Technical Analysis | Stock Market Timing Signals | Top Stock Picks

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.

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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.

Stock trading continued their move up today following yesterday’s indecision day.

Although stock prices pulled back from the highs of the day, they finished in the middle of the days price range for a solid gain of approximately 60 points.

As we reviewed in yesterdays post, prices did move up sufficiently today to trip the weekly PSAR into a bullish position.  The weekly CCI(20) is moving solidly upwards and is currently at a level of 99.92.

Although there are still two days of trading remaining before the weekly chart will be complete.  Using technical analysis techniques it appears probable that the week will finish in a bullish mode.  There is always the possibility that conditions could reverse by the end of the week but stock prices would have to drop below 10,500 to drop below the PSAR indicator.

Again, on the weekly chart, stock prices have reached the level of the sharp downturn in weekly prices that occurred in late September of 2008.  This level combined with the 11,200 to 11,250 level could present some additional resistance to overcome before prices can move solidly higher. 

The next overhead resistance on the weekly chart is approximately 1000 points higher at around 12,250.

The interaction with overhead resistance levels is even clearer on the daily time frame.  Not only do the weekly time frame resistance levels come into play but prices are just below the prior daily high set in mid October of this year.

On the daily chart the CCI(20) has moved firmly into bullish territory and is currently 79.40.  Stock trading action today created a topping tail candlestick that may indicate some future weakness as the overhead resistance is either worked through or pushes prices back down into a consolidation pattern.  A breakthrough and close above this resistance level is crucial for prices to keep their upward momentum.

On the hourly chart, stock prices have carved a fairly aggressive upward sloping channel.  Stock prices are currently at the lower channel line.  Also on the daily time frame the overhead resistance from mid October is clearly in play with stock prices at this level.

However, the last hour of trading did produce a bottoming tail candlestick which may predict trading strength tomorrow if it carries over.

Trading Strategy:

Traders should watch for a move above the overhead resistance at the 11,250 level before considering new long positions in this market. Prudent traders may want to wait for a close above this level before considering new long positions.

Once above the overhead resistance, traders should only consider new long positions on trading days when prices are moving up.  This means that stock prices are above the high made during the first half hour of trading and moving higher.   View the subscription options.

Trading action today created a classic “indecision day” type of candlestick on the daily chart.

After yesterday’s huge run-up, an indecision day is just what you’d like to see on the day after – unless prices run up again.  An indecision day gives the market a chance to digest recent gains and provides evidence that profit taking is not the first thing on trader’s minds.

The recent months of trading has produced several of these types of trading days, look at the daily chart on July 17, September 11, and most recently October 7.  All these days were indecision days after a run-up in prices. 

You’ll also note that after these indecision days, prices had a tendency to take-off to the upside again.  Will that be the case this week?  We hope so and our trading strategy – see below – will take advantage of this action if it occurs.

On the weekly chart, prices did not move up to trip the PSAR indicator into a bullish mode.  The CCI(20) moved up to a level of 93.63.  If prices move up tomorrow we could have a PSAR move to the bullish side which would also provide momentum for a break through of the overhead resistance at the 11,250 level.

On the daily chart, the CCI(20) has moved up to 57.22 and with stock prices still above the PSAR indicator, the daily mode appears to have some upward momentum left.

On the hourly chart you can see the controlled amount of profit taking that took place in the morning.  Another sign of strength were the bottoming tails that were created during the mid-day hours.  The last hours of trading recovered the morning loss and prices finished just about where they started.

The final hour of trading moved stock prices above the PSAR so perhaps this late day market strength will influence prices tomorrow.

Trading Strategy:

Traders should consider new long positions on trading days when prices are moving up.  This means that stock prices are above the high made during the first half hour of trading and moving higher.  Unless this condition occurs during the day tomorrow, traders should take no action.