Unfortunately at the time of my writing the market direction outlook for Thursday May 9, my broker’s charting software was down as they were experiencing technical issues. With their software now available I thought I would put up the market direction technical indicators charts and explain the changes from yesterday for those investors who are interested in a technical overview of market direction heading into May 9.
Market Direction Technical Indicators At The Close of May 8 2013
At the close of the markets on May 8, let’s look at the Market Direction technical indicators to see what the outlook is for May 9 2013.
For Momentum I am using the 10 period. Momentum is still positive and after two days of declines momentum has turned back up. It is not higher than Monday but it is turning back up which is a good sign for market direction to continue higher.
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) issued a buy signal on April 26 and the signal remains valid. The buy signal continues to grow in strength.
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 overbought and you can see in the chart how it is entering an extremely overbought state. This is what bulls like to see from the market direction. A push such as this into overbought territory often drags in more investors and the upswing can continue for a while longer.
Rate Of Change is set for a 21 period. Rate Of Change is still positive but it is turning down. This indicates that while momentum, MACD and the Ultimate Oscillator are all showing higher positive readings, the Rate Of Change is indicating that fewer investors are buying into stocks. This could be the first signal that the buying is not overdone and a rest or pullback is needed before the market direction can continue higher.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is now extremely overbought but still signals that the market direction is 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 now at the most extreme overbought level it can reach but it still indicates there is more room to the upside. Yesterday I indicated that these extreme overbought levels won’t last too much longer. I do believe there will be a pullback shortly.
Market Direction Outlook Second Summary
Not much new to say than my previous market direction outlook. However the indicators do show how extremely overbought the market is. The almost 100 percent readings from both the Slow Stochastic and Fast Stochastic are rarely not followed by selling shortly. I would still expect that to happen. The Rate of Change is interesting in that it is warnings investors that this latest rally is losing buyers as more and more buyers have moved aside and many have taken profits.
My outlook is unchanged with the above technical analysis. I am expecting the market direction to be weak tomorrow unless the Weekly Initial Unemployment Insurance Claims are a lot better than expected. That could be enough of a fire to light this market higher. If that happens though, I would expect some selling to enter the market direction.
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