Market Direction today was all up. There is more than one reason for it but between being deeply oversold with markets down below the 200 day moving average and hope that Congress and the President get the message about the fiscal cliff, investors were back buying again. A number of the stocks I follow did very well today and others not as well as I had expected. Intel Stock is deeply oversold but it cannot get a serious move back to even the $21.00 valuation. Microsoft stock as well did not see a great bounce back despite the shift in market direction, but other stocks did, including Nucor Stock, Home Depot Stock, Yum Stock, McDonalds Stock and many others. Apple Stock bounced back to $565 for a 7 percent gain after being so oversold for much of the past couple of weeks.
Before proceeding with the chart of the S&P I want to take a look first at the market timing technical indicators to see what they say about market direction.
Market Timing Indicators and Market Direction
Market Timing Indicators For Nov 19 2012
For Momentum I am using the 10 period. Momentum is still negative but as you can see in the chart, today’s action has pushed momentum higher.
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 it is up from Friday’s close.
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 but today’s push higher in market direction has moved the Ultimate Oscillator away from oversold and on the edge of turning positive.
Rate Of Change is set for a 10 period. Rate Of Change is still negative but it too is moving higher.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is no longer oversold. Today’s push higher in market direction has given the Slow Stochastic a market direction up signal.
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 no longer oversold and it too is signaling market direction higher.
What To Watch For In The Market Timing Indicators
This rally today has set the stage for more upside tomorrow. The Fast Stochastic signals are telling me that tomorrow the market will be higher than today. The slow stochastic looks out beyond one or two days so it is indicating the market should be higher by mid-week.
The most important indicator to follow is MACD. The MACD Histogram must turn positive to confirm a change in trend. On September 25 and 26, MACD signaled market direction down. That has not changed. The Fast Stochastic is a short-term indicator and is signaling tomorrow’s market direction is still up, but it is not a medium or even a weekly indicator. The Slow Stochastic is looking out to mid-week but MACD is the longer term indicator and the one to watch.
If the S&P can recover to the 50 period moving average, which is what I suspect will happen, watch to see if MACD can turn positive. If it does then there is more upside left to the rally. However if it does not, then it will not confirm the market direction rally higher and the 50 period will be a perfect shorting opportunity.
Market Direction Chart Of S&P 500
Below is the latest Market Direction chart for the S&P 500 Stock Market Index. The trend remains down until the S&P 500 breaks the pattern of lower lows and lower highs. But the S&P 500 closed above the 200 day moving average which is a great sign for more upside tomorrow.
The most important technical readout from the chart below is the close for the day which was at the high for the day. This is a very bullish sign and unless something unknown to the market occurs overnight, the market direction is up for tomorrow.
Market Direction Nov 19 2012
Trading For Pennies Strategy And Spy Put Hedge
As I indicated in my market timing call from the weekend, both of the above are trend trades. The Trading For Pennies Strategy is somewhat better than the Spy Puts Hedge because it can be traded either up or down. The Spy Puts Hedge is designed for down markets only.
That said, the Trading For Pennies Strategy still works better when the trend is recognized and followed. This means tomorrow I will be watching for upside action to buy and sell calls. The Trading For Pennies Strategy can be followed here for FullyInformed Members.
Candlestick Chart Analysis
For those investors who like to follow Candlestick Chart Analysis today’s close created what is called a White Marubozu. This candlestick shows that buyers were in control the entire day and closed the market at the high for the day. This created a confirmed buy signal.
Market Direction Portfolio
William put up some trades today and explained more about his market direction portfolio. He has had very good success trading his market direction portfolio. He created the portfolio around his need for income but with limited time spent actually investing. He hates to read up on companies, study charts or stocks and he thinks mutual funds and the like are a poor investment strategy. For FullyInformed Members you should take a minute and read his write-up through this link. Also he is expanding his description of his trades to assist Members as well so you might also want to check out his latest trade through this link.
Market Direction Outlook For Nov 20 2012 And My Strategy
Market Direction is now back up. This could last just until mid-week, but it being a short week, we could see more upside than normal just because of the shorten week. I plan to use the upside action to close any naked puts that are at the money or even slightly in the money and move out of the money as long as there are profits. I am continuing to raise cash when it is profitable to do so and I will be doing more Trading For Pennies trades. Meanwhile I am expecting this rally will end and downside will return but it could be later next week or even the week after that. My technical tools are designed for short-term outlooks and certainly not much beyond a few days to a week at most in market direction.
That said, market direction is up for tomorrow and I will be taking profits throughout any rise in my favorite stocks and naked puts positions.
Internal Market Direction Links