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. 

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 moved sharply higher today as investors and traders sought to renew this rally.  In anticipation of IBM’s earnings announcement after the market close, stock prices rose almost 150 points on the broad market, or about 1.29%.  The last time this happened, traders were reacting to an Intel announcement of higher profits – which actually occurred.  The following day the market moved sharply lower.

However, IBM did report increased earnings after the market and in contrast with Intel, pointed to more confidence in future business levels.  So we’ll have to wait out the market reaction as trading resumes tomorrow.

A technical analysis of the daily chart shows a recovery in prices back to the highs for the year.  This move recovers the sharp loss of Friday’s trading.  Unfortunately, today’s trading volume was lower than last Friday’s and actually lower than every trading day last week with exception of the down days.  As a matter of fact, trading volume on the up-days has generally been trending lower since the year started with the rally on the first trading day of the year.  This is generally not a good sign for price growth strength.

The move up today put prices above the PSAR indicator, a good sign, but I’ll reserve judgment until prices break-out above the highs of this consolidation.  Just because prices have moved above the PSAR doesn’t guarantee they’ll continue in that direction.

On the 30 minute chart prices jumped up right from the opening bell.  Prices continued up with a small pullback before lunch.  Prices flattened a little during lunch then moved up some more with the last hour of trading creating a close at the highs of the day.  This is generally a good sign for carrying momentum into tomorrows trading.

Trading Strategy:

The market looks poised to renew this rally.  However, action has been extremely choppy.  You need to be extremely careful of whipsaw trades in this type of trading environment.  There is still a possibility that this consolidation may be creating a reversal area.

On the other hand, a solid break to the upside into new highs for the year and a strong close above the highs could renew the rally.

For tomorrow you should consider new long positions from our selection of top stock picks only if all three major market indexes are:

• Above the high made in the first 30 minutes of trading
• Moving up after 10am market time
• Above a price level of 11755 on our market charts

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.

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.

Our cautious strategy towards this market for the last week or two seems to have paid off as the broad market loses over 116 points in the last hour of trading this year. 

It remains to be seen if more profit taking will occur on Monday, or if the bulls will return to push this market higher.  Right now it seems that Thursday’s sharp loss could be an early indication of additional profit taking that may occur at least during the early part of January.  Technical analysis of the stock charts will yield additional market timing insights.

On the monthly time frame, price growth still continued through December, but at a slower pace than earlier in the year.  Two momentum indicators, the stochastic, and the MACD are pointing towards increasing upward momentum.  However, the CCI is not which is a worrying sign.

Trading volume on the monthly basis has also been moving down even after accounting for the end-of-year holidays – which points out how low November’s volume was.  December’s candlestick finished with a topping tail and the PSAR getting closer to tripping to a bearish condition.

Prices on the weekly time-frame are looking a little top heavy, but the daily chart is where all the real damage was done during Thursdays trading.  I mentioned a few days ago the daily chart was looking a little top-heavy.  Regular readers will recognize the strategy of trading when the weekly time frame matches the daily time frame, and right now both the weekly and daily are looking down.

The CCI and the stochastic on the daily chart are both sharply negative, moving sharply in the same direction that was observed earlier in the week so there really wasn’t any surprise that we had a meaningful drop in prices.  The MACD has not gone negative yet, however, the MACD usually follows the stochastic and the CCI so that isn’t a surprise.  What is notable about the MACD during December is how flat it was.

On the 30 minute chart you can see the drop in the morning hours, the flattening during the mid-part of the day, and then the sharp drop during the last hour of trading where the market gave up 80 points in 30 minutes – not a good sign.

Looking to the last chart in the series, SH, which is a Contra ETF, is starting to look positive.  This is another indicator of the increasing potential for a downward move in stock prices. 

Trading Strategy:

If you don’t already have stops in place to protect profits and your overall portfolio from large losses, now is the time to do so.  Traders should hold off from taking new long positions until we see how far this down move will go.

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.

Stocks moved higher again today for the fourth day in a row, shrugging off conflicting economic reports.  The Dow was flat, but the broader market showed a solid gain of almost 40 points by the close of trading.

Stocks slid mid-morning as news regarding sales of new homes fell in November.  A separate report showed personal incomes and spending both rose, but not as much as expected.  A survey of consumer sentiment hit a 3-month high.

The market regained lost ground in the afternoon as a rally in the oil market boosted share prices of industrial companies and energy producers.

Let’s examine the stock charts for additional technical analysis and market timing insights.

The weekly stock chart is moving up nicely from 3 areas of support.  Prices are bouncing off the 11,250 support level, the lower channel trend line, and the 20 week moving average.  This bullish aspect is of course tempered somewhat by the slow trade of this holiday shortened week of trading.

The MACD indicator is still comatose, while the CCI and the stochastic indicators are showing some increasing momentum.  Frequently the MACD is delayed somewhat from showing an increase in momentum when an up move starts.  Let’s hope this is the case with the weekly MACD.

On the daily chart prices have created a new high at the 11,451 price level, 200 points above the 11,250 support level.  The CCI and the stochastic turned positive earlier in the week while the MACD is playing catch-up.

On the 30 minute chart you can clearly see the pullback when the new housing report was issued at about 10 am market time.  The market pulled back to below even and looked like a bearish move was going to take over.  But prices moved back up through the day and then consolidated during the afternoon.

The only bullish indicator on the 30 minute chart appears to be the stochastic.  The CCI and the MACD are looking a little weak.  So it wouldn’t surprise me to see prices under pressure a little bit tomorrow in a shortened trading day.

Trading Strategy:

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.  

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.