Technical Analysis | Stock Market Timing Signals | Top Stock Picks

Reacting to a “less bad” government employment report, stock prices increased sharply today.  The Dow was up 122 points or a little more than 1%, the Nasdaq added 34 points or 1.48%, the S&P500 added 15.72 or 1.4%.  The broad market index added 167 points or 1.45%.

According to the monthly government employment report, employers shed 36,000 jobs in February, slightly more than were lost in January, as severe storms crippled East Coast cities.  Expectations were that 68,000 jobs would be lost and the unemployment rate would increase to 9.8%.  Not only were less jobs loss than expected, the unemployment rate decreased to 9.7%.

Employers hired 47,500 temporary workers whose hiring is often a sign that employers are looking to add staff but are not confident enough yet to hire employees directly. 

In addition, many retailers reported solid jumps in same-store sales. 

For all the talk about the weather affecting employment and retail, projections just didn’t seem to be that accurate. 

True, the numbers may be revised, but it’s a lot easier to identify evidence that the economy is on the mend, although without jobs for right now.

Stock prices on the monthly chart are getting close to moving above the PSAR indicator.  With the momentum indicators gaining strength we may have the makings or renewing the solid uptrend that existed in 2009.

On the weekly chart, prices are a hair below the recent 2010 highs set in January.  Breaking through the 2010 highs would be an important technical event for the market.  Trading volume increased for the week, but not significantly.  The momentum indicators continue to pick up steam so when the daily trend is in synch it appears time to consider new long positions.

On the daily chart prices rocketed up to the old 2010 high tide mark.  Trading volume increased but quite frankly was not at a level that creates lots of confidence in rallies.  Trading volume will need to increase at some point.  However, there is enough evidence that the time is right to buy stocks now although we’ll keep an eye on trading volume.

On the 30 minute chart prices shot out of the gate at the opening bell and moved up through the first hour of trading.  Prices then consolidated at the highs until buyers became more aggressive in the afternoon.  The last hour of trading created a close near the highs for the day.

Trading Strategy

Traders who followed yesterdays trading strategy would have considered new long positions between 10 & 10:30 market time as the market continued upward.

It’s likely that Mondays trading will be a consolidation day or will set off some consolidation near the 2010 highs so be wary of new long positions while this is taking place.

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Stock prices gained today on the eve of the Big Report Day. 

The big report day is the monthly employment report that is scheduled to be issued about an hour before the market opens tomorrow.  There was a smaller report issued today that indicated the pace of job losses is slowing.  However, expectations are that tomorrows government employment report will show employers cut 65,000 jobs in February, an increase from 20,000 in January.

Many economists are claiming that the increase in job losses can be attributed to snow days across the country.  Even if that is true, how anyone will be able to spin a report like that as anything other than negative for the future of the economy will be interesting to watch. 

The bottom line is that an increase in job losses means less money for consumers to spend.  I wouldn’t want to predict how the market will react to whatever the report says, but I’d be willing to bet that volatility tomorrow will be high.  It might be a great day just to watch.

Many media outlets are screaming that the Dow is “positive” for 2010.  That is little solace if you bought at the “high” of 2010!   If you bought at the high so far this year you’d be underwater.  However, if the media outlets can raise some interest in buying stocks that would be great because trading volume continues to be dismal – and getting worse.  Trading volume continues to decrease on up-days, not an encouraging sign.

Prices on the weekly chart continue to approach the old high set in mid-February.  A move above this high will be important for confidence to return to this market.  The momentum indicators continue to strengthen somewhat.

On the daily chart prices appear to have stalled somewhat underneath the overhead resistance at the 11,600 level.  Breaking through this level might create some momentum to create an assault on the 2010 high mark created in January.

The MACD indicator is continuing at a high level and if you compare how long prices have been oversold on this cycle with the length of prior cycles it’s not difficult to be concerned about some sharp down days to come.

Trading Strategy:

Friday is very likely to be a high volatility day so it’s difficult to recommend a strategy until the day’s trading plays out. 

However, some guidelines can be established.

If the employment report comes out equal to or better than expected and stocks are rising above the high set in the first 30 minutes of trading then new long positions could be considered.

