Monday was fairly quiet as the bond market was closed for Columbus day and market direction basically spent the day with shallow losses. The IMF downgrade of Asia hit the market before the open and the stock markets wandered in the red for Monday. The NASDAQ is being pulled down by the decline in Apple Stock. This is why it is important for Indexes to be weighted better. With Apple Stock such a large component of the NASDAQ it has moved it both up and down over the past two years and I doubt that is going to change any time soon.
There is not a lot to report on market directionat the close today as it was a fairly quite day. This is an important week with earnings out of Alcoa tomorrow. The S&P 500 is expected to post a decline in overall profits for the first time in 11 quarters which with the indexes at elevated levels may be a significant problem for market direction to push any higher. Meanwhile Tuesday also marks the five-year anniversary of the record high closes of both the Dow and the S&P. The S&P is up 16 percent this year and is now 7 percent below its record high. The Dow meanwhile is up 11 percent and just 4 percent below its record high.
A number of market leaders like Apple Stock (AAPL) are declining and stocks that did lead earlier this year like Priceline Stock (PCLN) have not recovered their May highs. All of this is not lost of many investors who you can be sure are taking profits here and there and raising small amounts of cash. None of this is good news for a push higher in market direction which opens the windows to the possibilities of naked calls or call credit spreads. The problem is with no clear signs of a market top or a serious pullback yet in place, it is hard to sell calls at this point in the rally.
Probably the most interesting bit of news today was the announcement of prepaid debit cards for those without banks, by both Walmart and American Express. Walmart has for a number of years been trying to offer banking services. With the cash flow of Walmart Stores, it is not surprising they want to get into banking.
Market Direction Needs To Move Up
While the market direction presently remains intact for the short-term, Friday say a market direction high that almost reached the high of Sept 14. The market needs to push higher to keep this rally moving both short-term and for the mid-term. This is important to watch for. If the market sells here and breaks 1430 it will have set a new lower low and a new lower high. That could mark a turning point in the rally, so it definitely is something that should be watched.
S&P 500 shows that the market direction needs to move higher
Candlestick Chart Analysis
The candlestick at the close for today was a black candlestick. The market opened higher than Friday’s close butit closed below Friday’s close. Friday already had a warning that a sell signal might be generated and today that sell signal came through.
Market Timing Technical Indicators For Market Direction
On the weekend I indicated that overall the market direction remains intact. Today’s news pressured the market and most have turned neutral to unchanged but the fast stochastic is warning that there is more selling ahead and MACD remains negative and did not confirm the Oct 5 high.
Momentum is neutral.
MACD remains negative and unchanged from Friday’s close. This shows the continued pressure on market direction.
Ultimate Oscillator is neutral.
Rate of Change is unchanged.
The Slow Stochastic is slightly bullish.
The Fast Stochastic is slightly bearish.
Market Timing Indicators are predominantly neutral to unchanged with fast stochastic indicating lower tomorrow.
Market Direction Summary for Oct 8 2012
The three most important indicators today are the slow stochastic, MACD Histogram and fast stochastic. The slow stochastic is telling me that the market should be higher later in the week. The Fast Stochastic is telling me there is selling to come either tomorrow or Wednesday. Meanwhile the MACD Histogram is confirming what the fast stochastic is advising about market direction, namely that market direction is about to move lower.
The outlook then is for more pressure to be on stocks for at least the start of the week. The slow stochastic is advising the market direction will be higher later in the week , but that could mean higher from a lower point if there is some selling headed our way Tuesday or Wednesday and that possibility could be influenced tomorrow when Alcoa kicks off earnings season. For Fullyinformed members I am finishing up the Trading For Pennies Strategy outline but tomorrow could be a great day for this strategy to be put to use, whether paper trading or risking actual capital.