Technical Analysis | Stock Market Timing Signals | Top Stock Picks

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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The weekly trend remains up but the daily trend is starting to look a little overbought.

The weekly chart is still moving up with the momentum indicators gaining strength.  The trading volume is really going to have to pour on the steam to technically have an increase in volume if this weeks trading ends on an up-note.  If trading volume falls it could add to the uncertainty of this rally.

On the daily chart today’s trading created a topping tail candlestick.  Prices ended up close to the up sloping trend line as shown on the chart.  Prices really have not accelerated from the lower trend-line as we would like to see on a strong uptrend, so caution is still advised.  Stock prices may be encountering some difficulty breaking through the overhead resistance at around the 11,600 level.

Trading Strategy

Although the weekly uptrend is in sync with the daily uptrend, caution is advised on taking new long positions in this market.

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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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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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.

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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.

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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.

In yesterdays email I discussed how the hammer candlestick formed in the days trading action could possibly lead to a limited rally in stock prices.  Today, stock prices ran up at the open, fell back 1/3 of the distance, then fell again and recovered slightly in the last hour of trading.  

All told, today’s trading resulted in a modest gain of 57 points.

Is this a move up that you should pay attention to?  Prices have not closed above the overhead resistance level of 11,250 that is the upper limit of this range bound market, so the answer for now is probably not.

Let’s take a look at the stock charts for a more in-depth technical analysis and market timing strategy.

On the weekly chart, prices have moved up to near the highs for the week.  The stochastic, MACD, and CCI indicators are fairly flat to dropping, indicating an overall weakness in momentum.  Stock prices are certainly at the lower end of the up trending channel and look like a rally could ensue, but until prices move up and indicators turn up, any daily rally is suspect.

The stochastic, MACD, and CCI indicators on the daily time frame are certainly starting to look a little stronger.  The stochastic and the CCI has triggered to the bullish side.  The MACD is still heading down.  Today’s action created another topping tail candlestick and still hasn’t closed above the overhead resistance line.  In addition, stock prices need to move up to the 11,310 level to trip the PSAR indicator to bullish.

This is a market that has some work to do before you can feel safe committing to long trades.  It is also noncommittal on the short side – although I think short trades are going to be in the near future based on the lackluster market action.

Trading Strategy:

This market remains range bound between 11,000 and 11,250.  Until stock prices close solidly outside these levels it will be difficult to create profits in either direction.  Prudent investors and trader should sit on the sidelines until a trend develops.  Aggressive investors should play the market up or down as price moves develop.

A sharp drop at the open of today’s trading was recovered by the end of the day to enable the broad market to finish down by only 10.74 points.

With thanksgiving just around the corner, don’t expect any huge moves in either direction for the balance of this trading week (although anything is possible).  After this week is over traders should watch for a definite directional move – the question is – which direction are prices likely to move?

Lets’ take a look at the stock charts for some technical analysis and market timing insight.

Stock prices on the weekly chart (attached) is clearly holding at the prior support/resistance level right around 11,200.  Looking back on the chart, you can see this level was an important break in the huge price drop during September of last year.  A move up from here is likely to move to the 12,000 level fairly quickly.

On the daily chart (attached), prices are holding steady at the recent highs.  A move down last week was answered by solid gains on Monday.  The price momentum indicator is holding fast to bullish levels.  The relative price level is vacillating between bullish and bearish with no real direction in mind it seems.

A move up in prices will quickly switch the price level indicator to bullish and new long positions would be justified.

The hourly stock chart shows the sharp drop in prices at the opening of today’s trading, a quick recovery and downtrend followed.  The last two hours of trading moved prices back up to near the opening level.  Prices are above the relative price level indicator.  If this strength carries over to tomorrow then the daily chart could move solidly bullish.

Trading Strategy:

Right now the model portfolio is in cash awaiting a new signal to enter into long positions.  It is unlikely that a new downtrend will emerge in the short term, but anything is possible with the end of the year just around the corner.

Wait for a new bullish signal on the daily chart before considering new long positions.

