Market Direction Morning Comments For Jan 10 2013 – Textbook Technical Trading

Market direction this morning is following exactly the market direction technical outlook comments made yesterday after the close. Click her to review yesterday’s closing market direction outlook.

The market direction opened strong on the news of China’s export growth rebound which caught a lot of analysts off guard. The strong jump in exports in December ended the string of declining growth reports but then this is China, so I take into context how accurate any financial reporting is on China. Analysts were quick this morning though to jump in an indicating that December’s report “could be” an anomaly and since it would appear that Global growth is declining (questionable I think), December’s numbers are probably a one time rebound due to Christmas sales or may be revised lower shortly.

Market Direction Intraday Tech Talk

Let’s look at the 5 minute time frame chart for yesterday (Jan 9) and today (Jan 10 2013) to get a better picture technically what is happening with the S&P 500 and market direction.

I have numbered all the key aspects of the market direction technical chart below.

1. Yesterday the market had a gap open, meaning it jumped up and never traded between the previous day’s close and the opening of January 9. Believe it or not, eventually most of the time the S&P 500 will eventually fall back and fill that gap. I realize it is strange but it’s as if the market does not “trust” these empty ranges.

2. All day long the highs were never captured and the market slide lower managing to close near the high point of the last rally of the day. Performance was poor which is why the market technical indicators were unimpressed by the rally attempt. The rally should move higher not lower, but that gap open first thing, bothers a lot of investors and they remain cautious, which results in lighter volume and smaller trades.

3. All day yesterday the market made lower lows. Note how today’s (Jan 10) the market has done the same thing. Lower lows in the market direction after a nice big gap open again.

market direction intraday Jan 10 2013

Market Direction Intraday for Jan 9 and Jan 10 2013 - 5 minute time frame

4. This morning the market opened again with a gap open on the news about China and the news of Ford doubling its dividend from 5 cents to 10.

5. Then analysts jumped in to explain why they are still right on China and the world’s economies are slowing globally. I have my doubts on the global slow down. I see a lot of signs of anemic growth here and there and the US housing market is downright getting hot as it looks like now it bottomed out in 2011 and despite all the doom and gloom on US housing, it is coming back to life which is a great sign for the overall economy. As well, the US has had no negative months of employment growth in months. So while the employment growth is low, there is still growth every month which means little by little, the unemployed are getting jobs.

6. The late morning downturn has filled in that opening gap from this morning. Now there is a chance the market direction can turn back up.

Market Direction Outlook Unchanged

Overall though my market direction outlook remains unchanged. I expected some selling which we got this morning and I am expecting more a sideways movement which the Fast Stochastic predicted yesterday, with a slight bias to up. I don’t see any reason for a big sell-off here so sometimes when there is no sell-off pressure the path of least resistance is to move higher in market direction.

Market Direction Investor Mentality

A move higher in market direction often feeds on itself, just as a move lower in market direction does. When stocks begin to sell, investors become unnerved and they start to sell. Soon more investors join in and suddenly you are down 100 points in the Dow. The same can happen in a market direction up move. The market direction slowly creeps up and some investors notice this. They then buy some more stock pushing the market direction up yet again. Suddenly other investors see that the market direction is creeping up and they jump in pushing the market direction still higher. Then more investors pile in basically because the market direction isn’t falling. They are not buying with any conviction. Investors are simply buying because most investors are not selling.

Whatever happens, I simply follow whatever the trend is. There is underlying strength in the market direction right now as there was heavy selling of Treasury Bonds and Notes just a few short trading sessions ago when the Fed announced they may end their QE3 this year. That money has to go someplace and a lot of it will move into stocks.

So keep a watch on market direction because overall the trend remains higher until investors decide they think its time to get out.

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