Today the market direction moved higher as investors warmed to the idea of another 4 years of Obama. When you consider the past 4 years I suppose there isn’t much not to like about it. Today commodities moved higher and the US Dollar fell lower which are ideal environments for the stock market direction to move up. The stock market loves the liquidity of the Federal Reserve and if the past 4 years are any indication then the next four years may see a very accommodating Federal Reserve. If that continues to be the case, stocks’ earnings may be able to grow somewhat and possibly prices will move higher.
I thought it was interesting this evening as the news came out that Romney might win, the Dow futures fell 100 points and then as the evening wore on they came right back up as Obama was obviously going to win. The market direction remains range bound but as with most Presidential elections, there is a “honeymoon” period which could see stocks push higher and allow for some Put Selling opportunities.
Market Direction S&P 500
I think the bigger question on market direction is perhaps not so much the upside as how much downside is there in stocks? This is what can make or break it for put sellers. If we look at the S&P 500 over the past 1 year as in the chart below it actually looks like the market direction could hold the 1375 to 1400 on the low end.
The S&P 500 seems to be holding the 1400 level quite well
With that knowledge the strategy could easily be to do Put Selling in two stages. Sell a handful of puts at the strike just out of the money on a favorite stock and then apply additional capital to Put Selling further out of the money strikes on the same stock. This two prong approach has worked for me during periods when the market looks top-heavy but doesn’t fall which is what the market direction seems to be signaling presently.
This also leaves more capital at lower levels while less capital is being exposed to higher risk at higher put strikes. Should the market direction pull back down to the 1400 level again, there is a good chance that the lower put strikes may end up out of the money keeping capital free from assignment and able to produce more income.
Market Technical Indicators for Nov 6 2012
The market timing technical indicators will not be quite accurate this evening as they will be heavily influenced by the big rally leading to the election results. This can skew the technical indicators but still they are worth a look.
Momentum is almost positive and won’t take much to turn it back into positive territory.
MACD is probably among the more important indicators for today. Right now it is still negative but it has moved up substantially over the past few trading sessions, a very good sign for market direction change.
The Ultimate Oscillator is already positive and climbing.
Rate Of Change is climbing as well although still negative but another positive trading day and it too will be positive.
Slow Stochastic is signaling more sideways action than up action, but the Fast Stochastic is signaling more upside for tomorrow and into Thursday as well.
Market timing indicators for Nov 6 2012
Market Direction Outlook For Nov 7 2012
For tomorrow, Nov 7, I won’t be surprised to see more push higher. I imagine there will be some nervousness and there will probably be some selling to start, but after that I am expecting the market direction to regain its footing. William plans on moving back to a buy for his market direction portfolio. Tomorrow I will be looking at using the Trading For Pennies Strategy in the morning and then into the close as I expect volatility will push the IWM ETF around and make it very decent for trading.
Market direction remains range bound which is actually quite good for Put Selling my favorite stocks on dips and I will be watching for any such opportunities tomorrow should nervous investors push the stock market direction down to start the day after the Presidential election.