The Market direction outlook for Friday was for the market direction to turn back down and try for a retest of the most recent lows. This is what happened on Friday but once again the market closed above the lows for the day. Let’s take a look at the past few weeks and you can see the market direction action. Two days earlier the S&P 500 fell to 1684.91 before closing back above the lows. On Friday the low was 1686.02 before the S&P 500 closed at 1691.42. You can see why I have remained within the market and remain unconcerned about the market direction. This movement sideways is continuing to stay well contained. Friday was just another example. I have marked on the chart below my two support levels which I continue to watch. If 1670 breaks I will be purchasing Spy Put Options.
If we dig a little deeper you can see the same pattern again within the daily chart. The chart below is set for 5 minutes intraday for Friday. You can see that once again the market pushed to the lows for the day shortly before noon. Once the selling was contained and the low held, buyers stepped back in and the market direction turned back up. This has been the pattern for quite a few days now. The market direction sells off in the morning, the lows hold and buyers step back in. Analysts keep indicating that this cannot continue and they are right, but it can continue longer than a lot of analysts realize. The most important aspect of Friday’s action was that the market direction failed to close near the highs of the day and that might be the signal that we could see lower lows on Monday. Let’s look at the technical indicators at the close to determine the outlook.
Market Direction Closing For Aug 9 2013
The S&P 500 closed at 1,691.42 down 6.06. The Dow closed at 15,425.51 down 72.81. The NASDAQ closed at 3,660.11 down 9.02.
Market Direction Technical Indicators At The Close of Aug 9 2013
Let’s review the market direction technical indicators at the close of Aug 9 2013 on the S&P 500 and view the market direction outlook for Aug 12 2013.
For Momentum I am using the 10 period. Momentum finally has turned neutral and is starting to exhibit a bias to the negative.
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 weak sell signal on July 31 which was confirmed August 7 and today that sell signal is continuing to climb.
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 but has fallen dramatically over the past several days and is ready to turn negative.
Rate Of Change is set for a 21 period. The rate of change is positive but has taken a large drop over the past several days as well.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling that the market direction is definitely lower.
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 indicating that the market direction is down again for Monday.
Market Direction Outlook And Strategy for Aug 12 2013
The market direction outlook remains sideways but the bias is continuing to build for more downside action than upside. The market direction technical indicators are all turning down and MACD is building momentum to the downside. The two stochastic indicators are also pointing to lower days ahead in the upcoming week. All in all, none of the technical indicators look particularly promising.
The outlook then for Monday is for more selling. While there remains strength within the market direction and many investors are unwilling to sell, the fact that Friday saw the market direction bounce back from the morning selling but closed off the highs is just another signal that Monday could see more selling. The strength in the market may be test shortly if the market direction should continue lower on Monday.
My strategy at present is still unchanged. I am looking for opportunities to sell puts and taking them when I see them. Until 1670 breaks on the S&P 500 I remain unconcerned about the market direction. If 1670 breaks though I will be purchasing Spy Put Options puts. For Monday then I am looking for more weakness.
Market Direction Internal Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)
Market Direction External Links
Market Direction IWM ETF Russell 2000 Fund Info
Market Direction SPY ETF 500 Fund Info