Technical Analysis | Stock Market Timing Signals | Top Stock Picks

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.

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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.

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Stock prices hit the skids today as traders and investors looked forward to a long weekend and likely wanted to lock in some profits.  The broad market lost about 130 points today – a little over 1% of value.

Banks led the selloff today, even as JPMorgan announced better than expected earnings.  However, revenue missed forecasts.  Intel, who announced spectacular earnings after the market yesterday, fell about 2%. 

This type of action is beginning to appear as a market in a “buy on the rumor – sell on the news” type of environment.  The rumor being increased earnings during the fourth quarter, and the news is starting to come out.  This is the type of situation where big institutions start to unload stocks at high prices onto retail investors.

So we need to be extremely careful in this environment.  This could be the beginnings of a new longer term downtrend.  We’ll have to stand aside and see how this reaction plays out.  There is definitely a slowing of upwards momentum on the longer term charts.

January trading is about half finished and the monthly chart appears to be already reacting to the overhead resistance at about the 12,000 level.  In addition to being a significant number, this level also corresponds to the low of September 2009 and the high of October 2009.  There are probably a lot of investors interested in getting back to even at this level.  Their selling activities could prove difficult to overcome. 

 Today’s sharp price drop is not very apparent on the weekly time frame.  All three indicators seem to be holding their own to some degree.  The CCI is above 100 but falling slightly, the MACD has returned to flat and the stochastic is still high but looking a little weak.

Another week like this one will likely move prices below the PSAR which would be another indication of a trend change.

Stock prices on the daily chart fell sharply and moved below the PSAR.  Two PSAR switches in as many days are real evidence of a market that just can’t make up its mind which direction it wants to go.  Trading volume increased today which is a sign of institution selling or “unloading at the top” type of action.

All three of the momentum indicators fell.

The 30 minute chart is really scary.  Prices fell precipitously from the opening bell until they reached the support level of the low set Tuesday.  Once at that level a hammer or bottoming candlestick was evidence that a bounce was likely.  Sure enough, prices stabilized a little with the last hour of trading at least pulling prices off the low for the day.

The indicators on the 30 minute chart appear to be showing a strengthening of upward momentum.  However, the market is closed on Monday so the next opening event is 3 days away, which will likely reduce the likelihood of this late small bit of strength contributing to Tuesday’s opening.

Trading Strategy:

Stand aside until these sharp movements identify a profitable trend.  We’ll let you know when that occurs.

Our strategy of only considering new positions in up markets should have kept you out of the market for the most of this week. 

Profit taking and tightening of stops should be the focus of activities before the market opens on Tuesday.

Stock prices will need to close solidly above the 11750 resistance level in order to justify even considering new long positions in this 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.

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.

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.

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

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.

With today’s unemployment report being much worse than expected, and the “worse-case” unemployment rate being increased beyond prior projections – it’s amazing that the stock market was able to hang on to yesterdays gains.

Perhaps traders and investors think that if the recent 3^rd quarter GDP growth was created with so many unemployed, just think what the rate will be once all these people get re-hired?

Or maybe big fund managers and institutions just don’t want to appear “under-invested” at the end of the year?

Either way, we’ll continue to use our technical analysis to generate profitable market timing signals and trading strategies no matter what they are thinking.

The first complete trading week in October has tacked on 3.25% to the broad market Wilshire 5000 average.  Every day except Wednesday has been a solid up day for the market. 

The weekly chart is still flashing the caution signal for next week but is appearing to be strengthening somewhat.  The CCI(20) seems to have stabilized at a level around 60.  Prices have reacted to the 10,500 support level with a respectable bounce this week of over 3%.  A price increase and close above the overhead resistance of approximately 11,250 would indicate a further strengthening of upward momentum.

On the daily time frame, the situation is not as precarious as it was this time last week.  Stock prices have managed to show strength after a couple serious down days prior to this recent week of trading.  On Wednesday of this week stock prices managed to cross the PSAR indicator to the bullish side.  The CCI(20) has moved quickly up from below the -100 level and appears ready to cross the zero line into bullish territory. 

Stock prices on the daily chart are still being affected by the combination of multiple overhead resistance lines which includes the down sloping trend line from the prior high, the up-sloping channel line, and the 20, 40, & 50 day moving averages.  Right above this resistance is the 11,000 level.  Price movement above these levels would certainly justify taking new long positions.

