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 stock market achieved another modest gain today, making today the fifth straight session of price increases – although all of them on lower volume due to the holidays.

This is also the time of year when a lot of effort is expended on advertising predictions on where the market will be this time next year, what the interest rate will be, who will be employed & who won’t, 10 stocks you just have to own, 10 stocks you should sell now, etc, etc.  After a while – like 5 or 10 seconds – it gets kind of tiresome.  

The truth is that very few predictions will be right or even right enough for you to profit from.  Most of their predictions will be as off the mark as our government prognosticators when they predicted a globally catastrophic swine flu pandemic.  

That prediction was only designed – from what I’ve observed – to create sufficient panic to ensure the transfer of the most amount of money from our pockets to the drug companies’ pockets.  The phrase “just follow the money”  certainly comes to mind here doesn’t it?

So be careful about who you listen to.  In the meantime, we’ll continue to react to what the market “does” rather than what the talking heads “think” it will do, or “should” do. 

 It’s turning out to be a much better strategy.  Check out the results of the model portfolio which we will close out this year and start tracking each year separately starting in 2010.

From 8/16/06 through the last sell transaction on 11/13/09, the market timing portfolio is up 170% while a buy & hold portfolio during the same time period was down 14%.  Not bad for trading just two stocks!

Let’s open the stock charts for some technical analysis and market timing insights.

As mentioned above the market eked out a small gain today.  On the weekly chart barely anything moved so there isn’t much to conclude from this time frame.

On the daily chart the story is about the same.  However, the daily chart is starting to look a little top-heavy to me.  The CCI and the stochastic indicator is starting to roll over which could point to some rough days ahead. 

No-one can know ahead of time how high the MACD will go into bullish territory, but once it moves across the zero line it frequently indicates that about ½ of the current move may be over.  So caution is certainly warranted for new positions.  At this point a return of prices to test the break-out at around the 11,250 level cannot be ruled out and may be fairly likely.

On the 30 minute chart prices once again bolted out of the gate at the open but left a bearish topping tail candlestick.  The bearishness of that topping tail lasted most of the trading day except for the last hour of trading when prices managed to move modestly above yesterdays close.

This last hour of trading also moved prices above the PSAR indicator and the CCI, MACD, and stochastic indicators to a bullish looking position.

Trading Strategy:

If the last hour of today’s trading can help influence tomorrow, then tomorrow may be fairly strong.  But nothing is certain and caution is still the watchword in this market.

Prudent investors should consider new long positions in markets that are going up.  Prudent investors should stay on the sidelines in markets that remain flat.

Aggressive investors should consider playing the market to the upside.

See our top stock picks email for bullish candidates.

The quadruple witching day – a quarterly event in which stock index futures and options, as well as individual stock future and options, all expire simultaneously – created increased volatility today.  In addition to the volatility, trading volume increased because of the contract unwinding taking place.

The broad market finished just about flat for the week but up approximately 70 points for the day.

So the squeeze continues.  Just when you think the market is breaking out up or down, it goes the other way.  Our cautious strategy will continue until this type of market action results in a clear direction with some momentum behind it.   

If you want more evidence of this market volatility, just check the market timing signals chart at the bottom.  In the last 3 weeks of trading the indicator have changed direction 6 times, a highly unusual event.  

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

On the weekly time frame, this weeks trading created a clear indecision type candlestick.  Prices finished just about where they started the week.  Because they started and finished flat, the lower channel trend line just keeps getting closer and closer to the market price levels.  This trend line also traces the direction of the 20 week moving average, the support area between 11,200 and 11,250, and the price break in late September of 2008.

The CCI indicator was up a little for the week, the MACD was flat – nothing new there – and the stochastic is flat.  What is noticeable about the weekly indicators is that prices are maintaining their level while the indicators decrease – not a great sign.  Trading volume for the week was higher than last week but that was mostly due to the increased trading volume due to the quadruple witching day mentioned above.

On the daily stock chart, the increase in trading volume is even more apparent.  Stock prices finished the day right at the upper end of the support/resistance level of 11,250.  The MACD and stochastic indicator finished up for the day but the MACD finished lower.   Prices on the daily chart also moved below the PSAR indicator so a tightening of stops and some profit taking on profitable positions may be prudent at this time.  This will protect your portfolio should the market break sharply to the downside.

The markets volatility is even clearer on the 30 minute chart.  Prices jumped out of the gate at the opening, fell back at the 10am reversal time until about lunchtime.  Late morning trading created a hammer candlestick at the lows for the day with prices climbing back into positive territory.  The last hour of trading created the bullish move to the 11,245 price level for the broad market.

Trading Strategy:

Prudent investors may want to sit this market out until a clear uptrend or downtrend develops.  If you want to take new positions use caution.

Aggressive investors and traders should play the market up or down as it develops. 

