Market Direction Turns Back Up But Can It Rally Higher

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Market Direction yesterday still remained bearish despite the action. The Rate of Change market timing indicator moved into positive territory yesterday and the fast and slow stochastic indicators both predicted a bounce could be at hand but I saw nothing yesterday to pinpoint a rally of 1.65% today. Overall investors were buoyed by the news out of Europe that ECB President Mario Draghi indicated he would do whatever it takes to defend the Euro and the Union. This is like the boy who cried wolf but investors keep buying into it. Investors in general are optimistic in outlook and any chance of Europe sorting out its mess is bought into by investors. I have no idea how long this “happier mood” will last among investors but as I sell options I am not very concerned which way the stock market wants to swing.

Market Direction Chart

Today’s Market Direction chart of the S&P 500 shows that the higher lows is still in place. On Wednesday the S&P 500 fell to a low of 1329.24, just above the important 1325 level which I indicated marks the most recent low point for this rally. If the S&P 500 manages to not break 1325, and right now all things look positive, then the S&P 500 rally should continue to move the index higher. The next indicator will be to see if the S&P can reach a new higher high.

Market Direction Chart of the S&P 500

The Market Direction chart of the S&P 500 shows that the higher lows pattern is still in play.

Candlestick Chart Analysis

For those readers who like to following the Candlestick Chart Analysis of the S&P 500 index, today candlestick was a white opening marubozu. This candlestick shows that the day opened strong and prices continued to rise throughout most of the day but failed to close at the high of the day. This is normally a “buy-if” signal which tells investors that if Friday’s open is higher than Thursday’s close, and the stock market maintains a move higher, then a buy signal will be generated for the S&P 500 Index.

Market Timing Indicators

There are a number of important changes in the market timing indicators as they relate to the overall market direction.

The first is Momentum. This market timing indicator has swung back to positive. The move up was strong today. We will have to wait until Friday to see what the market direction is and see how it affects the momentum indicator.

MACD Histogram or (Moving Average Convergence / Divergence) was moving sharply negative going into the open today. By the close of the market the move lower in MACD had been cut to -1.31. While still negative, MACD is climbing.

The Ultimate Oscillator has turned back positive and is climbing.

Rate of Change is the most interesting of the market timing technical tools for today. The Rate of Change reading yesterday was positive with a narrow reading of 23. Today despite all the upturn in stocks, the reading was 24, basically unchanged from yesterday. How this will impact tomorrow or how I should interpret this market timing tool’s reading I am unsure. We will have to wait and see what the Rate of Change reading is tomorrow.

Slow Stochastic which yesterday was signaling that the selling was slowing and a bounce might be at hand is today undecided. Often an undecided reading by the Slow Stochastic market timing tool signals that the market direction is going to turn sideways. We will know by next week.

The Fast Stochastic indicator is signaling an up move by stocks so I would expect today’s rally to continue into Friday.

Market Timing Indicator for July 26 2012

Market Timing Indicators for July 26 2012 have a lot to say on stock market direction.

Market Direction / Market Timing Outlook

There is enough indication by the market timing tools that the market direction for Friday is now changed back to up. With just three trading days left in July it should be interesting to see what August brings for the market direction.