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Stocks prices rose today but gave up much of the day’s gain as the afternoon turned to profit taking.  Driving prices up today was news about company mergers and signs that Greece won’t default on its debt.

The Dow Jones Industrial average finished the day just above unchanged.  The S&P 500 index added 2 points, or 0.2%, the Nada rose 7 points, or 0.3%.  The broader measure of the stock market added a little more than 36 points for a gain of 0.32%.  The broader index is a more accurate measure of market performance.

Although March trading is only two days old, the monthly chart appears to be gaining strength.  If prices can move above the overhead resistance at the highs of last October the momentum – and trading volume – may increase.

On the weekly chart prices continue to move up from the PSAR switch of last week.  The CCI has moved into positive territory and if prices can hold here for the rest of the week the market timing signal would move from cautious to up.  All three of the momentum indicators are gathering strength.

On the daily chart, today’s trading created a topping tail which may indicate weakness in the short term.  An encouraging aspect of today’s action is the increase in volume.  Although closing well of the highs for the day, an increase in trading volume on a market up day is a welcome sight. 

The 30 minute chart shows the price increase during the opening 30 minutes of trading.  Prices then moved up until the early afternoon when sellers became more aggressive.  The last half hour of trading move prices back up modestly.

Trading Strategy

Suggested trading strategy is to consider new long positions on market up-days. 

The momentum indicators are showing that the market is a little extended here so be careful of new positions with too much risk.

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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.

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Stock prices fell this week after digesting a steady stream of worse than expected news on the economy.  It’s quite surprising that the weeks loss wasn’t larger given the constant barrage of disappointing news.  The broad market wrapped up the week losing almost 50 points or a little more than 0.42%.

Investors and traders considered dismal news on the housing market, jobless claims, durable goods orders, and consumer confidence.  During the week, concerns about Greece’s debt crisis resurfaced like the monster in a bad horror flick that comes back to life.  It appears this monster may linger for a lot longer than anyone originally anticipated.

However, we need to remember that the stock climbs a wall of worry when prices are going up.  And the fact that prices didn’t drop further this week may indicate an underlying strength that may surface soon.  It’s too early to go short, but long positions have yet to be justified.  So we’ll wait until the market comes to us with trading opportunities.

On the weekly chart prices ended the week with a bottoming tail.  Trading volume was up for the week.  So the bullishness of the bottoming tail might be considered cancelled out by the increase in trading volume on a down week.  The CCI and MACD momentum indicators are fairly flat and the stochastic has dropped.  All things considered the weekly chart is sending mixed signals.

On the daily chart today’s trading created a sort of indecision candlestick.  Prices today remained below the PSAR level which indicates that long positions are risky.  The CCI looks like it is gaining strength, the stochastic is at least holding to the current level, but the MACD is still showing overbought.

The 30 minute chart shows the choppiness of today’s trading.  Prices look a little extended to the upside and ripe for a pullback, but there is a lot of time between today and the opening of trading on Monday.  Weekend news can change the investing picture a lot.

Trading Strategy:

Traders should watch for market strength before considering new long positions.  If the market moves above the daily PSAR and continues up then long positions would be appropriate.

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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.

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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.

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

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Overall the broad market lost a scant 7 points, potentially increasing the likelihood for a bullish bounce after the holiday next Monday.

With about half of the months trading behind us the broad market is up about 50 points.  However, the market is down about 550 points from the beginning of the year, so buy and hold investors have a lot of catching up to do.  We have managed to avoid most of that loss and we’ll be ready to catch a new uptrend if one develops over the next week or so. 

On the weekly time frame the market remains in a down trend although technically the market is getting stronger.  The weeks trading activity has recovered the losses from last week and is up about 150 points from last weeks close.  This gain has been on lower volume so it remains to be seen how much upward strength will develop.

The CCI, stochastic, and MACD are all looking stronger on the weekly basis.

On the daily chart, stock trading today dropped sharply at the open and closed at the highs of the day but not significantly above the overhead down-sloping resistance line.  The daily CCI is very close to crossing over into bullish territory, as well as the MACD showing increasing strength.  The stochastic pulled back a little today.  Overall though the daily time frame also appears to be gaining strength so a bullish bounce next week is certainly an increasing possibility.

