FullyInformed.com

Market Direction Technical Analysis For Second Week Of December 2012

Dec 9, 2012 | Stock Market Outlook

Market Direction last week saw a consolidation of the market. The S&P intraday market direction high was on Dec 3 when the S&P hit 1423.73. From there the S&P pulled back a bit but stayed within a very tight range. Friday though saw the S&P close at 1418.67 the highest close since Nov 6. Market direction remains cautious but is up. There are a few signs that need to be watched. To cover off these market direction signs I want to present 3 stocks and 1 ETF that are worth watching as the market direction tries to push higher.

Market Direction – Stocks To Watch

After the stock market crash in 2008 to 2009, the NASDAQ commenced the recovery of all the indexes. Three stocks were involved in leading the stock markets to recovery. These were Priceline Stock, Apple Stock and Google Stock. These three tech giants have all been leading but since setting new highs recently all three are having trouble.

While the stock market direction may continue higher, the job of investors is to make sure they do not get caught in a topping formation. The clues are straight forward. As the stocks continue to climb, these three tech giants need to stage a recovery. Let’s look at what levels investors need to be aware of.

Google Stock

The three levels for Google Stock are $765, $759 and $705. All three of these levels need to be watched. If Google stock pushes above $705 and the market direction continues higher, then Google stock needs to push above $759.00. After that it needs to recover $765. If Google stock does not recover any of these levels, the market direction recovery will most likely fail and this rise in valuations in the overall indexes will not be sustained.

Google Stock 6 month chart

Google Stock 6 month chart

Apple Stock

Apple Stock has three levels to attempt to recover. $700, $650 and $600 all need to be recovered.

Apple Stock 6 month chart

Apple Stock 6 month chart

Priceline Stock

Priceline stock is doing the best of all three stocks at holding its high valuations and recovering. There are only two levels to reach. The first at $650 was passed this week. The next level is $690.00 and Priceline Stock is within 31 points of the $690 high. .

Priceline Stock Chart

Priceline Stock Chart

All three stocks do not need to recover in order for market direction to be confirmed as still up. But one of these must recover and keep climbing. Of all three tech stocks, Priceline Stock was the first to lead the recovery in 2009. While it too pulled back, its correction was smaller than Google Stock or Apple Stock and it remains well within reach of its high. This could be the stock to continue to lead the market direction higher into December.

XLF Financial ETF

Part of the reason technology stocks lead the recovery back in 2009 is because the financial services sector was decimated. The destruction of the financial services sector left this sector unable to assist any recovery in the stock market direction higher. Therefore many investors turned to technology which has performed well up until this past fall. This could be signaling that the Financial Services sector is stepping back in to try to support the markets. I have watched the rise in the XLF Financial Sector ETF since the start of the year and there has been growing interest in the financial service stocks again.

If you look at the XLF chart below you can see that in early April the XLF reached $16.00 and then pulled back. This pullback occurred a few days before the market direction started to correct. But looking at the chart you can see that since bottoming in June the XLF has continued to push higher reaching $16.40 in September. The recent pullback which started in September was not very pronounced until November, but since then the XLF is once more pushing higher closing on Friday at $16.02.

If technology is starting to lose control of market direction up, the financials which in past markets was the sector to lead the market, may be finally starting to lead the market again. If the three technology stocks above fail to recover I will be watching XLF for any signals of a downturn. If the 3 large tech giants do not recover, but XLF moves higher, then market direction will be up and this will signal the return of the financial index to its lead role.

XLF Financial ETF

XLF Financial ETF Chart

By watching the above 3 stocks and 1 ETF investors have an early warning system for advising them when or if they should contemplate getting out of positions and buy inverse funds or puts for a downturn in market direction.

S&P 500 Market Direction Chart

In the market direction chart below you can see the consolidation of the market from this week. You can also see that the market is back making new higher lows as it tries to recover from the November correction. The S&P is back to the 50 period exponential moving average. This is the second attempt to break through resistance at the 50 period moving average. I am expecting market direction to be choppy but unless the fiscal cliff issue takes a turn for the worse, I believe the 50 period moving average will be broken and market direction will move higher.

Market Direction Technical Analysis Dec 7 2012

Market Direction Technical Analysis Dec 7 2012

Market Direction Technical Analysis Indicators – Dec 7 201

For Momentum I am using the 10 period. Momentum is still positive but Friday’s action has not turned it higher. It continues to fall. This is of concern as momentum indicates investor sentiment and for the markets to move higher sentiment has to improve.

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 and is down slightly from Thursday but the readings are still clear. The signal is for the market direction to remain up.

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 and is rising from the previous day, which is of course a good sign for a higher market direction.

Rate Of Change is set for a 21 period. Rate Of Change is still positive and it too is rising signaling a higher market direction.

For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is overbought and close to a neutral reading although on Friday the reading was still market direction up..

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 the signal is solidly for the market direction to move higher.

Market Direction technical Analysis for Dec 7 2012

Market Direction technical Analysis for Dec 7 2012

 

Market Direction Technical Analysis Outlook

There are some worrying signs which particularly are coming from momentum. Momentum needs to improve for the market direction to push higher. But overall the consensus is for the market direction to continue to push higher. The overbought readings from the slow and fast stochastic indicators are good signs. They show there is still strength within the market. The rate of change now set for a 21 period is continuing to rise despite the weak markets last week.

