Market Direction continued to be under pressure as Tuesday marked the second day of somewhat subdued selling on the stock markets. The S&P 500 closed at 1457.15 down 4.74 points or 0.3 percent while the Dow closed down 55.44 at 13,328.85, down 55.44 points or 0.4 percent while the NASDAQ closed down 7 points. In Canada though the market direction closed up 5.26 points thanks to some rising commodity prices which over the past several trading sessions had declined.
Market Direction and Stocks
As reported, Alcoa stock closed higher in after hours as the company reported earnings that met estimates and saw an increase in revenue that surpassed expectations by a fairly wide margin however they were still lower than the same quarter in the previous year. Meanwhile Monsanto stock rose 2.7% as it reported first quarter results that easily beat estimates and it raised its full year forecast.
Crude oil was almost unchanged at $93.15 a barrel and Gold rose $15.90 to close at $1,662.20 an ounce. Meanwhile Barrick Stock fell 1.3% as they withdrew from talks to sell its African unit to China National Gold. But Goldcorp Stock rose 3.2% reflecting the rise in the price of gold.
Market Direction Technical Indicators of Jan 8 2013
At the close today the market direction technical indicators were starting to reflect the two days of selling. Let’s look at the market direction technical indicators before giving a comment on what might be expected for Wednesday Jan 9 2013.
market direction technical analysis for Jan 8 2013
For Momentum I am using the 10 period. Momentum is still positive and despite today’s selling it is moving higher. This is a good signal for market direction, particularly because so many others are beginning to show weakness developing in the market direction uptrend.
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 it is moving lower.
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 still very overbought and is starting the move lower.
Rate Of Change is set for a 10 period. Rate Of Change is still positive but is moving lower.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is overbought but it is clearly signaling that the market direction is changing to down.
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 overbought and it too is indicating that the market direction is lower.
Market Direction Outlook And Strategy – Start The Rally
The market direction outlook for Wednesday Jan 9 2013 is for Wednesday to be a pivotal day. There is underlying strength in the market but two days of repeated selling and a move lower each day is wearing on the market direction technical indicators. The Fast Stochastic and Slow Stochastic indicators are both signaling clearly that the market direction has shifted to down.
Technically there are signs that the market direction up is starting to have trouble. The rally needs to get started to restore confidence.
Investors are back to where they have been for so much of the past few months – lacking confidence to invest. They are taking small profits where they can and refusing to stay committed. Meanwhile the bigger investors and institutional money are picking up stock on dips but are not pushing the market direction higher. They are continuing to selectively accumulate shares.
Technically market direction looks set to move lower, but instinct tells me that the selling is caused by the wait for Alcoa earnings, lack of confidence among investors and no real catalyst to get the markets moving higher, which is something I mentioned in my market direction comments on the weekend. There is accumulation occurring on many stocks, but those investors are not having trouble buying stock particularly after last week’s big rally, so there is little upward pressure on stocks at present.
Therefore I believe market direction remains higher and once the consolidation of stocks end. Tomorrow is an important day. If stocks fail to start the rally up and instead selling continues then the market direction will have to move lower before it can rally back up.
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