Market Direction Outlook For Mar 06 2013 – Cautious But Still Invested

Market Direction today ended up pushing higher on reasonable volume with the Dow up over 100 points beyond the Oct 9 2007 previous all-time peak. The S&P 500 closed at another new 5 year high and it about 1.6 percent below its peak. The market direction jump today was possibly more about investor enthusiasm than technical or economic. The ISM non-manufacturing index rose to 56 in February from 55.2 in January, ahead of estimates and a sign of continuing growth. The rally in the US markets followed on the heels of rallying in Europe. Meanwhile 28 of the 30 stocks in the Dow were up including Cisco, Boeing, United Technologies and HP Stock which saw gains of 2 percent and more

Even Apple Stock joined in as it rose 2.6 percent for its biggest jump in a month.

Market Direction Action For Today

The S&P 500 though is up just 0.57% from its intraday high of Feb 20 so while today was impressive the SPX market direction is still climbing slowly which keeps me continuing with the strategy of staying cautious. These new highs are impressive but each of them continues to be a grind and the last month has been incredibly slow. The S&P 500 is up just 1.76% from its close on Feb 1. All the big gains this year were in January.

Market Direction March 5 2013

Market Direction Closings

The S&P 500 closed at 1539.79, up 14.59 points and the Dow closed at 14,253.77, up 125.95 points. The NASDAQ closed at 3224.13 up 42.10 points.

Market Direction Technical Indicators At The Close of Mar 05 2013

Let’s take a moment now and review the market direction technical indicators at today’s close on the S&P 500 and view the next trading day’s outlook.

Market Direction Mar 05 2013

For Momentum I am using the 10 period. Momentum is clinging to the positive side but again the momentum while to the upside, is more neutral than truly signaling up.

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 negative but at negative 0.06 MACD is once more on the verge of issuing a buy signal.

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 overbought continuing the movement from yesterday. This overbought condition is less than previous periods including mid-January. This shows that while the market direction has continued higher, investors are becoming more nervous and pulling back on some of their capital as they take a wait and see approach.

Rate Of Change is set for a 21 period. Rate Of Change is had a big jump higher today. The last time the rate of change jumped higher the market sold off the following couple of days.

For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is overbought once again but it is indicating that the market direction should be modestly higher later this week.

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 extremely overbought but continues to signal a higher day tomorrow.

Market Direction Outlook And Strategy for Mar 06 2013

Normally after the market direction has had a strong day such as today, the markets have tended to open weak the next day. They remain weak for a short period during the day as investors test the support levels on dips and then the market direction has turned back to higher.

The put / call ratio is heavily overweight on the put side but this is natural as the market direction is back pushing into fresh territory. For the Dow Index the market direction is pushing into uncharted territory and that always worries investors. Often though the market direction moves against the majority and right now most are holding puts.

Tomorrow I believe the market direction will be weak but try to still move higher. The rally though continues to show signs of tiredness but with resilience and the ability to surprise to the upside. My outlook is for the market direction to remain with a bias to the upside. My strategy remains unchanged at cautious and as the VIX Index saw a low of $13.24 but closed higher at $13.48, I think the VIX Index could be advising that investors are concerned about this latest push to another new 5 year high. This could signal that market direction may see trouble as it tries to push higher. Meanwhile as explained in my intraday comments today, I do not see the giant bear trap being discussed by many market pundits. A pullback after such a strong day is to be expected but the bias for market direction is still up.

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