On the 30 minute chart the precipitous drop at the opening of trading is clearly shown.  The first 30 minutes of trading created a price drop of about 150 points but was not considered a down market day because prices did not drop further than the low created in the first 30 minutes.  Prices then continued generally up for the balance of the day with the last hour of trading moving prices back up close to the opening of the day.

Trading Strategy:

Unless some negative market affecting news is issued before trading opens on Tuesday, it is likely that prices will continue to move up next week. 

Aggressive traders should be ready to consider new long positions for short term profits if prices move higher than the overhead resistance at about the 11,050 level.

Prudent traders may want to wait until the weekly trend moves back to an uptrend before considering new long positions.

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.

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Stock prices rallied today on less than inspiring volume as concerns about a Greek default seemed to lose concern.  Details are still missing but a meeting of European Union leaders promised to put in place funding that would keep Greece from a default situation.

The number of new unemployment claims in the US fell to 440,000 while economists thought claims would fall to 465,000.  Last weeks claims were 483,000.  Real estate foreclosures fell almost 10% in January but filings rose 15% from a year ago.

The weekly stock chart is showing some strength in upward momentum.  It remains to be seen whether this strength will return the weekly trend back up create a shorting set-up.  Time will tell.

Prices on the daily chart closed right at the upper down sloping trend-line at just 50 points above the old resistance level of 11,000.  Tomorrows trading might just move above this resistance and if the move is powerful enough it may justify new long positions.  All three of the daily momentum indicators are showing increasing strength.  See the trading strategy below for more information.

Stock prices on the 30 minute chart were fairly flat to lower until late morning when prices pushed higher until mid-afternoon.  The last few hours of trading consolidated prices at the highs of the day and the resistance level shown on the daily chart.

Trading Strategy:

It is possible that tomorrows trading may break above the highs set today.  If this occurs then aggressive traders may consider new long positions for short term profits.  Keep in mind the weekly trend is still down so any long positions would be a counter trend position and therefore higher risk.

If prices move significantly above the overhead resistance the model portfolio will be moved to cash.

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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. 

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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.

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.

Today’s market action moved another step closer to a trend reversal that I have discussed several times.  Stocks plummeted today from the outset as concerns about China’s lending hammered commodities and the broader market.  Additional reports showing a drop in manufacturing activity and a rise in jobless claims overshadowed improved earnings from Goldman Sachs.  Additional price drops occurred in the afternoon as traders and investors considered President Obama’s announcement regarding additional regulations on the nation’s largest banks and financial institutions. 

Total damage to stock prices today was over 200 points or almost 2% of value.  Trading for the month of January so far is about even with Decembers close.

A quick check of the weekly stock chart shows that prices fell firmly below the lower channel trend line.  Prices have not yet dropped below the PSAR indicator, but I suspect that it is only a matter of time before they do so, thereby creating another nail in the uptrend’s coffin.  The weekly momentum indicators are all heading for bearish territory.  Even the stoic MACD that has been flat since November is now showing life.  Unfortunately it’s going in the wrong direction for long investments.

The daily chart shows the same type of initial indications of a trend reversal as the weekly chart, just what we need to suggest a shorting strategy.  Prices dropped way below the lower trend line and closed at the lows for the day.  Prices are close to creating a reaction low below the lows of late December 2009.  The volume increase on yet another down day is continuing evidence of the big investment houses heading for the exits.  All three momentum indicators are now in bearish territory.

In similar action to Wednesdays trading, the 30 minute chart of today’s trading shows most of the losses occurred in the morning hours.  A downside gap in prices is additional evidence of institutional selling.  Prices managed a small recovery from the hammer candlestick created at 1pm.  From 2pm through the last hour, trading was all downhill.

Trading Strategy:

Continue to take profits and tighten stops on long positions remaining in this market.  Do not consider new long trades until the market returns to an uptrend.

It is still a little early to consider short positions in this market although we are getting close.  In order to justify short positions the weekly chart would need to be bearish (it’s not all the way there yet) and the daily chart would need to take a bullish bounce to a resistance level after closing below the lows set in late December 2009.

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.