Wall Street makes it 5 days in a row for positive price growth with the last hour of the weeks trading pushing broad market stock prices up over 300 points for the week. 

If you focus on the Dow Industrial 30 average or even the S&P 500 you’ll see slightly different results.  This is the main reason why we focus on the Wilshire 5000, it’s the broadest measure of the market widely available and is frequently the best indicator of market internals.

A surprisingly weak government jobs report early this morning kept traders on edge all day.  Just the reality that a disappointing jobs report didn’t result in the devastating loss is good sign for future stock price increases.  Although a consolidation or pullback is inevitable at some point, we’ll take all the gains we can get thank you.  With effective technical analysis and market timing we’ll be ready to jump off and pocket our gains when the time is right.

On the monthly chart prices are getting close to the overhead resistance level of 12,000, even though we have 500 points to go.  The monthly stochastic, CCI and MACD are still showing increasing upward momentum.  Although January is far from in the history books it can be useful to be aware of what is happening on the longer term.

On the weekly chart the CCI and the stochastic indicators are continuing their upward path.  The MACD looks comatose but if you reduce the chart length to anything less than 6 months it is clear that the MACD is gaining upward momentum. 

The stock price increase for the week created a solid bounce from the lower channel trend line and has moved the broad market solidly above the highs of the late 2009 consolidation period.  The upper channel trend line doesn’t really come into play until the 12,500 level.  But as mentioned above, we really should watch for some resistance as we approach 12,000.

Trading volume for the week was not as high as we would like to see for this much upward price action, so we’ll keep that in perspective for market timing and trading strategy suggestions.

On the daily chart this week’s price action is clear.  Wednesday was really the only indecision day.  Tuesday, Thursday, and today’s trading all created bottoming tails.

The 30 minute chart shows the initial fall during the opening of the market due to the concern over the jobs report.  Prices quickly recovered to just below yesterdays close, then spent most of the day below yesterdays close until the last hour of trading.

The last hour of trading was really where all the action was today.  Prices started breaking out late in the day and then the last 30 minutes was where all the gain for the day was made.  Prices finished at the high of the day, a good sign and may provide some more upward momentum for next week. 

Although I certainly wouldn’t expect another 5 days of gains, a consolidation or pullback at this level should not derail long positions taken in well chosen stocks.

Trading Strategy:

Traders should continue the strategy of new long positions in up trending stocks currently in a consolidation or pullback on decreasing volume.  The best market conditions to take on new long positions are in a rising market.

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The Fed announced that low interest rates are here to stay until at least 2011.  That announcement wasn’t enough to keep the markets win streak intact.  Traders also had to contend with a rise in wholesale inflation and flat earnings from GE.

Also, bank shares led the way down today but the damage was contained to approximately half of yesterdays gain, but on slightly increasing volume.

Let’s take a look at the stock charts for some technical analysis and market timing insights.

On the weekly stock chart, prices are appearing still flat for the week but with more than half the trading week remaining things could still change either way.  The stochastic and CCI are still pointing up with the MACD is indicating just absolutely nothing in direction.  This is still a market that could move in either direction.

The daily stock chart shows the drop in prices that still held above the resistance level of 11,250.  Today’s action finished with a bottoming tail but both the stochastic and CCI reversed direction to the downside.  The upward movement of the MACD seems to have stalled somewhat.

On the daily chart prices dropped sharply in the first 30 minutes of trading, reversed right at the 10am reversal time to the opening price, then proceeded to lose value for the remainder of the day, with the exception of the last hour of trading. 

During the last 30 minutes of trading it looked like prices were going over the cliff.  But buyers jumped in pushing the average back up creating a sort of hammer at the close of the market.  This could potentially add strength to tomorrows open, we’ll have to wait and see.

Trading Strategy:

Aggressive traders could consider new positions during the market as long as prices are moving up and higher than the high made during the first 30 minutes of trading.

Prudent traders may want to wait until prices move up more before taking on new long positions.  

Either way, now is the time for caution.  Don’t be the farm on positions in either direction

Trading action today created a classic “indecision day” type of candlestick on the daily chart.

After yesterday’s huge run-up, an indecision day is just what you’d like to see on the day after – unless prices run up again.  An indecision day gives the market a chance to digest recent gains and provides evidence that profit taking is not the first thing on trader’s minds.

The recent months of trading has produced several of these types of trading days, look at the daily chart on July 17, September 11, and most recently October 7.  All these days were indecision days after a run-up in prices. 

You’ll also note that after these indecision days, prices had a tendency to take-off to the upside again.  Will that be the case this week?  We hope so and our trading strategy – see below – will take advantage of this action if it occurs.

On the weekly chart, prices did not move up to trip the PSAR indicator into a bullish mode.  The CCI(20) moved up to a level of 93.63.  If prices move up tomorrow we could have a PSAR move to the bullish side which would also provide momentum for a break through of the overhead resistance at the 11,250 level.

On the daily chart, the CCI(20) has moved up to 57.22 and with stock prices still above the PSAR indicator, the daily mode appears to have some upward momentum left.

On the hourly chart you can see the controlled amount of profit taking that took place in the morning.  Another sign of strength were the bottoming tails that were created during the mid-day hours.  The last hours of trading recovered the morning loss and prices finished just about where they started.

The final hour of trading moved stock prices above the PSAR so perhaps this late day market strength will influence prices tomorrow.

Trading Strategy:

Traders should consider new long positions on trading days when prices are moving up.  This means that stock prices are above the high made during the first half hour of trading and moving higher.  Unless this condition occurs during the day tomorrow, traders should take no action.

With approximately half of Octobers trading now in the history books, stock prices are holding right around the highs for the month.  Monthly trading so far is developing a bottoming tail which could indicate future strength if these levels continue to hold.

On the weekly chart with 2/5’s of the trading week complete, stock prices have appeared to react once again to the 11,000 level.  The weekly CCI(20) is above 100 and the prices are still above the PSAR indicator.  These are both required conditions for the week to end on a bullish note. 

However, for now the weekly time period is still in a cautionary mode that is left over from last week’s trading.  This cautionary posture on the weekly chart will color our trading strategy until the week is complete and the weekly trend is confirmed to be bullish.

The daily chart is perhaps signaling some weakness that is flowing over from the longer time frame.  The CCI(20) just peaked above the 100 level and finished today’s trading below 100 at 80.60. 

Today’s candlestick traced a bottoming tail which is an indication of strength but prices still lost a little more than 30 points on the broad index.

Daily prices are still above the PSAR indicator and as long as prices are above the PSAR and the CCI(20) is above zero we’ll trade in a bullish mode with the cautionary posture as noted from above.