Technical Analysis | Stock Market Timing Signals | Top Stock Picks

Stock prices recovered in the afternoon from what could have been a disastrous day of trading.  Technology shares led the late day advance after a 3 day rout that had taken the market to its lowest point since fall 2009.  Worries about a growing debt crisis in Europe and its potential affect on the US economy brought sellers into the market in the morning.  By the afternoon some of the selling pressure dissipated which laid the foundation for an afternoon rally.

The monthly employment report was not all that encouraging either.  Expectations were for employers to add about 15,000 jobs in December.  Instead the government report came out with 20,000 job losses.  However, the January report did have some positive signs, including an increase in the average work week and increased temporary agency employment – both of which are considered leading indicators for the job market.  But the jobs report also showed that the overall impact of the loss of jobs during this recession was far worse than originally reported, indicating an arduous recovery may be ahead.

On the monthly chart trading is starting to look a little toppy.  Although it’s clearly too early to call February trading as bearish, it certainly does have all the trademarks of a risky environment. 

The weekly chart created an indecision candlestick as a result of this weeks trading.  The momentum indicators are certainly showing a general slowdown of the downward momentum.  However, until the weekly chart gets back on track and confirms a return to a bullish trend, rallies are highly likely to be short lived and volatile.  When the market does turn for a bullish bounce, you could expect a rally to reach the mid to upper 11,500’s.  Keep an eye on the trading volume over the weeks ahead.  The last two weeks of price drops have come with increased volume – a sign of institutional investors selling out.

On the daily chart today’s trading created a hammer candlestick – well known for identifying a short term bottom.  However, hammers usually require confirmation with a close above today’s high.  A rally from here could be expected to reach the 11,200 resistance area.  This would set up an ideal level for short selling on the next drop down assuming the weekly trend remains vulnerable to down drafts.

The 30 minute chart shows the continuous drop in prices throughout the day.  As occurred yesterday, the closing of the bond market let the stock market trade unfettered.  Today it resulted in buyers flooding back into stocks and erasing all of the morning’s losses.  Yesterday’s bond market closing had the opposite effect.  Todays last hour of trading today created a gain of over 150 points.

Trading Strategy:

It is highly likely that a bullish bounce will occur if prices move up from today’s hammer candlestick.  Be aware of a sharp rally that will entice you to take new long positions.  Short term positions may create some profits but rallies up from here will be generally short lived until the weekly trend turns up.

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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.

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.

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.

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.

Investors and traders welcomed improving reports on personal income, Exxon Mobil’s profit, and manufacturing.  However, the price increase in today’s trading came nowhere close to erasing the gains of last Friday’s debacle, and the fact that volume dropped from last Friday should also create a suspicious attitude.

On the monthly charts today’s trading came within a hair breadth of moving below the PSAR indicator.  It’s not that the PSAR indicator has something magic about it, it doesn’t, but it does provide a good measure of when a move has the potential to run out of steam.

The weekly chart shows the move up nicely against last weeks losses.  The fact that the three momentum indicators are so oversold is increasing the possibility of a bullish bounce materializing at this level so we’ll include bullish swing candidates in the top stock picks email as well as bearish selections.

On the daily chart I have drawn what appears to be the resistance level that prices will need to break through in order to create a meaningful bounce.  If prices do break out above this level it is certainly not out of the bounds of possibility for prices to move up to below the old channel trend line at about 11,600 or above.  

All three momentum indicators are showing that this could occur so we’ll need to wait and see how this weeks trading develops.

On the 30 minute chart there are two resistance levels that may come into play, the first is the down sloping trend line from the recent highs at about 11,150, and the second at about 11,300.

Tomorrows trading is likely to be tough.  Today’s price increase has left all the momentum indicators oversold and with prices just below a resistance level.  If prices can break through at least 11,150 then the possibility of a stronger move up increases.  If prices get pushed back from these levels the more weakness is likely.

Trading Strategy:

Investors and traders should consider new short positions on days when prices are falling.  Be aware that a bullish bounce is still not impossibility.

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 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.