The market direction action on Wednesday shows that investor reaction yesterday was overdone and today the reality of concerns over Europe and Asia are back on investors’ minds. But the buying on the pull back brought the S&P 500 back from early morning lows and continues to show that the strategy remains trading these dips in stocks. The Organization for Economic Co-operation and Development said they expect growth of 1.9 percent in 2013 and 2.8 percent in 2014. Meanwhile the International Monetary Fund trimmed its growth forecast for China this year from 8 to 7.75%.
Market Direction See-Saw
As well investors yesterday bought stocks after the housing and consumer confidence came in better than expected. Today they were selling worried that the Fed may start easing up on Quantitative Easing earlier than expected as the US Economy grows. This see-saw market direction movement from one day to the next is often commonly seen with markets that are on the verge of topping out.
Market Direction – Fall 2007
For example if we look at the August to October 2007 period you can see all the see-saw events which I have marked with an A. One day up and the next down or vice versa. These days show indecision among investors but also demonstrate their unwillingness to hold onto an asset due to worries about being caught in a down turn.
Instead what we as investors want to watch for is when a high is made such as at point B but momentum refuses to validate the high. Then we want to look at MACD which I have marked with a C, to keep a watch out for sell signals, which you can see in the 2007 chart was flashed back in October before things turned nasty.
Before we look for these same signals in the present market, let’s look at today’s closing numbers.
Market Direction Closing For May 29 2013
The S&P 500 closed at 1,648.36 down 11.70 points. The Dow closed at 15,302.80 down 106.59 points. The NASDAQ closed at 3,467.52 down 21.37 points.
Market Direction Technical Indicators At The Close of May 29 2013
Let’s take a moment now and review the market direction technical indicators at the close of May 29 2013 on the S&P 500 and view the market direction outlook for May 30 2013. 
For Momentum I am using the 10 period. Momentum has been sideways for a few days and today it has turned negative.
For MACD Histogram I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) issued a sell signal on May 24. The sell signal is still valid today and continues to push to the downside indicating there is more downside to come.
The Ultimate Oscillator settings are Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months.
The Ultimate Oscillator is now negative as well.
Rate Of Change is set for a 21 period. The rate of change is positive but is sliding lower.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling that the market direction is lower.
For the Fast Stochastic I use the K period of 20 and D period of 5. These are not default settings but settings I set for the 1 to 3 month S&P 500 chart when it is set for daily. The Fast Stochastic is also signaling the market direction is lower.
Market Direction Outlook And Strategy for May 30 2013
Yesterday I indicated that the market direction indicators were advising that Tuesday’s move higher was simple an over-reaction by investors and that the trend was still lower not higher.
Today’s movement lower than was no surprise. What is surprising is how much buying was still ongoing as investors continue to trade the dips in stocks. The buying on today’s dip was strong enough to lift stocks far off their morning lows.
I did not Put Selling on Wednesday as I am still expecting lower prices.
My outlook then is for the market direction to continue to move lower, however the signals we saw in the fall of 2007 are not yet present in today’s market although it won’t take much to bring those types of readings into our current market.
I am holding off Put Selling here as I believe there is more downside to come on Thursday. I am therefore in a wait and see stance as I keep an eye on my favorite stocks for Put Selling opportunities.
Market Direction Internal Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)
Market Direction External Links