Market Direction by the close today followed almost the identical pattern as yesterday and stuck cleanly with the market direction technical indicators for another day. The market weakness which I discussed in today’s market direction intraday comments remains throughout the rest of the day and into the close the final rally failed to close near the final rally high. The action today was again related to the unknown outcome of the Cyprus bailout and their tax levy plan on savings accounts. Meanwhile in Cyprus the government has continued to keep banks closed until at least Thursday. Protests were loud and not just from Cyprus. Government in many countries including the United States and Canada have called for fair tax treatment and honoring the banking guarantee for depositors savings. On the Kremlin website President Putin called the tax “unfair, unprofessional and dangerous”. In the end the Cyprus parliament voted down the tax levy by 36 to none with 19 abstaining. Bonds yields today rose in many European countries and the Euro is at a 3 month low against the US Dollar. The yield on 10-year Treasury bonds fell more than 5 basis points, to about 1.9%.
Market Direction Action For Today
It was a seesaw session on Tuesday with the Dow finally ending with a very small gain and the S&P 500 ending with a small loss. During the day the Dow was as high as 14514 and as low as 14382 a swing of 132 points.
The 5 minute chart of the S&P 500 is below. The S&P today exhibited the same pattern as yesterday, falling back and then recovering half the loss. Today the index fell 1.1% by around 1:30 and by the close the market direction had pushed back up and recovered 0.6% of the decline or roughly 50%. This is a repeat of yesterday’s market direction and is only of concern if it continues for one or two more sessions. Tomorrow Fed Chairman Bernanke speaks and that could the catalyst to move the markets back into a more positive tone.
S&P 500 Market Direction 5 minute chart.
Market Direction Closings
The S&P 500 closed at 1548.34, down 3.76 points and the Dow closed at 14,455.82 up 3.76 points. The NASDAQ closed at 3229.10 down 8.50 points.
Market Direction Technical Indicators At The Close of Mar 19 2013
Let’s take a moment now and review the market direction technical indicators at today’s close on the S&P 500 and view the next trading day’s outlook.
For Momentum I am using the 10 period. Momentum is still solidly positive. Today momentum continued to fall but is still positive. One more day of even light selling and momentum will fall to 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) is still positive but only barely. The buy signal remains active until MACD changes to a down signal which one more day of selling will bring to the MACD indicator.
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 and overbought. It is not falling very quickly as it reflects the seesaw action of the market direction today.
Rate Of Change is set for a 21 period. Rate Of Change is still positive but today it took a hit as the market fell over 1% by the early afternoon.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is overbought and with the sell signal still active, it is indicating that lower prices still lie ahead.
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 overbought and the sell signal issued yesterday remains active. The Fast Stochastic is signaling market direction will be lower tomorrow.
Market Direction Outlook And Strategy for Mar 20 2013
The market direction outlook for Wednesday is continued weakness. The past two days of selling have had an impact on the market direction technical indicators. They are all rapidly turning negative. Even those that are still positive are having trouble remaining as such. The weakness in the market direction was caused by Cyprus but it was also the overbought nature of the market direction itself that has added to the downward pressure.
Despite this the markets are holding up very well and certainly better than other countries around the world. I have no interest in shorting index calls at this stage. Instead I believe the better money is to be made through Spy Put Options and today I entered my second Spy Put Options trade of the year. I prefer to buy the Spy Put Options on signs of weakness following the market direction technical indicators for the day, rather than short Spy or SPX Calls. The market direction could easily jump back including even tomorrow with Bernanke speaking.
Europe as always will have to find a resolution, otherwise they are risking the Euro, bond yields and investor confidence. In the end unless something extremely unpredictable happens with the Cyprus issue, the market direction looks like it is determined to continue the rally at the first chance it can get.
Meanwhile I have been busy Put Selling over the past two days and taking advantage of heightened volatility which has pushed up put premiums. These are the types of events that create opportunities and I am watching my favorite stocks daily for the chance of higher profits.
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