Technical Analysis | Stock Market Timing Signals | Top Stock Picks

Stocks fell sharply today in what hopefully will be a controlled consolidation but may well turn out to be the beginning of a longer pullback.  The news cited for this downturn in prices was the drop in a key measure of consumer confidence.

However, investors are also searching for evidence of fundamental strength in the overall economy and they are coming up empty handed.  The employment picture is not improving as quickly as many has hoped, home prices continue to fall, interest rate jitters have been increased as a result of the Feds latest move – overall there isn’t a lot to be excited about – and a lot of profits to capture.

But regular readers will recognize this underlying nervousness as a reflection of trading action over the last few weeks.  Prices have been rising on ever decreasing volume – an almost sure sign of big players dumping shares. 

On the monthly time frame the picture is looking like the tide is starting to turn down.  Prices really started to meet some headwind at the mid 11,000 level. 

On the weekly time frame, prices recently moved above the PSAR indicator but the balance of the technical indicators are not supporting this strength.  All the momentum indicators have appeared to stall in bearish territory and a new 2010 high appears unlikely – at least in the near future.  This could quite possibly set up a longer pullback or a renewed down trend.

On the daily chart, prices have dropped below the lows of the recent uptrend line.  Trading volume today increased from the recent 5 or 6 days of trading volume on up days.  All the momentum indicators are at bullish extremes and appear to be moving down.  Whether they progress into bearish territory or this pullback can turn into a less damaging consolidation is yet to be seen.

On the 30 minute chart you can see that most of the downturn in prices occurred in the morning hours.  The balance of the day was fairly choppy trading action with some increased selling taking place during the last hour of trading.

Trading Strategy

Prudent traders and investors should tighten stops and take profits where present.  No new long positions should be entered until this pullback demonstrates some support before a lower low is made.

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After the close, Cisco and Novellus reported better than expected earnings but right now investors and traders are pulling the reports apart for more insight as to future expectations.

For the day the broad market lost about 64 points or less than 1%.  This loss is certainly within the realm of an expected pullback, and on lower volume than the recent up days – a welcome site.

However, the weekly trend and the daily trend are still out of sync so although selected long short term positions may be profitable, don’t be the farm on this rally continuing and creating new highs – yet.

On the weekly chart not much has changed from yesterday.  The CCI and the stochastic indicator are showing some strength but the MACD is still heading down.

The daily chart shows the trouble the market had today with the resistance level of the prior highs from late last year.  Prices being below the 40 day ma and the 20 day ma doesn’t help.  The CCI and the MACD are getting stronger but the stochastic is mixed.  

Trading Strategy:

Aggressive investors and traders should play the market as it develops either up or down with short term positions.  Additional caution is advised at least until the weekly trend lines up with the daily trend.

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

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.

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.

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

Sample 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 at the subscription page.

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

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

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.

Stock prices were hammered today but trimmed some of the losses by the close of the market.  Techs fell after cautions outlooks from Motorola and Qualcomm.  Continuing worries about the labor market didn’t help matters.

On the monthly chart the situation is not looking well.  Stock prices are struggling against the overhead resistance level and volume looks to be higher than December.  At least that’s the way it’s appearing but January isn’t over yet.

The weekly chart is looking like it is preparing to drop below the support level of 11,000.  If that happens it may accelerate the move down to the next support level at 1,000.  All three of the indicators are weak.

It appears that chances for a bullish bounce are disappearing rapidly.  The daily chart is showing lower highs for the last 4 days.  Today’s trading volume was again higher than yesterdays on another down day in prices.

Trading Strategy:

As mentioned in yesterdays email, a solid breakdown in prices through about the 11,150 level could be considered a good point for new short positions.  That happened today and short positions or positions in Contra ETF’s should be considered.

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

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

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.

The Federal Reserve hinted today that interest rates will remain steady for the foreseeable future.  I don’t know about you but I have trouble envisioning how long the “foreseeable future” is.  It probably means that until something makes the Fed decide to increase rates – which could be anytime I guess.

The Fed also stated that the economy has continued to strengthen since December’s meeting and that the labor market is essentially “less bad”, to borrow from Vice President Biden’s famous statement.

Apple unveiled its new iPad stating that a new category of computing devices has been created.  Hmmm, I’m sure I remember other screen oriented devices.  But nonetheless, anything that is announced with the standard iHype from Apple is bound to be purchased in profit creating quantities.

Back to the stock charts…

The weekly chart is still holding above the support levels we’ve reviewed several times.  The turn to a downtrend on the weekly chart is still lacking some confirmation.  We’ll be watching for a bullish bounce but won’t count out a return to a bullish trend on a weekly basis.

As mentioned above, the daily chart has created a moderately weak hammer candlestick from today’s trading.  I say moderately weak because ideally a hammer has a bottoming tail twice as long as the body and prices should finish at the high of the day.  However, it does have some strong characteristics of a hammer although the trading volume is weak.

Typically hammers indicate a short term bottom and upcoming strength so we may get the bounce we’ve been waiting for tomorrow.  See the trading strategy below for the details on what to watch for.

On the 30 minute chart, stock prices started the day going nowhere.  Then prices drifted down and it looked like at the 2pm mark it was time to take short positions. 

But because prices moved above the PSAR indicator (indicating strength) we wanted to wait and see what would happen.  Sure enough, prices moved up closing near the highs for the day in the last hour of trading.  This strength in the last hour of trading may flow over to tomorrow.

Trading Strategy:

Based on the market action of the last few days it is quite possible that a bullish bounce may develop over the next few days.  If so it could create some profits if caught early enough.  But unless there is some follow through it could peter out fairly quickly.

Aggressive traders should watch for a price break-out upwards through the 11,300 level with prices above the high set in the first 30 minutes of trading AND moving up in order to consider new long positions.  You can see this level drawn on the free real-time stock picks provide through this site.

The top stock picks for this event is contained in the top stock picks email.

Prudent traders should wait until a new trend is confirmed prior to taking new positions in this market.

No real earth shattering news today that was likely to drive the market in either direction.  News consisted of the continuing hand-wringing about the banking sector and the possibility for Bernanke’s second term.  A weaker-than-expected report on the housing market didn’t help.

With the CCI dropping below the zero line in today’s action you could say that a weekly downtrend has been confirmed.  However, we don’t call trends on middle of the day market action and we don’t call weekly trend changes in the middle of the week either. 

On the other hand, the general positioning of prices on the weekly chart should be part of any trading strategy, and right now a downtrend seems inevitable on a weekly basis.  

On the daily chart, today’s trading created a topping tail candlestick which means as prices moved up they brought out more sellers than buyers.  It is possible that the market may eventually rally from this level which will set up the short sale environment we’ll be waiting for.  In situations like these it’s frequently better to wait for the market to come to you.

All three of the daily momentum indicators are bearish but appear to be pointing towards a bullish bounce.

On the 30 minute chart you can see the price increase at the opening that brought sellers into the market.  Prices dropped in late morning trading to the open of the day.  Prices then moved up until the last hour of trading when some profit taking occurred.

Trading Strategy:

It still appears to be a little early for short positions.  What we are looking for is a consolidation at this level at least in order to justify short positions.  Short positions are then best entered at a break-down from this consolidation level or after a bullish bounce.

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.

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.