Technical Analysis | Stock Market Timing Signals | Top Stock Picks

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 Federal Reserve re-iterated their statement that interest rates will remain unchanged for the foreseeable future, but they also voiced the opinion that economic weakness will persist for some time.

Stock prices were sharply up prior to the Fed announcement and retreated during the afternoon hours to close up a modest 25 points. 

Still a gain is a gain and we’ll take it.

Technical analysis of our standard stock charts continue to point to a bullish continuation of our market timing signals - although some caution is mixed in based on today’s trading action.

Today’s trading created a candlestick with a topping tail.  Many times this can presage a fall in prices, especially if the bottom of the candlestick is located at the highs of the recent rally.  In this case the bottom of today’s trading is close to the support level of 11,250 so we’ll need to wait and see if the support will hold.

All three other indicators, the stochastic, MACD and CCI are either neutral to bullish.  Trading volume was a little less than yesterday which lessons any bearish tendencies of today’s action.

On the weekly stock chart, prices appear to be marking time, still at the support level of the lower channel trend line and the 20 day moving average.  The stochastic and CCI are moving up, while the MACD is still flat.

On the 30 minute chart, prices moved up in the morning, retreated a little bit during lunch time, then fell in the afternoon.  The last hour of trading dropped a little bit and then recovered to the level of the opening gap.

This trading action created a gap or a trading “window” that may provide additional support on the 30 minute chart for tomorrows trading.

Trading Strategy:

Caution is still warranted on this market until the current support level proves strong enough to support a rally from here.

As suggested yesterday, 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.  

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