Market Direction Remains Down Despite Friday’s Rally Attempt

The market direction outlook on Thursday was for the stock markets to attempt a rally on Friday which is only natural after such a big drop on Thursday. You can read Thursday’s market direction comment here. Based on Thursday market direction outlook and Thursday’s market timing technical indicators, I bought spy put contracts on Friday near the close. You can read about Friday’s spy put trade here including the problems with holding spy put contracts over a weekend.

Market Direction Outlook After Friday’s Close

Despite Friday’s rally attempt the market direction outlook has not changed and Monday looks to be a down day. Indeed the slow stochastic technical market timing indicator which looks out beyond more than a couple of days also points to continued weakness in the S&P 500 for much of the next week.

Market Timing Technical Indicators For June 22 2012

Below is Friday’s market timing technical indicators after the close of the S&P on Friday June 22 2012.

Market Direction and Market Timing

Market timing indicators at close of trading June 22 show a general consensus of market direction lower.

Due to Friday’s rise, the momentum market timing indicator is almost unchanged from Thursday and remains positive.

MACD (Moving Average Convergence / Divergence) has contracted further and the MACD Histogram is on the verge of turning negative. The Divergence was still at 4.39 has pulled back by almost half from its high just two trading sessions earlier when market direction was still up and the divergence reading was 7.11.

The Ultimate Oscillator has now turned negative, while rate of change has turned back up and is positive at 1.99.

However the Slow Stochastic is signalling more weakness ahead and the fast stochastic which looks out one or two days continues to also point to market direction heading lower.

Market Direction Outlook For June 25th week

While certainly not a market timing indicator, the Trader’s Almanac shows that the last week of July has been bearish for the Dow and the last trading day of June has seen the Dow down 15 of the last 20 years. The NASDAQ has been down 6 of the last 6 years. Believe it or not, the Trader’s Almanac also indicates that July begins the NASDAQ’s worst four months of the year. However July is the best performing month for the Dow and the S&P for the third quarter.

Leaving the Trader’s Almanac aside, the market timing indicators as a general consensus are pointing to a lower market direction this upcoming week. The track record so far this year for my market timing technical indicators is 63% accuracy of the market direction calls of the S&P 500 to date. With my spy put trade ready for Monday I am interested to see if my market timing technical indicators are correct once again for market direction this upcoming week.