The general consensus of the Market Direction Technical Analysis indicators is for the market direction to continue higher this week. The fast stochastic is signaling that the market direction should move higher on Monday Dec 8.

Market Direction Strategy

The strategy for market direction is unchanged. I am still selling naked puts on my favorite large cap dividend paying stocks. With the market direction up I am looking for any opportunity to close naked puts early which releases my capital for other naked put trades. I do not want to hold options into expiry with the market this high and the fiscal cliff looming. This week marks the options expiry for Dec 22 options. I have a lot of options set to expire. I will only look to close options early that are close to be in the money. Right now though my naked puts are either in the money like Intel Stock or out of the money but I will be keeping a close eye.

The Trading For Pennies Strategy has now entered my portfolio permanently as the returns are excellent for the amount of capital being invested. I have tripled my capital in the Trading For Pennies Strategy trades making the loss of capital should a trade go against me of little consequence.

Market Direction then for the start of the week is for the market to continue to break through the 50 period moving average and move higher.

Internal Market Direction Links

Market Timing Articles Index

How I Use Market Timing

Understanding Short-Term Market Direction Signals

Understanding Market Timing Systems

Market Direction Prior Signals

Search

Select to view all results...

Generic selectors
Exact matches only
Search in title
Search in content
Post Type Selectors

Recent Outlooks

Stock Market Outlook for Thu Mar 28 2024 – Choppy – Dips Likely – But Higher

Prior Trading Day Summary: On Wednesday investors returned and snapped up stocks that had drifted lower. The SPX bounced at the open and by the close it was up 45 points to close at 5248. The NASDAQ rose 83 points …

Morning Investing Strategy Notes for Wed Mar 27 2024

For FullyInformed Members the morning Investing Strategy Notes for Wed Mar 27 2024 discuss the outlook for Wednesday and comments on a possible correction and what it might entail. There are a number of trade ideas outlined including FedEx Stock …

Stock Market Outlook for Wed Mar 27 2024 – Unconfirmed MACD Down Signal

Prior Trading Day Summary: I lost my power shortly after the markets closed. Articles this evening will be shorter if I can post any. On Tuesday trading volume picked up as stocks fell for another day. The SPX closed near …

Morning Investing Strategy Notes for Tue Mar 26 2024

For FullyInformed Members the morning Investing Strategy Notes for Tue Mar 26 2024 discuss the outlook for Tuesday. As well there are comments on support levels to watch in the SPX for the week. There are a number of trade …

Stock Market Outlook for Tue Mar 26 2024 – Still Bullish

Prior Trading Day Summary: On Monday low trading volumes hindered the chance of a positive close. The SPX saw just 3.4 billion shares traded. This matches the volume on last Friday. While poor , it is also bullish as it …

Morning Investing Strategy Notes for Mon Mar 25 2024

For FullyInformed Members the morning Investing Strategy Notes for Mon Mar 25 2024 discuss the outlook for Monday and the shortened week ahead of the Easter holiday. There are a number of trade ideas outlined including FedEx Stock (FDX), Nike …

Stock Market Outlook for Mon Mar 25 2024 – Dip Likely But Higher Close

Prior Trading Day Summary: On Friday investors took profits ahead of the upcoming shortened Easter week with indexes sitting at all-time highs. On Friday the SPX closed down just 7 points to 5234. For the week the index was up …

Morning Investing Strategy Notes for Fri Mar 22 2024

For FullyInformed Members the morning Investing Strategy Notes for Fri Mar 22 2024 discuss the outlook for Friday. There are a large number of trade ideas outlined including FedEx Stock (FDX), Nike Stock (NKE), Lululemon Athletica Stock (LULU),  and more …

Stock Market Outlook for Fri Mar 22 2024 – Choppy – Dips Possible But Still Up

Prior Trading Day Summary: On Thursday all 3 indexes closed at new all-time highs for a second straight day. Volumes remained decent but stocks are seeing some selling as investors are taking a few profits with the indexes at new …

Morning Investing Strategy Notes for Thu Mar 21 2024

For FullyInformed Members the morning Investing Strategy Notes for Thu Mar 21 2024 discuss the outlook for Thursday following Wednesday’s FOMC interest rate decision and Fed Chair Powell’s news conference. There are a large number of trade ideas outlined including …

Stock Market Outlook for Thu Mar 21 2024 – Higher Still

Prior Trading Day Summary: On Wednesday the SPX, Dow Jones and NASDAQ indexes all closed at new all-time highs. Comments from Fed Chair Powell reaffirming 3 rate cuts in 2024 were still “on the table” was all that investors needed …

Morning Investing Strategy Notes for Wed Mar 20 2024

For FullyInformed Members the morning Investing Strategy Notes for Wed Mar 20 2024 discuss the outlook for Wednesday and the latest FOMC interest rate decision. There are also a number of trade ideas outlined including Chewy Stock (CHWY), SPY ETF, …

Stock Market Outlook for Wed Mar 20 2024 – All About The Fed – Bullish

Prior Trading Day Summary: On Tuesday the morning started with a dip down to 5131 but buyers were waiting for the dip and volumes picked up. Deep dips in a number of big caps like NVIDIA Stock (NVDA) found ready …

Morning Investing Strategy Notes for Tue Mar 19 2024

For FullyInformed Members the morning Investing Strategy Notes for Tue Mar 19 2024 discuss the outlook for Tuesday following Monday’s rally and before Wednesday’s latest FOMC interest rate decision. There are also a number of trade ideas outlined including Chevron …