Market Direction Is Bearish But Where’s The Bounce

Today’s rally was poor as the gains in market direction were all given back. I would have expected a bit more market direction push higher, but if anything the rally shows the continued lack of conviction on the part of investors. The push higher in market direction last week was all about the televised debate between Obama and Romney. The reality presently  is that stocks were overvalued, investors refused to continue to buy and push them higher and now stocks are pulling back looking for support. While the indexes market direction are down just 2.5% a lot of individual stocks have taken a beating and that’s actually a good thing as it should help bring in some buying.

S&P Market Direction Today

The S&P managed to squeak out a very small gain in market direction but the Dow and the NASDAQ market direction turned lower on the day. They didn’t turn much lower but they were still in the red after giving back the small rally in market direction. The bulls need something to grasp onto to be able to push market direction higher at this stage. But no matter how much manipulation is done, in the end it is earnings and profits that keep stocks moving higher and right now the earnings parade is a bit of a disappointment. There is no doubt that stocks could turn, bounce from the 50 day and claw their way higher, but are earnings strong enough to keep them higher. While stocks like YUM did very well, too many other stocks did not including  Cummins, Alcoa and Chevron and with the tech companies in a retreat the bears have taken control of market direction at present.

I read the analysts reports on Alcoa and as usual they report how earnings were better than expected but honestly, Alcoa lost money and their sales are lower. These are not the kinds of earnings that can keep stocks pushing the market direction higher. There is value in many stocks today, but I do believe in the end investors have to ask themselves at what price are stocks fairly valued. That for me one of the purposes of Put Selling stocks. I look at a quality stock and examine cash flow, price to sales, book value, earnings growth and more and then determine what is fair value.

Market Timing Technical Indicators

At the close today momentum is starting to fall.

MACD which gave a sell signal on September 25, is continuing its slide, lower today than yesterday despite today’s feeble attempt to rally.

The Ultimate Oscillator is extremely oversold and rate of change has climbed since yesterday but remains negative.

The Slow stochastic is extremely oversold but still signaling more downside ahead.

The fast stochastic is also at an extremely oversold level but with a D period of 32.78 you can see just how bearish the market direction has become.

Market Direction turning bearish

Market Direction For Oct 12 2012

All the market direction indicators are bearish but there are still signs of a bounce in market direction. The Ultimate Oscillator which is extremely oversold, could bounce any time now. The Slow Stochastic which at K period of 12.61 is extremely oversold and the Fast Stochastic which with a K period of 5.25 is so close to zero that a bounce really does appear imminent.

But any bounce higher in market direction has to be strong and contain volume, otherwise a little bounce like today with no conviction gets more investors worried and brings on more selling. The most surprising thing today had to be the VIX at 15.59 a decline in volatility of 4.29%. Investors appear in most cases, genuinely unconcerned about the overall market direction. They may be correct, but I rarely find the majority of investors are right. Just last week many of my investor friends looked at the market direction push higher after the debate and told me they were going long. Today a lot of them have sold out some positions for small losses. They are not “worried” as they put it, but they are watching “carefully the market direction” as one investor told me.

Market Direction Outlook

It’s hard to trade what might happen so I normally trade what I see happening and right now I see some bargains among the likes of tech stocks such as Intel Stock and Microsoft Stock and I see stocks like Johnson and Johnson Stock below $68 again and Pepsi Stock falling. All of these are bringing more Put Selling opportunities but I am only doing small quantities while I wait to see if the market direction either regains its footing here at the 50 day moving average or whether it has to move lower. I like the stocks I am Put Selling against so I do not mind being assigned, but for investors who don’t want to own stocks, they really should wait for a clear signal because since September 25 the signal has been to sell and market direction has been under pressure even when it tried to climb last week.

MACD has been right with the market direction down call on September 25 as it was in early April. The 50 day remains the key to market direction and that’s what I am busy watching.

So with extremely oversold readings we need to see a bounce in market direction a lot better, higher and with more volume than today to get the bulls back in the game. If that does not happen then the 50 day will break and raising some cash will be warranted.