The market direction outlook for the start of this week was for the market to continue to hold the 1600 level in the S&P 500 and move higher. The gyrations over the past few days though show that investors are jittery and anxious. The movement of the market direction up over 100 points one day, then down over 100 points the next, then back up show the typical fear that investors have. The fear of missing out on a rally and the fear of being caught in a downturn. Today’s market opening jump is once again based on the “hope” by investors that the Fed Chairman will announce support for the ongoing Quantitative Easing program. Then a Financial Times Report that the Fed would announce on Wednesday the start of scaling back sent stocks tumbling. Then the report that it was all just conjecture and nothing more saw stocks recover somewhat but definitely close off the highs.
Market Direction Game Of Musical Chairs
Believe it or not this has always been the market direction. It is a game of musical chairs. Everyone wants to play but everyone hopes someone else ends up without chair. I have seen this type of market hundreds of times and rather than playing the game of musical chairs, I prefer to stay with my large cap stocks, pick the price points I would own them at and continue my Put Selling strategy. I love to earn income all thanks to heightened volatility.
Volatility And Option Premiums
The VIX Index was interesting to watch as at the morning it was down to $16.33 but with the Financial Times report it jumped 7.8% to $17.62. A lot of fear is in the markets right now and that fear keeps the options premiums, both puts and calls, higher, making my option strategies very profitable.
Stocks followed the same pattern today. For example, Intel Stock during the morning reached a high of $25.25. In the early going I sold naked puts for .36 cents for July 20 options expiry at the $24 put strike. That afternoon as the news hit the markets, the stock plunged back to $24.91 and the same put was trading for .40 cents and could have at one point been sold for .44 cents for the same $24 put strike for July.
Fear is still deep with stocks and investors are willing to bail at a moment’s notice. This is the ideal Put Selling environment.
Home Builders Jump
The National Association of Home Builders/Wells Fargo builder sentiment index jumped to 52 from 44 in May. The index hasn’t been that high since April 2006, which coincidentally was just before housing started its collapse.
Market Direction Closing For June 17 2013
The S&P 500 closed at 1,639.04 up 12.31. The Dow closed at 15,179.85 up 109.67 points. The NASDAQ closed at 3,452.13 up 28.58 points.
Market Direction Technical Indicators At The Close of June 17 2013
Let’s review the market direction technical indicators at the close of June 17 2013 on the S&P 500 and view the market direction outlook for June 18 2013. 
For Momentum I am using the 10 period. Momentum is still negative but would have definitely turned positive if the selling in the afternoon had not entered the picture.
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) issued a sell signal on May 24. The sell signal is still valid and while the divergence is fairly wide, it is narrowing again today from June 12 when it peaked at negative 5.08. Each day it has decreased which could be a signal that the market direction might try to move higher from here. It is however important to understand that the MACD sell signal is still valid.
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 negative today.
Rate Of Change is set for a 21 period. The rate of change is negative for the fifth day.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is still signaling that the market direction is up.
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 indicates that the market direction is higher for tomorrow.
Market Direction Outlook And Strategy for June 18 2013
The Market Direction Technical Indicators are somewhat split. Two are indicating that the market direction will be higher tomorrow and into mid-week. Two are rising but still negative and two are flat and still firmly negative.
As to strategy, there still is no change. I am staying the course as it were and continuing with my Put Selling which is obvious from today’s Intel Stock trade.
For tomorrow then I am expected a bit of weakness but the market will try to hold its ground here. I see nothing that advises me the market direction will be lower tomorrow. If it is lower I am not expecting much. The Market Direction Technical Indicators are showing that the market will be choppy again tomorrow and there may indeed be no clear direction, but that also usually means little chance of the market moving a lot higher or lower in a day. I think looking at the technical indicators, there is a better chance the market direction will be higher tomorrow at the close.
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