Investor’s awoke on Wednesday to the market futures being up. The day started with lots of promise, especially after Tuesday’s collapse after the markets seemed to recover almost all the losses in the morning and then gave it all back in the afternoon. I received a number of emails wondering about the market direction call I had released for Wednesday with the bias to the downside.
Market Direction Chart for June 12
The chart for Wednesday is certainly not an encouraging one. The market opened with a sharp gap up and then commencing falling. The very first rally back I bought my first set of Spy Put Options and posted it to twitter. The market direction then set up a pattern of lower highs. The rally attempt in the early afternoon failed and the markets then sold quickly and closed near the lows for the day.
Market Direction Closing For June 12 2013
The S&P 500 closed at 1,612.52 down 13.61 points. The Dow closed at 14,995.23 down 126.79 points. The NASDAQ closed at 3,400.43 down 36.52 points.
Market Direction Technical Indicators At The Close of June 12 2013
Let’s review the market direction technical indicators at the close of June 12 2013 on the S&P 500 and view the market direction outlook for June 13 2013.
For Momentum I am using the 10 period. Momentum is still negative today and has now been negative since May 29.
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 sell signal on May 24. The sell signal is still valid and again today the signal is increasing to the downside.
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 now negative.
Rate Of Change is set for a 21 period. The rate of change is negative for the second day.
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 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 also signaling market direction is up. The Fast Stochastic is signaling that the market direction is down and oversold.
Market Direction Outlook And Strategy for June 13 2013
The market direction today was not encouraging. Every little rally was lower than the previous one and sold into. All the market direction technical indicators are negative. This could be a good thing as they are showing an oversold condition is beginning to take hold which could mean a slight bounce in a day or two. Meanwhile though the market direction remains decidedly negative.
My strategy has been Put Selling with smaller quantities of contracts and buying Spy Put Options for downside movements. I see no reason to change this although if necessary I will be rolling naked puts lower if the stocks I am Put Selling against pull back enough to place my naked puts in jeopardy of being in the money. For my retirement account I am looking to sell at the money covered calls to bring in income and possibly buy them back if the correction looks like it may stall out and then try to recover.
For Thursday then I expect the market direction will try to bounce, fail and then continue to move lower.
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