Market Direction May Be Changing According To Market Timing

Breadcrumbs: Home » Stock Market Outlook » Market Direction May Be Changing According To Market Timing

The May Durable Goods report is all it took to move Market Direction back up. Then the housing data from the National Association of Realtors indicated that May pending home sales rose to their highest level in two years was enough to build the momentum and push the market to 1333. In the morning I sold my spy put trade which I had held overnight. You can read about the small loss here. I tried a couple of spy put trades during the day but the best came near the end of the day. But I did not hold spy put options overnight despite the European summit because of the market timing technical readings toward the end of the day.

The S&P is now back above the 200 day moving average. Some analysts commented that it looks like the S&P has made a right shoulder. I disagree at this point but we could see something develop Thursday or Friday and that may give a clearer market direction outlook.

Market Direction S&P 500 Chart

The latest S&P 500 chart for the past 3 months is below. You can see the head and shoulders that analysts are looking at, but I believe it is too early to call this as market direction down.

Market Direction Chart S&P 500

May and June 2012 in the S&P 500 shows the narrow range market direction has been in. The familiar head and shoulders pattern has emerged but I believe it is too early to call.

Market Timing Indicators For June 27 2012

Below are the market timing indicators for today. These readings are after the market closed but the fast stochastic is the principal market timer to review tonight.

The fast stochastic, which is the last market timing indicator at the bottom of the chart below, has changed from signalling a market direction down to market direction up. The divergence is slight but when trying to time the market, it is important to look at this variable. %K is at 67.32 and %D at 60.46. This is significant enough that I sold my spy puts which I bought late in the day on the final little rally. Yesterday’s Fast Stochastic reading was %K 55.06 and %D 65.39. This was clearly a sign of weakness in the market, so today’s shift back up could be significant enough that tomorrow could see stock market direction continue higher.

When doing technical market analysis it pays to look at the other market timer tools and see if any agree with the Fast Stochastic. Rate of change was still positive is still lower than yesterday which marks two days of declines in rate of change while the market has continued to climb.

MACD (Moving Average Convergence / Divergence) histogram is almost at the same reading as yesterday which again is a bit disappointing for those investors looking for confirmation that the stock market direction has changed to up.

The Ultimate Oscillator is up only slightly from yesterday but the Momentum market timing tool is positive and with a reading of 101.29 it supports the signal from the Fast Stochastic.

Finally the slow stochastic is still negative but rapidly reaching oversold. This could assist in a bounce higher by the stock market. With timing the market it is important to take a consensus reading of all the market timing tools and presently only two show the market direction may be changing to up. One is neutral which is Rate of Change and three are pointing to the market direction pushing lower.

Market Timing Indicator For June 27 2012

Market Timing Indicators For June 27 2012

Candlestick Chart Is A Buy Signal

Yesterday’s candlestick chart showed a white candlestick showing indecision among investors. Today’s candlestick was a long white candlestick showing normal buying, but the gap-up created a higher open than yesterday’s close and the market closed near the highs for the day. This confirmed yesterday’s white candlestick and created a buy signal on the S&P 500.

Market Timing Summary for Market Direction

Today’s good news help push the market direction up again today. While the consensus is 3 to 2 that the market direction is still down, I believe there is enough justification to not hold spy puts but prepare for a possible higher move Thursday or Friday in the market. If something good comes out of the European summit meeting that will only assist. Overall though I think it is a fantasy to think that Europe can get its act together and fix the debt crisis. The problems in Europe are huge and probably beyond the ability of European political leaders to even comprehend the mess they are in. So with little bad news for a few days out of Europe, investors took heart today and pushed the market direction up again.

There are I believe enough signs that it is prudent to be cautious when predicting market direction today. I believe the bias is for market direction to continue higher at least for another day before selling shows up on Friday. However it could be vice versa. Selling tomorrow and buying on Friday. The S&P 500 is at a pivotal point here and has managed to push away from the 200 day moving average which is a very good market direction up sign.