over yesterday and continues to point to the market still rising.

Slow stochastic is not completely positive yet, but the fast stochastic is with a reading of 68.40. Again both of these market timing indicators are reading better than yesterday.

Market Timing / Market Direction for Dec 22 2011

Market timing / market direction indicators for Dec 22 2011 are decent but a couple of warning signs may be starting to develop.

RATE OF CHANGE MARKET TIMING INDICATOR

The rate of change market timing indicator chart for today shows that up until shortly after 10:00 AM it was climbing along with the market. Then some selling entered the market and the rate of change turned down along with the market direction. The push then for the rest of the day saw the market climb almost to the close, but the rate of change stayed completely flat. I have not posted the momentum chart, but if you look at momentum for the day you can see the exact same flat action.

Either this tells me that a lot of investors are out of the market after the morning or the rate of change refused to confirm today’s move higher. By closing slightly negative, it could be a warning that tomorrow we will see a lull in the market. This could easily be the case since tomorrow is the final trading day before Christmas and it is almost always a slow day.

Market Timing / Market Direction indicator the Rate of Change

Rate of Change Market Timing Indicator Is Not Confirming Today's S&P Rise

S&P 500 Candlestick Market Timing Indicator

Today’s S&P 500 candlestick is known as a white opening marubozu. Basically it means the market opened higher than yesterday’s close but did not close at the highs for the day. Often this is followed by a sideways day. Again, because tomorrow is the last trading day before Christmas, it is probably advising us of that.

Moving Averages Market Timing Indicator For The S&P500

The most interesting part of the recent rally is the 10-20-30 day moving averages strategy. Despite Tuesday’s big up day, the 10 day simple moving average has continued to decline and is on the verge of crossing the 20 and 30 day exponential moving averages. It turned down last week and it has not confirmed this move higher.

Market Timing / Market Direction indicators for the S&P 500 show the 10 day is not confirming this latest rally

The 10-20-30 Moving Averages Market Timing indicators for the S&P 500 show the 10 day is not confirming this latest rally

Market Timing Indicators For The Russell 2000 (IWM)

I took a minute out during the day to check the Russell 2000 and the same readings are being made by the market timing indicators. The Rate of change bounced slightly on Tuesday big jump higher BUT it has not confirmed the past two days. Again when I add the momentum to the market timing tools (last graph in this chart) you can see that momentum has not supported the rally at all. This could of course be due to this week being the last few trading sessions leading to Christmas or it could be warning that after Christmas we might not see a strong rally into the year end.

Market Timing / Market Direction Russell 2000 indicators

Market Timing / Market Direction Russell 2000 Indicators are positive except again the Rate Of Change is warning.

Russell 2000 (IWM) Chart of 10-20-30 Moving Averages Market Timing Indicators

One last chart. The same 10-20-30 moving averages strategy shows that the 10 day simple moving average never confirmed Tuesday big gain and it ready to cross the 20 and 30 day exponential moving averages.

Market Timing / Market Direction chart of the Russell 2000 for Dec 22 2011

Market Timing / Market Direction chart of the Russell 2000 for Dec 22 2011 shows the same non-confirmation.

Market Timing / Market Direction Summary For Dec 22 2011

The charts above may mean that the markets are simply going to coast tomorrow with light volume and into Christmas. Next week though is the traditional Santa Claus Rally period and right now the rate of change and the 10-20-30 moving averages strategy both may be telling us that this is the Santa Claus Rally and next week we won’t see much more.

However with the majority of my market timing indicators more positive than yesterday the market direction for now remains up. Let’s hope that the rate of change and the 10-20-30 moving averages technical indicators are just telling investors that the market is having a sleep before Christmas. Merry Christmas To All My Readers and All The Best For The New Year!
from Teddi Knight

  • Drew

    And a very merry christmas to you Teddi. I think I can speak for all readers when I say we thank you for your time and dedication in posting all through the day and night. It is rare and refreshing in this day and age to find someone who is willing to give so much. Perhaps a few more Canadians inserted into US politics may help our situation – of course I’m originally from Australia.

    Best wishes to all, Drew.

  • Thank you for your comments. I am not sure about the Canadians in US politics. LOL. Here in Ontario our deficit is getting over 250 billion dollars. These low interest rates are about all the governments have going for them to be able to afford to keep such enormous deficits. Once rates move back to historic levels, imagine the mess. The debt problems are world wide.
    Teddi