It is frequently said that bull markets climb a wall of worry.  There was no clearer evidence of this being true than today’s stock market action. 

Market bears currently outnumber bulls by a wide margin, yet the broad averages jumped up through resistance like a cork under pressure suddenly being released. 

There is another saying that the stock market actively seeks to make the greatest number of people look foolish.  Is there a relationship between these sayings?  If so at least proper market timing will keep you on the right side of the market.

Despite evidence that the recovery won’t be smooth, investors piled back into stocks today.  Short position covering also may have been a factor in today’s action.

We don’t predict the market, we just jump on board when it indicates a clear preference to move in one direction over the other.  At this time, the stock market is indicating that profits are going to be easier with long positions than short.

Even the technical analysis of the monthly chart appears to be strengthening.  Although we don’t use the monthly time-frame for our trading strategies, it is useful to paint a background for the mood of Wall Street.  With the CCI(20) moving progressively above the zero line, it acts as confirmation of bullish stock prices as indicated by the PSAR indicator.  Let’s hope this price trend continues.

On the weekly chart, stock prices are getting very close to tripping the PSAR indicator into the bullish territory.  The PSAR level is currently 11168 and stock prices are just a scant 66 or so points below that.  If trading through the week can tack on another 66 points to trip the PSAR indicator, we would have a bullish indication on the weekly chart.

However, don’t wait for this to happen before considering new long positions; see our trading strategy below for additional information.

On the daily chart, stock prices are clearly bullish.  Our suggesting trading strategy from last week for aggressive traders and investors to take positions on up days worked well today.

The hourly chart also displays the bullish action of today’s market.  Prices jumped out of the gate from the opening bell and just never looked back.  If you were waiting for a consolidation period in today’s trading before you entered into new positions, you were out of luck.

The model portfolio went into the market at the opening bell today and we’ll continue to publish the results of this portfolio on a regular basis.

Trading Strategy:

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There is a lot of money still on the sidelines looking for a home.  And with this years rally, there are not many fund managers or institutions that will want to appear “under-invested” at the end of the year.

This is one of those times when the market trend looks so positive that you should reduce the effect of the “Caution” indicator on today’s market timing signal chart below. 

If the weekly chart was in an “Up” mode, the chart summary would indicate purchases on stock market up days like today.  It is likely that the market will digest today’s gains over the next few days but it’s highly probable that more up days are in the works.  So purchases on market up days should be considered.