On the hourly chart the CCI(20) has held tough for the past several days’ right around the 100 level.  Prices fell below the PSAR indicator during the last hour of trading but recovered slightly to close within the upper half of the days trading range.

Trading Strategy:

With the market getting stronger and showing a capability to ingest relatively bad news on the employment front without serious heartburn (at least today), aggressive traders should consider new long positions but on market up days only.  More prudent traders should wait until prices move above the overhead resistance before considering new long positions.  

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A surprise dip in new home sales reported today sent stock prices into a tailspin, losing over 2% of value by the close of the market today.

Once again our market timing strategy was right on the money by suggesting you stand aside with your profits safely in your pocket while the market shows us the line of least resistance.  Based on today’s price action it appears the line of least resistance is down – at least for now.

Our model portfolio has strict sell rules and the portfolio sold out and went into cash at this mornings opening price.  Visit our blog on how to get more information about the model portfolio.  Before we closed out today the model portfolio was up 44% while the DJIA was down 14% over the same time period.

Let’s take a look at the market charts for a technical analysis of today’s market action.

With a little more than half of the weeks trading in the history book, the bullish condition of the weekly time frame looks vulnerable.  With only a little more downward movement in prices during Thursday and Fridays trading, our market timing signal on the weekly basis is likely to move to “Caution”.  It would take a lot of price reduction for both the CCI(20) and the PSAR indicator to move into a bearish position or “Down” prior to the end of the week. 

On the daily stock chart, prices are below the PSAR indicator and the confirming CCI(20) is now firmly bearish.  Whether or not we get a bounce from here remains to be seen.  However, we are now providing contra-etf’s for selection to our subscribers in preparation for an extended downturn.

On the hourly chart prices dropped like a stone from the opening bell.  The only break in price reductions was in the early afternoon.

Trading Strategy:

If you don’t want to trade short or don’t want to take positions in contra-etf’s then just sit and watch until market strength returns.  For now it appears that profits are going to be easier on the downside.

Subscribers are now getting suggestions for contra-etf’s.  Contra-etf’s are designed to increase in price as the stock market falls. 

If the market shows some strength, new positions in contra-etf’s should be considered once the hourly chart goes from strength to weakness.  It’s likely we’ll get a bounce up to maybe 10,650 or so but if the market returns to weakness after that then pick new positions from the contra-etf list.  

It was a fairly flat day for stock prices today with the DJIA gaining 14 points while the S&P 500 lost a little more than 3 points.  The Nasdaq was the clear loser and gave up almost 26 points.  The Wilshire 5000, which is the broadest measure of market performance widely available lost 55 points or 0.47%.

Even with the poor performance of stock prices over the last 3 days, it’s still a little early to throw in the towel on this rally.  We won’t be selling this market short or taking new long positions until clearer direction is determined.  Although there are always bad statistics or news on a frequent basis, the general economic background continues to improve.

Let’s look at the stock charts for more technical analysis and market timing insight.

We’ll start with the daily stock chart today.  5 days ago stock prices signaled their intent to go down and prices have done just that.  However, the market may be just at the turning point and this is when market timing is so critical.

Stock prices on the daily chart are now right at the support level of the up trending lower channel line.  If you look back over the last 5 or 6 times this support level was reached, what followed was a fairly significant rally, one you’d definitely want to participate in! 

Today’s market timing signal chart is correct in indicating that a trend transition may be in process.  Prices just may not reach the tipping point quite yet.  This position is supported by technical analysis of the weekly and hourly stock charts.

On the weekly chart stock, prices are again right at the lower trend line.  It remains to be seen if this level will support another attack on the overhead resistance at 11,000. 

The more times an overhead resistance is attacked the weaker it gets.  If prices move above 11,000 again we may see a powerful move up towards the next overhead resistance at about 12,000.  The CCI(20) is still bullish and prices are still above the PSAR indicator, both of which support a bullish outlook – at least for now.

On the hourly stock chart, prices have hugged the lower down-trending line for almost two days of trading.  Prices are really close to moving above the PSAR indicator.  If prices do move up from here you could expect 11,000 and the upper channel line to act as overhead resistance. 

If prices move up from here, the 11,000 level and the upper channel line would likely create resistance together, so punching through would likely create a powerful move up.

Trading Strategy:

As we recommended yesterday, 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.

We will know what position to take once stock prices fall below the current support or move above the overhead resistance.  Don’t risk funds trying to predict what the market will do, just wait for the market to indicate the line of least resistance as it will sooner or later.