Market Direction Is Up But There Are Market Timing Warnings

In yesterday’s market direction update I indicated that while follow through would be nice to see today, as long as there was not a down day the market timing indicators should continue to rise. The S&P had a nice open, but from there, investors hesitated and refused to push the market direction higher. Instead by 10 AM the S&P was pulling back so that by 10:50 it was ready to try to climb again. The rally lasted until 1:30 and then it was downhill to close below the open. While there was no heavy selling at all today, the S&P did leave behind a bearish candlestick known as the Bearish Doji Star Pattern. Basically this means that there is a bearish market direction trend change possibly about to occur.

I am not a big candlestick follower but I do believe in my market timing technical indicators. But before touching on them I want to mention that fundamentally big up days like yesterday are often followed by neutral to slightly bearish down days. Therefore I am not reading much into today’s action from a market timing perspective. Instead I prefer to look at my market timing indicators.

Market Direction As Indicating By Market Timing Tools

Technically though the market does not look too bad. The S&P 500 closed pretty well on the 200 day moving average. Momentum is unchanged from yesterday.

MACD though is now positive but barely, so I wouldn’t be reading this as a buy signal yet.

The Ultimate Oscillator is back at break-even with a reading of 51.12.

Rate Of Change remains negative although only slightly. Still the rate of change for long-term market timing against market direction has been accurate for a number of years so without a buy signal it could be a warning.

Slow Stochastic is giving a large up signal and as it usually signals more than a few days ahead, the S&P 500 might rally higher from here.

The signal by the slow stochastic is supported by an equal weighty up signal from the fast stochastic.

Market Direction as predicted by market timing tools

Market timing tools for June 7 still predict the S&P market direction will move higher

Market Direction and Market Timing Summary For June 7 2012

There is enough support among the market timing indicators to believe market direction will still move higher from here. But the warning from Rate of Change market timing indicator shouldn’t be ignored plus with such a huge rally on Wednesday you would think that momentum would be higher. It is important to realize that big money can try to move this market higher. While they cannot do this for very long, buying and selling small lots of shares is often all it takes to move the market direction higher in order for them to capitalize on retail investors.

While I am not predicting this will happen, it should be remembered that markets are always being manipulated even for short periods of time. Consider following my put selling tips for a recovering market from yesterday’s article when deciding whether to stay in this market or not. Today I closed a number of positions including selling my YUM Stock which I bought just a few days ago and my naked puts.

While market direction should move higher from here, investors remain somewhat jittery although the VIX back at 21.72 at the close would seem to indicate little fear in the stock market. This is definitely a time to be cautious while the market direction gets sorted out.