Technical Analysis | Stock Market Timing Signals | Top Stock Picks

Stocks rallied today for the second triple digit day in a row.  Investors and traders were encouraged by better than expected corporate results, signs of the housing sector beginning to stabilize and solid auto sales – a benefit of Toyota’s issues?

As we mentioned in yesterdays email, investors and traders should be aware that a bullish bounce is still a possibility.  Today’s action may have created the momentum to hold off on short positions and take cautious new long positions.

On the weekly chart stock prices continued their move slightly above last weeks high and further away from the 11,000 support level.  All three momentum indicators are turning up as an additional confirmation that a bullish bounce is in process.

On the daily chart, prices moved above the PSAR indicator and continued up from there.  This type of move was expected for some time given the extent of the recent move down and the oversold condition of the momentum indicators.

On the 30 minute chart prices wavered at the open until the first normal reversal time of the day at about 9:30.  Prices then continued to move up for the balance of the day.  The last hour of trading left prices close to the highs of the day.

Trading Strategy:

Unless the market moves sharply down from here then this appears to be the bullish bounce we have been looking for.  Today was an ideal day for new positions from our top stock pick list.

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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.

The technical analysis transition on the weekly basis from caution to a reconfirmed uptrend appears to be correct as the first day of trading this week adds almost 1% to stock prices.

At the end of last week we had suggested that you consider some exit stops to take profits off the table where suitable and to keep you in the market if stock prices continued upward today. 

If you followed that advice and our market timing signals, then it’s likely your portfolio is in pretty good shape for a renewal of this rally.  As always though, anything can happen so let’s take a look at the stock charts for some more insights.

On the monthly stock chart, October is continuing the month’s long tradition of increasing stock prices.  The CCI(20) is above the zero line and is indicating a strengthening of the long term trend.  Prices have been above the PSAR on the monthly chart since this trend started in April.

On the weekly chart the uptrend was reaffirmed during last weeks trading with stock prices remaining firmly above the 11,000 support level.  It remains to be seen if the 11,000 support level will be tested and we’ll watch for that on the shorter time frames.

In the meantime the weekly CCI(20) and the PSAR are in bullish positions.

On the daily chart stock prices regained last Friday’s loss and seem to be building a resistance at about the 11,200 level.  This is the level to watch when considering new long positions. 

The upper trend line on the daily chart is located at about the 11,500 level so one would expect to see a consolidation or a reversal if prices continue upwards and reach this level.  In the meantime, the daily CCI(20) and the PSAR are both bullish.

The hourly stock chart shows the bullishness in the opening hours of today’s market.  Stock prices then pretty much held around the highs until the last hour of trading that saw a little pullback in prices.

The CCI(20) is falling from the high of the day and may indicate some weakness in tomorrows trading.  Stock prices are still above the PSAR indicator on the hourly basis although any weakness may result in a pullback which could set-up an opportunity to consider new long positions.

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The last hour of trading in today’s action once again vaulted prices above a fairly significant resistance level.

Next stop appears to be the 11,000 resistance level.  If we vault over this resistance can 12,000 be far away?

The tone of this market makes us suspicious that a lot of big guns that missed the party that started earlier in the year are getting nervous.  Big portfolio managers who are measured on yearly performance certainly don’t want to get left behind with too much cash at the end of the year if prices maintain these levels.

So based on the end of the year being right around the corner this may turn into quite a party for the end of the year trading.

Let’s take a look at the stock charts.

As we mentioned in yesterdays daily post, the monthly stock chart is starting to look stronger as October trades away.  We certainly have more than half of the month left for trading, but the monthly chart is starting to show bullish indications.

On the weekly stock chart, stock prices are just about as near as they can be to climbing above the PSAR indicator without actually doing so.  It won’t take much of a price increase next week to get prices above the PSAR.   

Getting above the PSAR on the weekly chart will likely move prices above the 11,000 level. 

A combination of these events would make for a strong uptrend indeed.

On the daily stock chart, prices continued their climb closer to the 11,000 level.  If prices get above the 11,000 level then it’s quite probable that prices will move up to the upper trend line at about 11,500.  Prices are currently about halfway to the upper trend line so there is still significant upside remaining if prices move above 11,000.

Both the CCI(20) and the PSAR indicators on the daily chart are showing a strong uptrend.

Once again the last hour of trading pushed prices sharply higher.  This is exactly the type of action expected in a strong marke

As suggested in yesterdays update, waiting for the hourly chart to move above the PSAR indicator before taking new long positions was certainly the right move.

