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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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:

Stocks moved higher on slower trade today, fueled by two economic reports that increased optimism about the future of the economy.

A government report showed the economy grew in the third quarter, although more slowly than forecast.  Helping push prices even higher was an industry report that showed sales of existing homes rose in November to the highest level in three years.

Price increases are great, but be wary of the decreasing volume as we closeout the year.  Let’s review the stock charts for more market timing and technical analysis insights.

Stock prices on the weekly chart continue to move up from the support level of 11,250 settling at 11,412 at the close of today’s market.  Both the CCI and the PSAR indicator are bullish, but the MACD is still playing dead. 

On the daily chart prices are up for the third day in a row, although on decreasing volume.  Decreasing volume tends to reduce the strength of other technical aspects so this market is still very cautious.  A return to test the 11,250 support level cannot be ruled out.

Unlike the weekly chart, all 3 indicators, the CCI, MACD, and stochastic are showing a return to strength.

On the 30 minute chart once again you can see that prices moved up during the first hour of trading, fell back during late morning action, rose through lunch, fell in the afternoon and ended with a little flurry.  The momentum indicators finished in a mixed fashion with the CCI and stochastic moving up, the MACD showing weakness. 

This may indicate a mixed market tomorrow.  I wouldn’t expect any drastic move up or down during the balance of this week.

Trading Strategy:

If the market moves up during tomorrows trading more than 1% then prudent investors should consider new long positions.  See our top stock picks email for candidates.

Prudent investors should stay on the sidelines in the market remains flat.

Aggressive investors should consider playing the market to the upside on a market that is moving up.  

Bulls were clearly on a rampage early today and through the morning market hours.  Afternoon trading retraced some of the morning’s gain, but overall, prices were up approximately 116 points by the close of trading. 

Investors cheered a combination of corporate deal-making and analyst upgrades.  Even so, it was a fairly slow day when you look at the total volume of shares changing hands.  Maybe just the bears took time off today?

Because of the low trading volume, be careful of reading too much into any market moves this week.  Even so, a gain of over 1% in stock prices is not easy to ignore.

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

On the weekly stock chart the MACD is remaining flat as a pancake.  Sometimes you have to wonder if the chart is working properly!  The stochastic and CCI indicator are both moving up as a reflection of today’s move.  Stock prices may be reacting to the support level of 11,250 and the lower channel trend line and a bounce up from this level is good news.

Let’s take a look at the daily chart for any indications that this move up may continue.

On the daily chart prices have rebounded from last weeks general sell-off and this reaction took place right at the support level of 11,250.  Today’s action moved prices above the PSAR indicator which is a strong indicator of price increases to come.

However, don’t get excited too soon.  There have been a lot of false-starts during this consolidation period so we want to wait for a little more bullish confirmation before being aggressive taking new long positions.

On the 30 minute chart you can clearly see the sharp move up that took place in the first hour of trading.  Prices then moved up until the noon hour.  Prices drifted downward during the lunch time doldrums and the afternoon trading until a last minute flurry of purchases pushed prices back up slightly.

The stochastic and CCI indicators appear strong for tomorrows trading but the MACD looking weaker is the wild card.

Trading Strategy:

The stock market appears to be strengthening somewhat but this assessment is tempered somewhat by the low trading volume this week.   This is an uncertain market and if you really want to trade prior to 2010 then prudent investors should use extreme caution. 

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

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.  

Disappointing corporate news – or should I say – a lack of encouraging corporate news, and increasing nervousness about the economy in general contributed to a sharp drop in stock prices today.

In addition to the sharp drop in prices of over 129 points, trading volume increased today, that can indicate more of the same is in the near future.

This market is becoming so treacherous that is seems logical to take the rest of the year and just watch the market. 

I’m becoming more suspicious that big investment and trading institutions are just keeping this market treading water until the year expires.  These fund managers have to show they made money this year.  What happens in 2010 is anyone’s guess, but the volatility is just creating a frothy market and a frothy market is a good sign of a top – at least an intermediate top.

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

On the weekly chart there are a lot of divergent signals – a clear sign of a directionless market.  The stochastic headed down today, the CCI headed up, and the MACD looks like it’s starting to head down.  None of these are bullish signs – in fact they look like warning signs to me.

On the daily chart prices were pushed down below the support level of 11,250, clearly indication how weak this market is. All three of the indicators are bearish on the daily basis and the price level is approaching a negative PSAR switch.

As we mentioned above, trading volume increased today, another negative sign.

Trading Strategy:

My recommendation is to step aside until this market displays some solid momentum in one direction of the other.

The model portfolio is currently invested in the market and in the unlikely event that the position is not stopped out during tomorrows trading, we will keep adjusting the stop upward each trading day to close to the prior close as possible.

Pretty much regardless of what happens in the market from now until the end of the month you may want to consider taking a break from trading until 2010.  

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.  

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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In a display of weak follow-through strength, stock prices jumped from the opening bell, added over 150 points to the broad market averages, and then finished the day with a small loss.

Most of the focus today was on the Fed announcement.  The Fed announced that the target interest rate would continue to be essentially zero for the foreseeable future.  Even though the Fed claimed to see glimmers of economic recovery, the fact that interest rates are going to be kept at zero seemed to reduce the positive assessment of the “recovery”.

Does today’s action mean you should jump back into this market?  Let’s take a look at the stock charts for an in-depth technical analysis.

On the weekly chart the 10,500 support level continues to support trading.  The CCI(20) is still positive at 46.44 but stock prices remain firmly below the PSAR indicator.  This configuration still casts a shadow on the direction of stock prices.

On the daily stock chart, prices jumped above the PSAR indicator in early morning trading.  Today’s trading action has created a candlestick with an extreme topping tail.  This topping tail may lead to weakness in tomorrows trading so standing aside until price direction is demonstrated continues to be a good strategy. 

The daily CCI(20) has moved above -100 to -92.55, so some strength may be returning to the market, but prices have a long way up to confirm any return to an uptrend.

On the daily chart you can see the gap up at the opening bell until the correction at mid-morning.  The rest of the day was essentially a consolidation until the Fed announcement was issued.  Evidently, traders did not like what they heard from the Fed.  The last hour of trading eliminated all of the days gain – including the opening gap.

Usually a gap in prices will create an area of support.  For prices to close the opening gap in one time period is a demonstration of weakness. 

Trading Strategy:

Based on the last hour of trading there is a high probability that tomorrows trading may challenge the 10,500 support level.  If prices break and close below this level, that would create evidence to support taking positions in Contra-ETF’s.

If prices recover and move up from here it would demonstrate a continuing consolidation activity.

Either way, our suggested trading strategy is to sit on the sidelines and wait for a more complete picture of the direction of stock prices.