Market Direction on Monday saw a very nice jump-start and from there is was all down hill. Market direction turned bearish within a few minutes of the open and failed to recover, closing on the lows of the day. This is definitely a bearish signal. There were a lot of reasons including of course the fiscal cliff mess. GM reported weak sales and a huge rise in inventory. Ford though reported a 6.5 percent rise of sales in November but its stock fell almost half a percent. Meanwhile Dell stock rose on analysts recommendations out of Goldman which moved to buy from sell on the stock. The brightest news for the day came first thing in the morning with news that China saw its manufacturing index at the highest level in seven months. That bit of news got the market direction up at the open, but that was it.
Europe continues to perform well, particularly Germany’s stock market which is up 25% for the year. The move by Greece to buy back their own bonds at distressed prices makes a lot of sense and I couldn’t figure out why they didn’t do it earlier. Rather than dumping in hundreds of billions to try to rescue Greece why wasn’t the ECB and IMF buying up the Greek debt that was at fire sale prices earlier in this debacle? Wouldn’t that have been money well spent. Someone finally clued in to what investors have known for decades. You buy when others won’t and for Greek debt it is obviously the time to buy.
Overall the S&P was down 6.72 or half a percent as was the Dow. The NASDAQ was down just a bit more than a quarter of a point but still closed above the psychological important 3000 level.
Let’s look at the market timing technical indicators for today.
Market Timing Technical Indicators For Market Direction
For Momentum I am using the 10 period. Momentum is up but today’s pullback has momentum starting to slow. The market has had too many see-saw type days and it is impacting momentum.
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) is still positive but has pulled back a bit from friday.
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 no longer overbought and is turning down.
Rate Of Change is set for a 10 period. Rate Of Change is still positive.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is extremely overbought but the readings have turned more neutral than bearish or bullish.
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 somewhat overbought and it too is neutral in its market direction outlook.
The consensus among the technical indicators is that weakness is growing. The market direction after the close on Friday showed that the rally was tiring and beginning to fizzle out. The general consensus now is that the market direction is changing to back down or at the least sideways. Until the fiscal cliff can be resolved it will be hard for the markets to rise much higher.
Market Direction Outlook And Strategy
The change for market direction is for a return to a down trend. It could still be quite choppy but the general underlying current in the market direction is that moving higher is facing too much resistance and with the fiscal cliff on the minds of investors, the easier route is to move lower.
Market Direction then for Tuesday is a neutral outlook with a bias to the downside as the stock market direction faces heavier resistance. I had felt there was a good chance the S&P could reach the 50 period moving average before pulling back, but right now the markets look too weak to push much higher.
Those who follow candlestick chart analysis will have noticed that the close today was a black candlestick which confirmed the Friday signal of a possible downturn in the market direction. The candlestick chart analysis issued a sell signal at the close today.
We could see more market direction action on Tuesday like today. I will be doing the Trading For Pennies Strategy tomorrow. I did not have a chance today to trade it.
Internal Market Direction Links