Subscribers who watched for this signal to enter long trades benefited from this strong move and likely finished the day with profits in new trades.  That is a nice position to take home for the weekend.

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

Even though the weekly stock chart shows caution, stock prices are close enough to moving above the PSAR that we could consider that indicator as neutral – even though the market signals below show caution.  Traders should take new long positions on market up days.  Market up days are indicated by the major indexes being above their prior close and moving higher AFTER 10am market time.  Select new positions from our top stock picks service.  

Visit our market timing signal summary page to see this chart in color and market timing signals that go back to 2006.

Weekly
 
Daily
 
Strategy for next market day based on price position only.  Refer to technical analysis & market timing verbiage for further details.


Week End Date
Trend
Market Day
Daily Trend


10/16/2009
Caution
Fr
 
 


Th
 
 


We
 
 


Tu
 
 


Mo
 
 


10/9/2009
Caution
Fr
Up
Potential Trend Transition


Th
Up
Potential Trend Transition


We
Up
Potential Trend Transition


Tu
Caution
Potential Trend Transition


Mo
Down
Potential Trend Transition


10/2/2009
Up
Fr
Down
Potential Trend Transition


Th
Down
Potential Trend Transition


We
Caution
Tighten Stops/Take Profits


Tu
Caution
Tighten Stops/Take Profits


Mo
Caution
Tighten Stops/Take Profits


9/25/2009
Up
Fr
Caution
Tighten Stops/Take Profits


Th
Caution
Tighten Stops/Take Profits


We
Up
New Longs On Up Days


Tu
Caution
Tighten Stops/Take Profits


Mo
Caution
Tighten Stops/Take Profits

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.

The first two trading days in October have certainly started on a rocky path.  The stock market has lost approximately 2% of its value this week.

Can we expect more losses as October continues to unfold?  Obtain stock charts here for the following discussion.

The 11,000 resistance support level I have discussed many times in this column has at last shown up on the monthly chart as a trouble point.  11,000 also coincides with the downward sloping upper trend line that extends from the high of late 2007

So it’s not surprising that this trading level would at least highlight a price area where a consolidation would be expected.

The real question is will any consolidation here result in a longer correction that we could profit from on the short side?  Let’s view the shorter time frame stock charts for more insights and market timing data.

As I suggested might happen in yesterdays technical analysis, the weekly stock chart has switched into a cautionary posture.  Prices closed this week below the PSAR indicator.  This alone doesn’t guarantee a down trend on the weekly stock chart, but it is sufficient to alert us that a trend change may be taking place.

The CCI(20) line which is used as a confirming indicator is above zero but heading lower.  A transition below zero would help confirm a down trend is the strongest possibility for future prices.

As I have described many times, technical analysis cannot define with certainty the exact top or the exact bottom of prices – only hindsight can do that.  However, market timing analysis can certainly help us identify trends and when a trend change is likely.  And the weekly chart appears to be in a transition mode.  

We just have to be patient and let the stock market action in the days ahead show us which is the most likely tradable direction.  So for next weeks trading the suggested trading strategies will be overshadowed by a caution indicator on the weekly time frame.

On the daily stock chart prices are clearly in a bearish mode.  However, as mentioned in yesterday’s column the daily price level is at another support level of approximately 10,500.  There is fairly strong price support here.  As you can see on the chart this support is provided by the lower channel trend line and the 6 or 7 day price consolidation of late August.

Will this provide sufficient support on the daily chart to move the weekly trend back out of the cautious mode?  We’ll wait for an indication of that before taking on new long positions.

The hourly stock chart has started to create a downward sloping channel.  There is some support at the 10,400 level from the price gap on Sept 8, so this level may help prices on a daily basis.  If prices drop below this support level then additional drops appear likely.

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

It’s still a little early to take short positions or positions on contra-etf’s.  If the weekly stock chart continues its bearish activities then short positions may be warranted.  Until the stock market provides clear information on the possible future direction you may want to consider just waiting before taking on new positions on either side of the market.  

Technical analysis shows an increased possibility of more advances in the short term.

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The weekly technical analysis update from last Friday suggested entering into new bullish positions today only if the stock market went up.

This recommendation was based on a number of market timing factors that indicated a consolidation of the current bullish trend could be in the works.  We also suggested that if the stock market did not go up today then the best strategy would be a wait and see approach to the current market.