With today’s unemployment report being much worse than expected, and the “worse-case” unemployment rate being increased beyond prior projections – it’s amazing that the stock market was able to hang on to yesterdays gains.

Perhaps traders and investors think that if the recent 3^rd quarter GDP growth was created with so many unemployed, just think what the rate will be once all these people get re-hired?

Or maybe big fund managers and institutions just don’t want to appear “under-invested” at the end of the year?

Either way, we’ll continue to use our technical analysis to generate profitable market timing signals and trading strategies no matter what they are thinking.

The first complete trading week in October has tacked on 3.25% to the broad market Wilshire 5000 average.  Every day except Wednesday has been a solid up day for the market. 

The weekly chart is still flashing the caution signal for next week but is appearing to be strengthening somewhat.  The CCI(20) seems to have stabilized at a level around 60.  Prices have reacted to the 10,500 support level with a respectable bounce this week of over 3%.  A price increase and close above the overhead resistance of approximately 11,250 would indicate a further strengthening of upward momentum.

On the daily time frame, the situation is not as precarious as it was this time last week.  Stock prices have managed to show strength after a couple serious down days prior to this recent week of trading.  On Wednesday of this week stock prices managed to cross the PSAR indicator to the bullish side.  The CCI(20) has moved quickly up from below the -100 level and appears ready to cross the zero line into bullish territory. 

Stock prices on the daily chart are still being affected by the combination of multiple overhead resistance lines which includes the down sloping trend line from the prior high, the up-sloping channel line, and the 20, 40, & 50 day moving averages.  Right above this resistance is the 11,000 level.  Price movement above these levels would certainly justify taking new long positions.

On the hourly chart the CCI(20) has held tough for the past several days’ right around the 100 level.  Prices fell below the PSAR indicator during the last hour of trading but recovered slightly to close within the upper half of the days trading range.

Trading Strategy:

With the market getting stronger and showing a capability to ingest relatively bad news on the employment front without serious heartburn (at least today), aggressive traders should consider new long positions but on market up days only.  More prudent traders should wait until prices move above the overhead resistance before considering new long positions.  

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