Use the expanded week-end edition of the top stock picks email for a large selection of stock picks for a variety of strategies.  

Stock trading continued their move up today following yesterday’s indecision day.

Although stock prices pulled back from the highs of the day, they finished in the middle of the days price range for a solid gain of approximately 60 points.

As we reviewed in yesterdays post, prices did move up sufficiently today to trip the weekly PSAR into a bullish position.  The weekly CCI(20) is moving solidly upwards and is currently at a level of 99.92.

Although there are still two days of trading remaining before the weekly chart will be complete.  Using technical analysis techniques it appears probable that the week will finish in a bullish mode.  There is always the possibility that conditions could reverse by the end of the week but stock prices would have to drop below 10,500 to drop below the PSAR indicator.

Again, on the weekly chart, stock prices have reached the level of the sharp downturn in weekly prices that occurred in late September of 2008.  This level combined with the 11,200 to 11,250 level could present some additional resistance to overcome before prices can move solidly higher. 

The next overhead resistance on the weekly chart is approximately 1000 points higher at around 12,250.

The interaction with overhead resistance levels is even clearer on the daily time frame.  Not only do the weekly time frame resistance levels come into play but prices are just below the prior daily high set in mid October of this year.

On the daily chart the CCI(20) has moved firmly into bullish territory and is currently 79.40.  Stock trading action today created a topping tail candlestick that may indicate some future weakness as the overhead resistance is either worked through or pushes prices back down into a consolidation pattern.  A breakthrough and close above this resistance level is crucial for prices to keep their upward momentum.

On the hourly chart, stock prices have carved a fairly aggressive upward sloping channel.  Stock prices are currently at the lower channel line.  Also on the daily time frame the overhead resistance from mid October is clearly in play with stock prices at this level.

However, the last hour of trading did produce a bottoming tail candlestick which may predict trading strength tomorrow if it carries over.

Trading Strategy:

Traders should watch for a move above the overhead resistance at the 11,250 level before considering new long positions in this market. Prudent traders may want to wait for a close above this level before considering new long positions.

Once above the overhead resistance, traders should only 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.   View the subscription options.

In a highly volatile – but relatively news free day, with the exception of banks that are still bleeding – stocks prices swing from being up over 100 points to being down over 100 points. 

Earnings news from companies today was generally good, so is this a situation of buy on the earnings rumor and sell on the news?

At the end of last weeks trading we suggested to subscribers that they maintain the current cautious approach to taking new long positions until the market can break through the overhead resistance at 11,250.  We also mentioned that the current environment may be setting up for positions on contra-etf’s. 

Contra-etf’s are market trading funds that allow you to take short positions in funds that go up in price when the market falls.  Contra-etf’s are excellent vehicle for earning profits in retirement accounts that are prohibited from short selling.

How close are we to suggesting positions in contra-etf’s?

As usual, let’s take a look at the stock charts of today’s action for an in-depth technical analysis.

The monthly stock chart shows October is likely to finish the month creating an indecision candlestick.  In addition, buying interest is certainly tapering off as shown by the trading volume.  However, we have 5 days of trading remaining in October and we don’t trade on the monthly basis so this chart is only used as for background reference.

On the weekly stock chart the CCI(20) is now below the 100 line and although still technically bullish it’s losing momentum which will be needed to breathe new life into this rally.  Stock prices on the weekly chart remain above the PSAR indicator, at least for now.

On the daily chart prices retested the downward sloping overhead resistance in early trading but quickly gave up and reversed sharply to the downside.  Prices stayed below the PSAR indicator and our confirming indicator, the CCI(20) has fallen almost to the zero line. 

Today’s action centered around the 11,000 support level and now that same level is going to act as overhead resistance once again.

Another day’s action like this would likely create a sell recommendation in our model portfolio.

On the hourly chart prices shot out of the gate in an opening move and quickly reversed to the downside.  This type of action is sometimes created by professionals selling into the remaining strength of a rally.  The CCI(20) has been firmly in bearish territory for the last 3 days.

Trading Strategy:

Watching from the sidelines is the suggested strategy while the market decides to indicate whether it is safe for new long positions or new positions in contra-etf’s.

Even strong earnings from software giant Microsoft and on-line retailer Amazon was not enough to prevent stock prices from returning all of yesterdays gain, and then some.
 

Our market timing trading strategy from yesterday of recommending caution on taking new long positions until stock prices break through the resistance at the 11,250 level was right on the money today.  What’s worse, stock prices have appeared to have given up attacking the resistance at 11,250 and are now working on the 11,200 level.

Is more downside movement of stock prices in the works?
 
Let’s view the stock charts for a more insightful technical analysis.
 
The weekly stock chart has traced a second indecision candlestick in as many weeks.  But from a weekly perspective the time frame is still in a bullish status.  This is shown in the table below for next weeks trading.  

