Technical Analysis | Stock Market Timing Signals | Top Stock Picks

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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Trading Strategy:

Traders should consider new long positions from our top stock picks if the market moves up tomorrow.  See the top stock picks email for additional information.

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.

Once again yesterdays trading strategy suggestion would have kept your portfolio safe from today’s downturn. 

Even though the weekly chart is still technically bullish, a general weakening of upward price momentum may be the start of a deeper consolidation or reaction at the current level. 

This is the type of situation is similar to a traffic light that may be showing it’s ok to cross the road, but you can see a truck coming.  The best approach is to wait and see what the truck is going to do before making a commitment.

Let’s take a look at the charts for a deeper technical analysis.

As mentioned above the weekly chart is still in a bullish mode.  The CCI(20) is certainly in a bullish position and stock prices are above the PSAR indicator. 

However, the daily chart is sending caution signals so we need to pay attention to this early indication of weakness that may spill over to the weekly time frame.  On the daily chart the CCI(20) is above the zero level but falling.  Stock prices are now below the PSAR indicator.  This situation puts the daily time frame into a cautious mode.

On the hourly stock chart you can see that prices attempted to break through the overhead resistance for most of the day.  However, weakness overcame the market in the last hour of trading and stock prices finished sharply lower.

On the hourly chart the CCI(20) is in a bearish mode and prices are below the PSAR indicator.  In addition, a new reaction low was created by the sharp move down in prices at the end of the trading day.  This action has created significant weakness for the short term.

Towards the end of last week we suggested that taking some profits off the table and tightening stops would be an advisable course of action.  Today’s action would likely have exercised many of those stops.

Trading Strategy: