The current excuse is concern about the White House’s bank plan, Fed chief Bernanke’s future, and China’s lending practices.

Stocks lost almost 250 points today, or a little over 2% of value.  Trading volume was not quite as high as yesterdays, but still elevated from average.  This is likely to spell the death knoll for a resumption of this rally, at least in the near future.

So what are we doing now?  Right now we are sitting this slide out until the market moves up on a bounce, and then we’ll likely take short positions.

Let’s take a look at the charts for some more analysis.

Trading in January now shows a net loss of about 200 points.  It appears that the so-called  “January” effect – documented in many media outlets – may not be a valid justification for new long positions.

On the weekly chart, prices have fallen and closed well below the lower trend line, and also below the PSAR indicator, so the weekly chart is appearing to be entering a down trend.  The CCI is close to dropping below the zero line – and we really need these two events to occur for a confirmation of a new downtrend on the weekly time frame.

The daily stock chart is a disaster.  After a week of ratcheting back and forth at the top, prices have finally broken down and closed solidly below the prior low set in December.  On their way past the prior highs of Nov and Dec, the price action didn’t even pause.

Our momentum indicators are clearly bearish.

On the 30 minute chart, prices tried to hold a little below even for most of the day.  However, when traders returned from lunch it’s obvious that selling was the object of the day.  Prices fell sharply for the remainder of trading with the last hour of trading closing near the lows of the day

Trading Strategy:

If you were following the trading strategies described here then you probably managed to get out of profitable positions with most of the profit intact.  Any tightened stops were likely stopped out over the last few days of trading.

Next week I anticipate we’ll be watching for an opportunity to take short positions in this market.  Aggressive short traders may consider new short positions if the market continues down on Monday, however, the market is extremely extended to the downside so a prudent strategy would be to wait for a bounce back up to overhead resistance.

Technical Analysis, Market Timing, and Top Stock Pick posts are free on this blog but are delayed a few days. 

For a $1 trial of timely market timing updates and top stock picks emails sent to you after the close of the stock market on each trading day please visit our subscription page.

View information on the model stock portfolio and how it grew by over 170% over the same time period that a buy-and-hold S&P 500 portfolio lost 14%.  No margin, options, penny stocks, commodities, or other high risk vehicles were used – just two well respected ETF stocks.

Get free, no obligation access to the real-time stock charts used in these posts.

View our free market timing signals ,  stock trading strategies , and stock trading forum at these links.

Stocks certainly took it on the chin today right from the opening bell.  Alcoa announced disappointing earnings after the close of the market yesterday.  Alcoa’s dismal news combined with Chevron’s profit warning and the fact that prices have increased for 6 days straight through last Friday, made a correction a high probability.

The question is will this current pullback remain a consolidation at the current price levels or will a deeper correction transpire?  Technical analysis of the stock charts is not encouraging.

Yesterday, we also mentioned that the weekly chart was having difficulty building upwards momentum from the lower trend line.  In fact, with today’s price drop, the weekly chart is in danger of dropping below this trend line.  Prices are getting perilously close to dropping below the PSAR indicator which would not be good news.  The three momentum indicators are looking weak also.

On the daily chart all three price momentum indicators dropped today.  The stochastic and CCI are close to dropping below zero.  Stock prices dropped below the PSAR indicator which is a prime reason to tighten stops and take profits.  Trading volume increased.

On the 30 minute chart prices dropped sharply in the morning, dropped more until after lunch, and then recovered slightly.  Trading finished the last hour of trading with a hammer candlestick – which may add some momentum to tomorrows opening.  But remember, even if it does, one day does not make a trend.  We’ll need to watch for strength to return to at least the daily chart before considering new long positions.  And this assumes the weekly chart remains positive, and that doesn’t look good right now.

Trading Strategy:

Technical Analysis, Market Timing, and Top Stock Pick posts are free on this blog but are delayed a few days. 

For a $1 trial of timely market timing updates and top stock picks emails sent to you after the close of the stock market on each trading day please visit our subscription page.

View information on the model stock portfolio and how it grew by over 170% over the same time period that a buy-and-hold S&P 500 portfolio lost 14%.  No margin, options, penny stocks, commodities, or other high risk vehicles were used – just two well respected ETF stocks.

Get free, no obligation access to the real-time stock charts used in these posts.

View our free market timing signals ,  stock trading strategies , and stock trading forum at these links.

Earnings are hoped to be good this reporting period but improvement statistics are likely to be skewed by the extremely low bar established on earnings reported a year ago.

The weekly stock chart is having a hard time in following up from the rally last Monday.  Looking at the chart you can see that prices have not moved up very much from the lower channel trend line.  Although it’s early to judge where this week will end up, momentum on the weekly basis seems to be suffering a little.

The weekly MACD is just starting to look up after being flat for 11 weeks or so.  The stochastic and CCI are at least holding their own. 

The daily chart shows the price increases of the last 6 days.  In conjunction with the weekly chart, prices are looking a little weak.  The stochastic indicator is turning down while the CCI is flat, and the MACD has stalled somewhat.  This may point to some weakness in the near term.

On the 30 minute chart you can see the run-up in prices at the opening bell.  Prices immediately reversed in the first 30 minutes of trading to a loss and then recovered to the opening price level.  Prices then drifted down until the last hour of trading.  The last hour of trading pushed prices modestly higher for the day but trading finished with an indecision candlestick, perhaps pointing to an increased possibility for a pullback during tomorrows trading.

Trading Strategy:

Prudent and aggressive traders should consider new long positions on well chosen stocks on days the broad market is increasing in price although caution is advised.  This means that prices are above the prior days close and above the high created in the first 30 minutes of trading.

For a $1 trial of timely market timing updates and top stock picks emails sent to you after the close of the stock market on each trading day please visit our subscription page.

View information on the model stock portfolio and how it grew by over 170% over the same time period that a buy-and-hold S&P 500 portfolio lost 14%.  No margin, options, penny stocks, commodities, or other high risk vehicles were used – just two well respected ETF stocks.

Get free, no obligation access to the real-time stock charts used in these posts.

View our free market timing signals ,  stock trading strategies , and stock trading forum at these links.

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.

Technical Analysis, Market Timing, and Top Stock Pick posts are free on this blog but are delayed a few days. 

For a $1 trial of timely market timing updates and top stock picks emails sent to you after the close of the stock market on each trading day please visit our subscription page.

View information on the model stock portfolio and how it grew by over 170% over the same time period that a buy-and-hold S&P 500 portfolio lost 14%.  No margin, options, penny stocks, commodities, or other high risk vehicles were used – just two well respected ETF stocks.

Get free, no obligation access to the real-time stock charts used in these posts.

View our free market timing signals ,  stock trading strategies , and stock trading forum at these links.

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.

Santa Claus certainly seems to have visited Wall Street this week as the market delivered a steady stream of higher prices and continued to gain upward momentum during this shortened trading week. The weekly gain for the week was 266 points or almost 2.5%.  For the month so far the market has gained almost 4% in value.

Durable goods orders rose by a scant 0.2% in November, with a massive drop in aircraft sales as the major reason why the increase was so low.  Without transportation, durable goods orders would have risen 2%.  The National Association of Realtors reported that November existing sales rose while new home sales fell.  Personal spending & income rose in November along with consumer sentiment.  Jobless claims fell in the most recent report.

Can this rally continue? 

Next week is also a shortened trading week so caution is still advised.  But traders should be considering new long positions in leading equities which we provide every day in our top stock picks email.  Let’s review the stock charts for more technical analysis and market timing insights.

As mentioned above for the month – even though there are still a few days trading left in December – the broad market has added almost 4% to the value of stock prices.  The CCI indicator is kind of flat, but is in bullish territory of over 100.  Both the MACD and stochastic are showing increasing upward momentum.  Prices appear headed towards the next overhead resistance level of 12,000, but there may be some bumps along the way that we’ll need to navigate around.

On the weekly chart, stock prices have added 2.37% as the market moved up as expected from the support level between the 11,000 and 11,250 mark.  The MACD is still flat, but if this flat period turns out to be a consolidation then more price increases can be expected.  The stochastic and CCI indicators are both heading up, indicating a good possibility of prices continuing up in the weeks ahead.  Trading volume is down although this would be expected for the shortened holiday hours this week.

The price increases for each day during the week is clearly shown on the daily price chart.  All three of the momentum indicators, the CCI, MACD, and stochastic are reflecting increasing upward momentum.  As with the weekly chart, trading volume was extremely low for each day of the week which may be adding increased upward volatility, so trade with caution.

The 30 minute chart for Thursday was extremely bullish.  Prices jumped out of the gate for the 4^th day in a row, continued up at 10am (which is normally a reversal time for morning action), remained flat for the majority of the day, then the last hour of trading saw another increase in prices.

Trading Strategy:

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.  

The stock market continued its steady climb upward to the next resistance level and as suggested in yesterdays post, the last two hours of trading once again created an opportunity to add to long positions.

It appears that the weekly time frame will move into a more definite bullish mode for next weeks trading unless there is a severe downturn in stock prices during tomorrows trading. However, it may be prudent to prepare to take some profits off the table as the rally on the daily chart loses steam a little bit.

This is our favorite configuration to sell half of our holdings and wait for a consolidation or pullback in preparation for the next run up in prices. This trading strategy locks in half of the recent profits and reduces our exposure to a deeper correction.

On the weekly stock chart prices are continuing their move higher from the PSAR indicator and the CCI(20) is now well above 100 at a level of 124.47. If prices hold at this level or even a little below during Fridays trading the weekly mode will turn bullish for next weeks technical analysis.

The daily stock chart is continuing its bullish move with only one down day in the last 9 trading days. Even this down day was relatively tame and finished with a bottoming tail – just the type of price action you want to see in a solid rally.

On the hourly stock chart you can clearly see the small correction or consolidation of prices that occurred until the last two hours of trading.

During the last trading hours, stock prices moved above the PSAR indicator and the CCI(20) moved once again back above 100. As noted in yesterdays post also, the CCI(5) was a good indicator that it was time to consider taking on new long positions.

Trading Strategy:

Although we expect the weekly chart to move to the bullish mode for the start of next weeks trading, new short term trading long positions may be risky at this point because tomorrow is a Friday and the daily trend may be looking to consolidate some more as we reach the upper trend line.

You might consider exit two stops for exit strategies at this point:

1) Set a profit keeper stop 5 or 10 cents below the low of Wednesdays trading for half of your positions.

2) Set a portfolio stop loss 5 or 10 cents below today’s PSAR indicator for the balance of your positions to prevent a catastrophic loss to your portfolio should prices reverse sharply.

This strategy will help keep profits if prices reverse and will keep you in the market if prices continue upwards tomorrow.

If you are a longer term stock trader you should be getting your shopping list ready for a potential bullish change on the weekly time chart.

As expected from last weeks post, today’s trading was strong enough to trip the weekly stock chart to a confirmed bullish mode.  However, this could be just an aberration because only 1/5 of the trading on the weekly time frame is complete.  The remaining 4 days of trading could keep the caution indicator present.

Technical analysis shows that stock prices are just a little higher than the 11,000 resistance level that caused the recent consolidation.  If prices can break through this level and mount a sustained move upward then this rally could easily head towards the next resistance level at about 12,000.

On the daily stock chart, prices continued their move higher with both the CCI(20) and the PSAR reading remaining in the positive or bullish mode.

Traders who took advantage of last weeks suggestion to consider cautious new long positions would have taken the right move. 

Still, the two week consolidation on the weekly chart leaves us a little suspicious and we aren’t ready to throw all caution to the wind at this point, especially with a lot of earnings announcements just around the corner.

Check out our market timing signals for more insight on the current ralley

On the hourly chart the last two hours of trading saw a severe downturn in prices and then a mild recovery.  The last hour of trading each day has really been exciting over the last few weeks.

Stock prices vaulted above the recent resistance level and appear ready for a renewed assault on the 11,000 resistance level.

Yesterdays trading strategy appears to be working well and would have got you into the market fairly early in the day. 

What is on tap for tomorrow?

Regular readers will know that no-one can possibly predict what is going to happen to stock market prices before they happen. 

However, technical analysis and our system of stock market timing will get you into the market when the probability of prices increasing are greater than the probability of stock prices decreasing over the trading strategy time period.

Let’s take a look at the market charts for more insight.  Get access to the market timing charts.

Although Octobers trading is less than half complete if this pace continues then the monthly stock chart will be in a position to confirm a longer term bullish price trend.  The stock market has not been in this mode for approximately 2 years – so that would make a nice change.  It’s too early to make that call but it’s always useful to keep an eye on the monthly price trend.

On the weekly stock chart prices are still flashing a cautionary sign but this is has weakened some more after today’s price increase.  The stock market has appreciated by a little more than 4% already this week.  However, because stock prices a still below our PSAR indicator we’ll keep the caution indicator on.

The daily chart shows the move above the down trending resistance line that took place today.  With the PSAR and the CCI(20) in a bullish position it is safer to take new long positions but keep an eye on the weekly chart until it moves to a bullish mode.

Today’s hourly chart was helped by the sharp increase in stock prices that occurred in yesterdays trading.  That momentum spilled over into the opening period which propelled the stock market to a new reaction high, in turn appearing to break the down trend channel.  Prices now appear poised for a renewed attack at the 11,000 level.  If you recall, 11,000 was the resistance level that initiated the current reaction/consolidation.

If you missed today’s move then observation of the hourly chart will help you decide when would be the best time to take new long positions.  The hourly chart is currently bearish.  An optimum time for new positions – provided the daily trend holds – would be when the hourly chart turns bullish again.  That would be when stock prices are above the PSAR AND the CCI(20) remains above zero.

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

For the complete daily update which includes tomorrows trading strategy and market timing signals through todays close, please take advantage of our $1 can’t miss trial offer located at the subscriber page.