The weekly CCI(20) is still above 100 at 109.80 and stock prices are above the PSAR indicator.  These levels support the argument that the weekly time frame is still strong.  

Let’s now review the daily stock chart for insights regarding a trading strategy.
 
On the daily stock chart the CCI(20) has fallen below the 100 level and now sits below 50 at 49.91.  This is halfway to a bearish crossover.  This movement may be the preparation for a new base or it may be an early indication for a switch to further weakness on the daily time frame.
 
Keep an eye on the CCI(5) indicator on the daily chart for a move above the zero line to indicate increasing strength.  If the market can gain some upwards momentum it may set up some excellent buying opportunities.

On the hourly chart prices have been weak for the last 7 trading days or so.  The CCI(20) is firmly bearish and prices are below the PSAR.  The last two trading days have demonstrated support at the 11,000 level.  However, the hourly stock chart is creating a descending triangle.

A descending triangle is predominantly found as continuation patterns in ongoing downtrends which is not the situation here.  So it remains to be seen how prices will develop or breakout of this triangle formation.

If prices drop below the support level of 11,000 then more price weakness should be expected.  If prices break-out of the upper triangle trend line then more strength should be expected.

Trading Strategy:

Thursday’s trading strategy is still valid – until prices can move above the overhead resistance at approximately the 11,250 price level then you should be cautious taking on new long positions.  If you have not yet taken some profits off the table and/or tightened stops in anticipation of further drops in the broad market then you should strongly consider doing so.

If prices drop below the 11,000 level next week it may create an opportunity to take positions in contra-etf’s to take advantage of price drops.  If that happens we’ll suggest the appropriate strategy to use. 

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Upbeat earnings from several Dow components and the announcement of a crack down on executive pay by banks that are receiving government bailouts created a move up in stock prices today.

However, yesterday’s loss was only half erased by today’s action.

With 4/5’s of the trading week now in the history books, the weekly stock chart appears to be creating an indecision week with stock prices remaining firmly in the middle of the weeks trading range.

The weekly CCI(20) remains in the bullish range and stock prices remain above the PSAR indicator.  If the weeks’ trading was complete, the weekly trading time frame would remain bullish.  We need to wait until after the close of the market tomorrow to make this assessment on market timing.

On the daily stock chart the CCI(20) is falling and its value is now at 70.38.  Our timing strategy uses the CCI(20) as a confirming indicator so although it remains bullish it is indicating a potential future weakness.

Stock prices on the daily chart fell below the PSAR indicator yesterday and remain below the PSAR today. 

As expected, stock prices appear to have reacted positively to the11,000 support level.  A normal reaction to this support level may have become more pronounced due to positively perceived earnings news and presidential proclamations regarding bankers’ income.

More consolidation around the 11,000 support level is likely to define the short term probability of price direction.  If stock prices fall through 11,000 then more weakness should be expected.  If stock prices move up from here and continue to move above the daily PSAR then a renewal of the upward rally should be expected.

On the hourly stock chart you can see the drop in prices that occurred at the open then the recovery throughout the day.  The last hour of trading produced a topping tail that may create some weakness for tomorrow.

The CCI(20) on the hourly chart has moved into bullish territory and prices moved above the PSAR indicator during the last hours of trading.  If this strength continues and this momentum flows into the daily time frame it could produce the strength needed to create a bullish confirmation on the daily time frame.

Trading Strategy:

Today stock prices carved out an “indecision day” on lower volume after the two day rally.

Yesterday we suggested that waiting until today to decide on new positions would be a prudent move.  Even though the daily chart has swung back to a bullish mode, is this the right time to be jumping in with both feet?

As you can see below on the market signal timing chart, the daily signals have been swinging from green to yellow to red  and back again over the last two and a half weeks of trading.  This is typically the action you’ll see while the stock market is figuring out its next move.  The indecision is primarily driven by the status of stock prices on the weekly time frame.

Let’s review the stock market timing charts for more insights.

The weekly stock chart has not changed much from yesterday.  The CCI(20) is still fairly stable around the 90 level.  Stock prices are a little below the PSAR indicator.  This non-alignment is creating the cautionary posture towards the current market trend.

The daily stock chart tripped into the bullish mode at the close of today’s trading activity.  The CCI(20) is just slightly positive at a level of 7.26 so looking at the raw numbers the CCI(20) confirms the price to PSAR position.  Stock prices on the daily chart are above the PSAR indicator. 

Both daily indicators being relatively bullish would normally provide evidence that new long positions would be a good probability trade.  However, the conflicting indicators on the weekly time frame has kept the posture on the cautionary side.

On the hourly stock chart you can see that the last hour of trading has propelled prices slightly above the down sloping upper trend line.  Both the CCI(20) and the PSAR indicators are bullish.  The price trend displayed during tomorrow’s market activity may prompt some aggressive traders to take new positions from our stock picks.

Suggested trading strategies based on the current technical analysis and market timing signals:

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