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Stock prices pulled back from the overhead resistance in a fairly consistent down day for traders.

In a not-unexpected move, the overhead resistance level referred to in many posts on this blog had an effect on traders today.  Will this reaction finally turn the trend as many have been predicting, or will prices consolidate at this level in preparation for another run at the 11,250 level?

There is certainly evidence that prices may have moved ahead of the economic fundamentals.  On the other hand, there is a lot of money sitting on the sidelines. 

Let’s take a look at the technical analysis of the current situation to determine the best course of action.

On the weekly chart, prices moved above the PSAR indicator earlier in the week, although this will not officially change our weekly market timing signals until next week.  With one day in the trading week remaining, the weekly candlestick looks like it is preparing to create a topping tail.  This may lead to further weakness in future trading days.

On the daily chart, stock prices fell 127 points today and closed just above the support level of the prior high set in September at the 11,000 level.  Prices will need to hold above this level to keep strength in the late stages of this year-long rally or our market timing signals will move to bearish in all likelyhood.

If prices fall below the 11,000 level then a bearish move below the PSAR level of 10,913 will likely occur before the next support level of 10,800 is reached.  The CCI(20) reversed its upward course today, dropping to a reading of 54.84.

Today’s price drop on the hourly chart has clearly displayed a bearish market tone.  The CCI(20) is clearly in bearish territory.  A bullish reversal on the hourly chart is necessary to renew this rally but perhaps not likely in tomorrows trading.  We’ll need to wait and see.

Trading Strategy:

Until strength returns to the hourly and daily charts, traders should consider taking profits where appropriate and tightening stops on positions that would be vulnerable to profit taking on the broad market indexes.

In addition, new long positions should wait until either this current move hits a bottom or until prices move above the overhead resistance at the 11,250 level.  The 11,250 overhead resistance level may prove stronger than the upward momentum remaining in this rally.  

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.

With today’s unemployment report being much worse than expected, and the “worse-case” unemployment rate being increased beyond prior projections – it’s amazing that the stock market was able to hang on to yesterdays gains.

Perhaps traders and investors think that if the recent 3^rd quarter GDP growth was created with so many unemployed, just think what the rate will be once all these people get re-hired?

Or maybe big fund managers and institutions just don’t want to appear “under-invested” at the end of the year?

Either way, we’ll continue to use our technical analysis to generate profitable market timing signals and trading strategies no matter what they are thinking.

The first complete trading week in October has tacked on 3.25% to the broad market Wilshire 5000 average.  Every day except Wednesday has been a solid up day for the market. 

The weekly chart is still flashing the caution signal for next week but is appearing to be strengthening somewhat.  The CCI(20) seems to have stabilized at a level around 60.  Prices have reacted to the 10,500 support level with a respectable bounce this week of over 3%.  A price increase and close above the overhead resistance of approximately 11,250 would indicate a further strengthening of upward momentum.

On the daily time frame, the situation is not as precarious as it was this time last week.  Stock prices have managed to show strength after a couple serious down days prior to this recent week of trading.  On Wednesday of this week stock prices managed to cross the PSAR indicator to the bullish side.  The CCI(20) has moved quickly up from below the -100 level and appears ready to cross the zero line into bullish territory. 

Stock prices on the daily chart are still being affected by the combination of multiple overhead resistance lines which includes the down sloping trend line from the prior high, the up-sloping channel line, and the 20, 40, & 50 day moving averages.  Right above this resistance is the 11,000 level.  Price movement above these levels would certainly justify taking new long positions.

On the hourly chart the CCI(20) has held tough for the past several days’ right around the 100 level.  Prices fell below the PSAR indicator during the last hour of trading but recovered slightly to close within the upper half of the days trading range.

Trading Strategy:

With the market getting stronger and showing a capability to ingest relatively bad news on the employment front without serious heartburn (at least today), aggressive traders should consider new long positions but on market up days only.  More prudent traders should wait until prices move above the overhead resistance before considering new long positions.  

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