Market Direction Outlook for Last Week of Nov 2012

Market Direction going into the final week of November 2012 should be interesting. Thursday last week was a holiday and Friday was a short day. On Friday stocks pushed into the last few minutes of the day and the Dow ended up with a 172 point gain and the S&P moved to 1409. The NASDAQ which lead the correction moved back to close above the 200 day moving average with a 40 point gain bringing it to 2966.85.

There was a lot of activity on Friday including more Greek problems and an inability of Europe to still solve its problems, but there was also a rise in German business confidence. Gold and precious metals moved higher with Gold now at 1748.60 an ounce. Perhaps one of the more interesting developments on Friday was the rise in RIMM by 13.6 percent which many analysts were chattering about. Honestly this stock is so badly beaten up that I guess any jump is news, but Research In Motion shares are at the point where they are for speculators only at this stage.

Market Timing Indicators From Friday Nov 23 2012

With the big push up in market direction on Friday all the market timing technical indicators have improved.

market direction signal

Market direction is up as confirmed by market timing indicators

For Momentum I am using the 10 period. Momentum is now up after Friday’s market direction push 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 now positive after Friday’s big market direction push up and it has issued 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 now extremely overbought which could slow a further advance but the momentum remains to the upside..

Rate Of Change is set for a 10 period. Rate Of Change is positive as of Friday’s close.

For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is still signaling a market direction up but the rate of movement higher is slower and looking out mid-week, the S&P 500 may have trouble pushing into the 50 period moving average.

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 far more bullish than the Slow Stochastic at this point of the rally. Many analysts felt that this was nothing more than a one or two-day bounce. With the market continuing to push higher and now the S&P 500 up to the 100 day moving average, some analysts are worried this could be a full market recovery which they have mis-called.

The Fast Stochastic is signaling that the market direction is solidly higher to start the week.

Market Direction Outlook Chart

Below is the last 3 months of the S&P 500. The market direction on Friday closed above the 100 period moving average. I believe the market direction should be able to push to the 50 period moving average. Once it reaches the 50 period I believe it will meet stiffer resistance and could turn back.

Market Direction Chart for the S&P 500

Market Direction Chart For The S&P 500

Unless the market direction can push above the most recent high on November 2 of 1434, the rally will remain suspect. This though does not mean the rally cannot be traded profitably.


Market Direction Outlook And Strategy

The market direction outlook for the start of the week is definitely up. There should be enough momentum to push the market direction still higher but it must be remembered that the previous big up day had no follow through which is a warning about this rally. The key to the rally now is whether market direction can close higher than the Nov 2 high of 1434 and establish a new higher high. From there, the market direction must move still higher and set new higher highs in a string until it breaks the most recent high set September 14 of $1474.

Meanwhile I am continuing with Put Selling but in particular staying with out of the money puts on rising stocks and I have used the Bollinger Bands Strategy which I wrote about this weekend.

The Trading For Pennies Strategy is being used daily now and is definitely augmenting my earnings. For the start of the last week of November then, I expect the market direction to move higher, then meet stiffer resistance at the 50 period moving average. I will reassess at the 50 period once the market direction gets pushed that high. If it fails to reach the 50 period then naturally we will all know that this market direction rise was just a bounce and the move lower will resume. The markets are entering one of the more bullish periods of the fall to winter and that should have some effect on the market direction as well as earnings reports from the Black Friday and Cyber Monday sales. It should be an interesting final week.

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