Technical Analysis | Stock Market Timing Signals | Top Stock Picks

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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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.

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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.

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.

View our free market timing signals ,  stock trading strategies , and stock trading forum at these links.

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.

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.

Earnings are hoped to be good this reporting period but improvement statistics are likely to be skewed by the extremely low bar established on earnings reported a year ago.

The weekly stock chart is having a hard time in following up from the rally last Monday.  Looking at the chart you can see that prices have not moved up very much from the lower channel trend line.  Although it’s early to judge where this week will end up, momentum on the weekly basis seems to be suffering a little.

The weekly MACD is just starting to look up after being flat for 11 weeks or so.  The stochastic and CCI are at least holding their own. 

The daily chart shows the price increases of the last 6 days.  In conjunction with the weekly chart, prices are looking a little weak.  The stochastic indicator is turning down while the CCI is flat, and the MACD has stalled somewhat.  This may point to some weakness in the near term.

On the 30 minute chart you can see the run-up in prices at the opening bell.  Prices immediately reversed in the first 30 minutes of trading to a loss and then recovered to the opening price level.  Prices then drifted down until the last hour of trading.  The last hour of trading pushed prices modestly higher for the day but trading finished with an indecision candlestick, perhaps pointing to an increased possibility for a pullback during tomorrows trading.

Trading Strategy:

Prudent and aggressive traders should consider new long positions on well chosen stocks on days the broad market is increasing in price although caution is advised.  This means that prices are above the prior days close and above the high created in the first 30 minutes of trading.

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 higher on slower trade today, fueled by two economic reports that increased optimism about the future of the economy.

A government report showed the economy grew in the third quarter, although more slowly than forecast.  Helping push prices even higher was an industry report that showed sales of existing homes rose in November to the highest level in three years.

Price increases are great, but be wary of the decreasing volume as we closeout the year.  Let’s review the stock charts for more market timing and technical analysis insights.

Stock prices on the weekly chart continue to move up from the support level of 11,250 settling at 11,412 at the close of today’s market.  Both the CCI and the PSAR indicator are bullish, but the MACD is still playing dead. 

On the daily chart prices are up for the third day in a row, although on decreasing volume.  Decreasing volume tends to reduce the strength of other technical aspects so this market is still very cautious.  A return to test the 11,250 support level cannot be ruled out.

Unlike the weekly chart, all 3 indicators, the CCI, MACD, and stochastic are showing a return to strength.

On the 30 minute chart once again you can see that prices moved up during the first hour of trading, fell back during late morning action, rose through lunch, fell in the afternoon and ended with a little flurry.  The momentum indicators finished in a mixed fashion with the CCI and stochastic moving up, the MACD showing weakness. 

This may indicate a mixed market tomorrow.  I wouldn’t expect any drastic move up or down during the balance of this week.

Trading Strategy:

If the market moves up during tomorrows trading more than 1% then prudent investors should consider new long positions.  See our top stock picks email for candidates.

Prudent investors should stay on the sidelines in the market remains flat.

Aggressive investors should consider playing the market to the upside on a market that is moving up.  

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.  

The Federal Reserve re-iterated their statement that interest rates will remain unchanged for the foreseeable future, but they also voiced the opinion that economic weakness will persist for some time.

Stock prices were sharply up prior to the Fed announcement and retreated during the afternoon hours to close up a modest 25 points. 

Still a gain is a gain and we’ll take it.

Technical analysis of our standard stock charts continue to point to a bullish continuation of our market timing signals - although some caution is mixed in based on today’s trading action.

Today’s trading created a candlestick with a topping tail.  Many times this can presage a fall in prices, especially if the bottom of the candlestick is located at the highs of the recent rally.  In this case the bottom of today’s trading is close to the support level of 11,250 so we’ll need to wait and see if the support will hold.

All three other indicators, the stochastic, MACD and CCI are either neutral to bullish.  Trading volume was a little less than yesterday which lessons any bearish tendencies of today’s action.

On the weekly stock chart, prices appear to be marking time, still at the support level of the lower channel trend line and the 20 day moving average.  The stochastic and CCI are moving up, while the MACD is still flat.

On the 30 minute chart, prices moved up in the morning, retreated a little bit during lunch time, then fell in the afternoon.  The last hour of trading dropped a little bit and then recovered to the level of the opening gap.

This trading action created a gap or a trading “window” that may provide additional support on the 30 minute chart for tomorrows trading.

Trading Strategy:

Caution is still warranted on this market until the current support level proves strong enough to support a rally from here.

As suggested yesterday, aggressive traders could consider new positions during the market as long as prices are moving up and higher than the high made during the first 30 minutes of trading.

Prudent traders may want to wait until prices move up more before taking on new long positions.

Either way, now is the time for caution.  Don’t be the farm on positions in either direction.  

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.