Market Direction Outlook For Feb 19 2013 – Stay Cautious, Stay Invested

Market Direction on Friday stayed pretty well as expected. The market direction pushed sideways but with a bias to the downside. The news out of Walmart that sales were very disappointing for the month caught the market by surprise which made  it tough for the market direction to recover. The market direction technical indicators from Friday ended up with more strength being added to the downside..

Market Direction Action on Friday

The biggest news was probably the leak report from Walmart that suggested US Payroll tax increases were hurting February sales. This was not expected and the market direction pushed down later in the afternoon. Despite this though the S&P 500 was still higher for a seventh consecutive week of gains, albeit smaller ones lately.

On Friday the market direction action was a series of lower highs and lower lows throughout the day. The drop on the news out of Walmart is evident in the 5 minute S&P 500 chart below. Nonetheless the S&P 500 still managed to make a late day recovery in the market direction and closed down just 1.59 points.

Market Direction Action on Friday Feb 15 2013

The other big news for the day was the rumor that George Soros had cut his gold holdings in half. Gold fell $26 dollars to close at $1609. The rise in the US dollar is also hurting gold and this may very well continue into next week. Barrick Gold closed at its lowest level since 2008 on Friday. You can read more about my ABX Stock outlook and Put Selling trades through this link.

The Empire State manufacturing index showed that New York region activity jumped to a reading of 10 from last month’s negative 7.8 reading which beat forecasts. Added to this was the Thomson Reuters/University of Michigan consumer sentiment index for February which came in at a three-month high of 76.3.

Market Direction Closings

The S&P 500 closed at 1519.79 down 1.59 points and the Dow closed at 13,981.76 up 8.37 points. The NASDAQ closed at 3192.03.

Market Direction Technical Indicators At The Close of Feb 15 2013

Let’s take a moment now and review the market direction technical indicators at today’s close on the S&P 500 and view the next trading day’s outlook.

Market Direction Technical Indicator for Feb 15 2013

Market Direction Technical Indicator for Feb 15 2013

For Momentum I am using the 10 period. Momentum is still positive but again, it is being pulled lower.

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. It marks the send of the second week of negative readings and continues to confirm the sell signal from Feb 4. The S&P 500 is now up 1.6% since the sell signal of Feb 4. It should be interesting to see if the sell signal was correct.

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 positive but is back falling.

Rate Of Change is set for a 21 period. Rate Of Change is still positive and it too is falling.

For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is extremely overbought and indicating 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 extremely overbought and it too is signaling market direction is lower.

Market Direction Outlook And Strategy for Feb 19 2013

This is truly a market climbing a wall of skepticism. All the market direction technical indicators are now under pressure and the sell signal from MACD is continuing to grow. Since Feb 4 the sell signal has not changed but the readings are showing a wider divergence almost daily. On Thursday the market direction technical indicators were evenly split as to the market direction being either up or down. At the market close on Friday two are indicating the market direction is lower. One is confirming market direction is down. The other three are still positive but point to continued weakness in the rise in the S&P 500.

The outlook for Tuesday then is for a continuation of this see-saw market direction. Overall the move is really more sideways than either up or down. This sideways movement has a distinct bias to the upside but all market direction indicators continue to warn that caution is advised even if the market direction can push higher on Tuesday. I plan to stay cautious and stay invested.

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