The market direction today corrected following the comments from Fed Chairman Ben Bernanke who indicated that over the next few months the Fed may look for an easing back on the liquidity levels currently in use. Just the hint of a change is all it took for the market to plunge today on the news.
While there were positive signs for the economy released today, everything was lost following the news from Bernanke. This was the first such clear indication and it hit investors hard. Many though were already looking for an excuse to sell as the market direction was very overbought. This commenced the selling which I am anticipating will last several days at least.
Market Direction Economic News For The Week
Weekly Initial Unemployment Insurance Claims; New Home Sales and Weekly Fed Data on Thursday
Durable Goods Orders on Friday.
Home sales will be important as with durable goods orders. Next week is a short week with the Memorial Holiday on Monday May 27.
Market Direction Closing For May 22 2013
The S&P 500 closed at 1,655.35 down 13.81 points. The Dow closed at 15,307.17 down 80.41 points. The NASDAQ closed at 3,463.30 down 38.82 points.
Market Direction Technical Indicators At The Close of May 22 2013
Let’s take a moment now and review the market direction technical indicators at the close of May 22 2013 on the S&P 500 and view the market direction outlook for May 23 2013.
For Momentum I am using the 10 period. Momentum is positive but moving lower. After 3 days of sideways action the direction lower is a poor sign for market direction moving 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) issued a buy signal on April 26 and the signal remains valid but today that signal is falling which is another indicator that the market direction may be about to shift to 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 went from overbought to negative in one day as selling overwhelmed the market direction.
Rate Of Change is set for a 21 period. The rate of change is falling for the second day signaling that the rate of change is starting to build to the downside.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is overbought and it signaling that the market direction is lower.
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 signaling the market direction is down.
Market Direction Outlook And Strategy for May 23 2013
Bernanke has pushed the market direction into a corrective phase. Today’s selling was just the start of what I think will be a bigger move lower tomorrow. I don’t at this point see a large plunge in market direction, but investors have pushed stocks up into overvalued prices especially on dividend paying stocks. I believe investors will bail out of those stocks.
This is perfect following May options expiry. I have a lot of cash at the ready and I will be using it in everything from Spy Put Options to the Trading For Pennies to Put Selling. I think this is the start of a correction that the market direction technical indicators have been hinting at since turning primarily sideways.
Thursday then I think we will see a drop or a gap down at the open and then sideways with a rally here and there but overall the market direction tomorrow will be lower. Who knows perhaps the Sell In May adage will hold up once again, thanks to Fed Chairman Ben Bernanke.
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