As explained in the past few market direction outlooks on my site, the overbought condition of the market direction up is having an impact. Markets cannot go up indefinitely despite the number of new bullish analysts jumping in at the new market highs. The amount of enthusiasm for stocks in the past two weeks has reached levels not seen since 1994. Almost as if to commemorate the enthusiasm this past January was the best on record since 1994 as well, so its nice to see both enthusiasm and market direction have been in sync.
My comments on Thursday were for the market to jump on any good news for the unemployment and then I would be selling covered calls which is what I did on many long-term positions on Friday. Some readers missed my market direction outlook on Thursday in which I indicated:
The market direction outlook for Friday is for the markets to move lower. If they markets bounce because of the unemployment numbers being better than expected I am going to be trading covered calls as all the indicators above are looking poor and even with good employment numbers I would expect any bounce to be short-lived. A bounce could last all of Friday but if it does I will be pleasantly surprised.
The market direction up is over for now as far the market direction technical indicators are concerned. Something dramatic will have to happen to push them back to the point where they are once again indicating markets up. That I believe will be difficult for the moment. The belief that this is just a sideways trend before we resume moving back up, I think could be a mistake. I believe we could see a 4% or 5% correction in February
Weekend Market Direction Outlook
This past weekend I indicated that we were looking at warnings that stocks will move lower. Here is from the weekend technical outlook.
The market direction outlook for Monday is a mixed bag. The general consensus is for stocks to remain strong but stocks need to see a strong follow through on Monday to turn MACD solidly back up and get the Slow Stochastic to signal that market direction will be higher. Despite the market move higher on Friday, the push due to the unemployment numbers may be weaker than a lot of investors suspect.
Nonetheless the market direction remains higher with cautionary flags appearing. This is why combining options with stocks is such a good idea. This buys a bit of protection and still allows an investor to profit from the market direction staying up. Remaining cautious is always warranted when it comes to stocks, especially when the present rally is showing poor signs of momentum, a slipping MACD and a slow stochastic that keeps warning that stocks will move lower.
Market Direction Intraday Action Feb 4 2013
Lots of things weighed on the market direction up this morning giving investors a reason to sell and lock in some profits. Europe was back in the new today with Spanish bond yields climbing and European Stocks sinking. Germany fell 2.5 percent and the UK was down 1.6 percent.
In the US factory orders rose 1.8 percent in December which was below estimates for a 2.2 percent rise. This was enough to get the selling going and from the outset it has been downhill.
Market Direction 5 Minute Intraday Chart
The S&P 5 minute chart below shows the recent action. Bid down opening, then a typical bounce back where I bought my Spy Put Options and then the drop to a low.
Since then the S&P has been wandering trying to decide if it will break the day’s low. If it closes below this intraday low we should see more selling into tomorrow. If it closes above then I will have to look at the market direction indicators at the close to see how much damage has been done and what they show going forward.
Intraday Market Direction Feb 04 2013
Market Direction Outlook Intraday And Strategy
The market direction outlook for the rest of today is to see if the market closes above the intraday low. If it does then tomorrow may see muted selling or a modest rebound. February is the weakest of the best 6 months for the stock market so I still expect February to be weaker and this could lead to some excellent Put Selling opportunities. I was delighted this morning to enter into a new Spy Puts Trade to start 2013 and for FullyInformed Members doing the Trading For Pennies Strategy, remember to keep up the S&P 500 1 minute chart and apply it against your trading. I did one IWM Trading For Pennies Strategy trade this morning but that’s been it since the intraday bottom was reached.
I won’t be surprised to see a push back into the mid afternoon and then selling into the close. I am doing a number of the Trade Ideas I went over last night on the Members Section.
Internal Market Direction Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Candlestick Daily View (Members only)
Market Direction Portfolio Ongoing Trades (Members only)