Market Direction Technical Analysis Outlook for Dec 7 2012 – Higher But Cautious

Market direction tomorrow may be heavily impacted by the employment numbers but overall the fiscal cliff remains the main focus of investors. The US initial jobless claims fell back to 370,000 for the period ending last week which is a further decline from the previous week’s number of 395,000. If you recall the article on the market timing strategy using the weekly initial jobless claims, (link to that market timing article is here) you may recall that the lower unemployment claims is bullish for the stock markets.

The European Central Bank left its interest rate unchanged at 0.75 percent but the big news was the announcement of the economic slump that is continuing  and is projected to last until the second half of 2013. Meanwhile Germany, British and indeed most European stock markets are continuing to push higher. The sort of “wall or worry” scenario. Germany’s stock market has recovered all the losses from the 2008 to 2009 market collapse and is now nearing all time highs once again.

Market Direction Dec 6 2012

All the indexes were in the green today with the S&P 500 market direction up 4.66 points, the Dow market direction up 39.55 pointd and the NASDAQ market direction up 15.57 points. Apple Stock which was slumping in the morning after yesterday’s biggest drop in 4 years managed to turn around in the afternoon and closed higher by 1.6 percent on the rumor that Apple would soon introduce its own television. It was this bounce in Apple Stock that pushed Market Direction to the upside for the rest of the day.

Market Direction Technical Analysis

Yesterday my market direction technical analysis was for a move sideways with a bias toward down. That was the case in the morning but once Apple Stock bounced, the entire market moved higher. Let’s look at the market direction technical analysis indicators for today and see what they are forecasting for tomorrow.

Market Direction Technical Analysis Tools – Dec 6 2012

For Momentum I am using the 10 period. Momentum is back climbing but is not nearly as high are previous.

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 positive but despite today’s move higher, it is pulling back. It is lower than yesterday and continues to pull lower each of the last several days.

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 positive and back climbing after yesterday.

Rate Of Change has been altered to the 21 day period. The Rate Of Change is positive today and issued a buy signal.

For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is overbought and signaling a neutral outlook for the S&P 500.

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 overbought but it is signaling a move higher for tomorrow.

Market Direction Technical Analysis Dec 6 2012

Market Direction Technical Analysis Dec 6 2012

Market Direction Technical Analysis Outlook And Strategy For Dec 7 2012

The general consensus is for stocks to move higher tomorrow. The rate of change issued a buy signal today. There are two significant problems presently facing the market from a technical view. The first is MACD which is continuing to pullback. It is still positive and during any rally MACD will change slightly but the continual movement lower for MACD while the market attempts to keep pushing higher is not a good sign. MACD is a strong technical indicator and it is signaling that caution is warranted. The second is the Slow Stochastic which is not predicting a large move lower, but it is predicting a neutral market.

The market direction outlook for tomorrow then is for stocks to continue to try to push high but caution is definitely warranted. I am continuing with my Put Selling trades but I am staying out of the money when possible and as I have made a very good return this year I am not concerned about how much I make as much as I am in not being caught in any downturn.

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