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.

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

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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.

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.

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.

Please do your own research to verify if these stocks meet your investment criteria, market timing, and technical analysis requirements prior to taking positions in any of these stocks.

Model Portfolio

Fully invested in Cash. 

The broad market as measured by the Wilshire 5000 index will need to close above the 11,750 level as an initial requirement to consider moving the model portfolio back into the market.

Date 1/12/10

Action: Stopped out at the stop price established at the close of the market on 1/11/10

Symbol: VTI

Purchase Price: 57.38

Selling Price: 57.20

Current Stop:

2010 performance to date:

1/5 through 1/12    -0.3%

Top Stocks List

We do not advocate buying stocks at this time.  When this situation changes this list will be populated with either long or short recommendations.

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.

Please do your own research to verify if these stocks meet your investment criteria, market timing, and technical analysis requirements prior to taking positions in any of these stocks.

Model Portfolio

Fully invested in Cash. 

VTI would need to move above a price of $58.35 in an up-market for consideration to move back into an invested position.

Date 1/12/10

Action: Stopped out at the stop price established at the close of the market on 1/11/10

Symbol: VTI

Purchase Price: 57.38

Selling Price: 57.20

Current Stop:

2010 performance to date:

1/5 through 1/12    -0.3%

Bullish Top Stock Picks (Swing Trade Watch List):

The following stocks have been selected for swing trades.  These stocks are in up trends, have recently reached a new high, and are currently pulling back to their 20 or 40 day moving average.

These stocks are candidates for purchase if the price moves above yesterdays high price, with a stop under yesterdays or todays low, whichever is lower.

See the market timing update for trading strategy.

In a reversal of yesterday’s loss, today’s trading almost makes up for the loss experienced yesterday.  Stock prices were up a little over 100 points today or almost 1%.  Traders appeared held back by aggressive selling of commodities and oil stocks.

Does a one day reversal mean you should jump right back into this market

Probably not, although depending on the market action tomorrow you may want to consider new long positions in well chosen stocks that are already in uptrends.

On the weekly chart today’s action has created an indecision week so far.  So although today’s price increase is welcome, a return of the rally is not ensured.  The MACD appears to be heading higher, but the CCI and the stochastic are flat to lower. 

The daily chart certainly shows the rebound of stock prices from yesterdays down day, although the entire loss was not eliminated.  Prices are still below the PSAR indicator so we are still cautious about taking new positions in this market until that changes.

The daily CCI and stochastic recovered a little based on today’s action.  The MACD is looking weak but could turn back up if this rally continues.  Trading volume decreased today when compared to yesterdays action.  Although this is not a major red flag, higher volume on down-days than on up-days is not a good sign.

On the 30 minute chart, prices moved up nicely at the opening bell only to be pushed down for the remainder of the opening hour.  Prices then moved up the entire day but ran into a little bit of resistance at the level of yesterdays high.  The closing hour of trading ended up with a topping tail that may cause some lack of momentum for the early going tomorrow.

Trading Strategy:

If the broad market continues up tomorrow then traders should cautiously consider new long positions from the top stock picks email.  Here are several indications of an up-market:

• Prices above the high set in the first 30 minutes of trading

• Prices continuing to move up

• All three of the major indexes are moving up – Dow 30, Nasdaq, S&P500.

The Wilshire 5000 would need to move above a level of 11760 to trip the PSAR indicator to a bullish mode. 

VTI would need to move above 58.35 before the model portfolio would be re-invested in VTI.

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.

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.