Market Direction Still Down As Confirmed By Market Timing

Today’s stock market direction action was exciting and interesting. At the outset the S&P climbed and then went through a waterfall decline hitting a intraday low just shortly before 11:00 AM. The market direction then rose and managed to turn positive by mid-afternoon. The closing last hour saw investors become nervous again and selling intensified into the close pushing market direction back lower. The VIX Index which measures overall volatility in the market closed below 20 once again. The VIX Index keeps showing the lack of concern among investors despite the news out of Europe, the UPS full year downgrade of their earnings, Apple Stock pullback, global economic worries, to mention just a few issues facing this market.

This lack of concern shows that investors in the market remain convinced that the Federal Reserve will act eventually and keep stocks from falling too far. I am not sure I am in agreement with investors on when the Federal Reserve will act and I am continuing to raise cash levels.

Market Direction for July 25

Today's market direction chart shows a pretty interesting day.

Market Timing Indicators Decidedly Bearish

Today market timing indicators as of the close of the stock market are below. A few market timing technical tidbits to mention.

Momentum market timing indicator is negative but unchanged from yesterday.

MACD Histogram is once again sharply lower. This marks two days in a row of significant declines and MACD is a very good indicator at judging overall market direction so a continuing drop is cause for some concern.

The Ultimate Oscillator today finally turned negative.

Rate of Change however has turned from negative to positive but both yesterday’s negative reading and today’s positive reading are small which would indicate more a sideways market than a change in trend.

This brings us back to the slow stochastic and fast stochastic. Both are not quite as bearish as yesterday and both are reaching oversold. The Fast Stochastic in particular is flashing an oversold signal but there is more room for the market to fall before there would be an extreme oversold indication.

Market Timing Indicators are bearish

Market Timing indicators are bearish at the close of activity on July 25 2012.

Market Direction Summary for July 25 2012

The S&P 500 is managing to stay above the 1325 level which as I have previously explained marks the most recent low from the last rally. If the 1325 should break and the stock market close below 1325, that would signal an end to the recent string of higher highs and higher lows which started near the beginning of June.

Today’s action while interesting as it managed to rally and then fall but still close above the magically 1325 level, is partly explained by the oversold signal from the Fast Stochastic which I discussed in yesterday’s market timing column.

Overall the consensus is that the market direction remains down but aside from MACD, none of the indicators are extremely bearish. The market for Thursday could see more attempts to rally but overall market direction remains lower until the market timing technical indicators change to positive.