Market direction can be influenced by many things including past historic patterns. Memorial Day week has had significant influence on the mood of investors and the market direction. The day after Memorial Day long weekend the Dow has been up in 17 of the last 25 years. But while Memorial Week was always good for market direction moves higher before 1995, the last 15 years have not been as kind to stocks as the market direction has been down in 8 of those years following Tuesday after Memorial Day.
Friday though is June 1 and the Dow market direction has been up in 18 of the last 23 years with the worst down period being 2002 when the Dow fell 2.2% in one day. So if history is any guide, Tuesday might see the market direction move up then down on Wednesday and Thursday but possibly back up on Friday providing a mixed week which could turn somewhat volatile.
Market Direction Memorial Week Outlook
My market timing indicators from my column on May 24 showed that the stock markets, all of which are clinging to their 200 day moving averages may actually manage to hang on for a few trading sessions and keep market direction neutral. On Friday though, all my market timing technical indicators pointed to a recovering outlook except one, but that one gave a market direction down signal.
The problem is that all the market timing technical indicators except the Ultimate Oscillator are trying to claw their way back to positive readings. Therefore when I say that the readings are improving, they are, but they are all still negative which means no market direction up yet.
In the S&P 500 chart below you can see my stock market technical analysis tools and as I say, while improving, only one is positive, the Ultimate Oscillator.
Stock Market Technical Analysis For Friday May 25
Market timing tool momentum is barely up from Thursday. It is improving but it is really more flat that improved.
MACD has not given a market direction up signal in days and while still improving it remains negative. For the market direction to change to up we need more buying in order for MACD to give a buy signal and that hasn’t happened in weeks.
The Ultimate Oscillator is a different kind of market timing tool and on Friday the ultimate oscillator climbed from Thursday’s 53.60 reading to Friday’s 58.88. It’s nice to see and could be predicting a return to a more positive outlook, but one indicator alone cannot be relied on and from this level it won’t take much for the Ultimate Oscillator to turn back down and signal market direction down.
The rate of change is an important stock market technical analysis tool. On Friday this market timing tool made a big move from -2.42 on Thursday to close at -1.53. Nice move for sure but still negative which doesn’t mean the market selling is over.
Slow stochastic is actually not improving as much as I would want to see at this point. On Thursday the reading was %K 28.08 %D 22.28. On Friday it is %K 31.84 and %D 27.79, showing that while still pointing up the narrowing of the reading is becoming so close that any little move down will turn it back negative.
Finally the last stock market technical analysis tool, the Fast Stochastic, near the close on Friday gave a market direction down signal.
My stock market technical analysis tools are trying but too many are negative and with fast stochastic giving a new market direction down on Friday, next week looks tough
Market Direction Possibly Up Then Down For The Week
This shortened week with all the market timing indicators still negative but climbing I had hoped to see some push back to the upside in market direction. However with the Spanish banks problems and rising bond yields and the Euro Bond Issue unresolved I think it is adviseable to keep capital out of harm’s way. I will be watching closely for the chance to use my SPY PUT trade to hedge my portfolio further.
The way the market pundits are talking you would think we are down 20 percent or more while in reality we are at the 200 day moving average. Many bull markets restest the 200 day before moving higher but with stock markets around the world down it is prudent to realize that stocks in general may have farther to fall before reaching a bottom. So next week looks like a possible up move on Tuesday and then perhaps more selling. I will post my amrket direction and market timing outlook after the market close on Tuesday but right now, it looks doubtful the market direction will be moving much higher for a while yet.