Technical Analysis | Stock Market Timing Signals | Top Stock Picks

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Stocks certainly took it on the chin today right from the opening bell.  Alcoa announced disappointing earnings after the close of the market yesterday.  Alcoa’s dismal news combined with Chevron’s profit warning and the fact that prices have increased for 6 days straight through last Friday, made a correction a high probability.

The question is will this current pullback remain a consolidation at the current price levels or will a deeper correction transpire?  Technical analysis of the stock charts is not encouraging.

Yesterday, we also mentioned that the weekly chart was having difficulty building upwards momentum from the lower trend line.  In fact, with today’s price drop, the weekly chart is in danger of dropping below this trend line.  Prices are getting perilously close to dropping below the PSAR indicator which would not be good news.  The three momentum indicators are looking weak also.

On the daily chart all three price momentum indicators dropped today.  The stochastic and CCI are close to dropping below zero.  Stock prices dropped below the PSAR indicator which is a prime reason to tighten stops and take profits.  Trading volume increased.

On the 30 minute chart prices dropped sharply in the morning, dropped more until after lunch, and then recovered slightly.  Trading finished the last hour of trading with a hammer candlestick – which may add some momentum to tomorrows opening.  But remember, even if it does, one day does not make a trend.  We’ll need to watch for strength to return to at least the daily chart before considering new long positions.  And this assumes the weekly chart remains positive, and that doesn’t look good right now.

Trading Strategy:

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.

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.

Santa Claus certainly seems to have visited Wall Street this week as the market delivered a steady stream of higher prices and continued to gain upward momentum during this shortened trading week. The weekly gain for the week was 266 points or almost 2.5%.  For the month so far the market has gained almost 4% in value.

Durable goods orders rose by a scant 0.2% in November, with a massive drop in aircraft sales as the major reason why the increase was so low.  Without transportation, durable goods orders would have risen 2%.  The National Association of Realtors reported that November existing sales rose while new home sales fell.  Personal spending & income rose in November along with consumer sentiment.  Jobless claims fell in the most recent report.

Can this rally continue? 

Next week is also a shortened trading week so caution is still advised.  But traders should be considering new long positions in leading equities which we provide every day in our top stock picks email.  Let’s review the stock charts for more technical analysis and market timing insights.

As mentioned above for the month – even though there are still a few days trading left in December – the broad market has added almost 4% to the value of stock prices.  The CCI indicator is kind of flat, but is in bullish territory of over 100.  Both the MACD and stochastic are showing increasing upward momentum.  Prices appear headed towards the next overhead resistance level of 12,000, but there may be some bumps along the way that we’ll need to navigate around.

On the weekly chart, stock prices have added 2.37% as the market moved up as expected from the support level between the 11,000 and 11,250 mark.  The MACD is still flat, but if this flat period turns out to be a consolidation then more price increases can be expected.  The stochastic and CCI indicators are both heading up, indicating a good possibility of prices continuing up in the weeks ahead.  Trading volume is down although this would be expected for the shortened holiday hours this week.

The price increases for each day during the week is clearly shown on the daily price chart.  All three of the momentum indicators, the CCI, MACD, and stochastic are reflecting increasing upward momentum.  As with the weekly chart, trading volume was extremely low for each day of the week which may be adding increased upward volatility, so trade with caution.

The 30 minute chart for Thursday was extremely bullish.  Prices jumped out of the gate for the 4^th day in a row, continued up at 10am (which is normally a reversal time for morning action), remained flat for the majority of the day, then the last hour of trading saw another increase in prices.

Trading Strategy:

Stocks moved higher again today for the fourth day in a row, shrugging off conflicting economic reports.  The Dow was flat, but the broader market showed a solid gain of almost 40 points by the close of trading.

Stocks slid mid-morning as news regarding sales of new homes fell in November.  A separate report showed personal incomes and spending both rose, but not as much as expected.  A survey of consumer sentiment hit a 3-month high.

The market regained lost ground in the afternoon as a rally in the oil market boosted share prices of industrial companies and energy producers.

Let’s examine the stock charts for additional technical analysis and market timing insights.

The weekly stock chart is moving up nicely from 3 areas of support.  Prices are bouncing off the 11,250 support level, the lower channel trend line, and the 20 week moving average.  This bullish aspect is of course tempered somewhat by the slow trade of this holiday shortened week of trading.

The MACD indicator is still comatose, while the CCI and the stochastic indicators are showing some increasing momentum.  Frequently the MACD is delayed somewhat from showing an increase in momentum when an up move starts.  Let’s hope this is the case with the weekly MACD.

On the daily chart prices have created a new high at the 11,451 price level, 200 points above the 11,250 support level.  The CCI and the stochastic turned positive earlier in the week while the MACD is playing catch-up.

On the 30 minute chart you can clearly see the pullback when the new housing report was issued at about 10 am market time.  The market pulled back to below even and looked like a bearish move was going to take over.  But prices moved back up through the day and then consolidated during the afternoon.

The only bullish indicator on the 30 minute chart appears to be the stochastic.  The CCI and the MACD are looking a little weak.  So it wouldn’t surprise me to see prices under pressure a little bit tomorrow in a shortened trading day.

Trading Strategy:

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.  

The broad market sheds another 37 points in the third down day in a row following at least an interim trend reversal.

Economic conditions in the technology sector, continued dismal employment reports, coupled with concerns over retail sales during the holiday season contributed to a growing unease about the strength of any economic recovery.  Many analysts are now expecting a flat 2010 instead of an expansion of economic growth.

Let’s take a look at the attached charts for a technical analysis and market timing wrap-up for the week.

The weekly chart is looking vulnerable to further price drops.  It is clear that prices are having trouble moving significantly above the 11,000 support level.

Study the number of times the weekly relative price level indicator has swapped back and forth between bullish and bearish over the last two months.  A market that can’t make up its mind is vulnerable to price drops.  There is also a growing sense that stock prices have moved up in this rally further than economic conditions warrant.

On the daily chart stock prices moved below the relative price level indicator early in today’s trading.  This movement coupled with the price momentum falling below 100 could contribute significantly to additional price drops.

Stock prices are now probably going to be affected by the support level of 11,000.  Remember that overheard resistance, once broken, now becomes a support level on the return trip.  So expect some bounces in the days to come.

If you recall, the 11,000 level was the cause of several reversals and consolidation events over the last few months as prices moved up – but also lost momentum.  You could expect this level to provide some strength in the near future.  If prices break below this level then the mid 10,500’s become the next support area.

On the hourly chart prices dropped fairly sharply at the opening of today’s trading.  Prices recovered a little during the last hour of trading to finish in the middle of today’s trading range.

While prices moved above the relative price indicator during the last hour of trading, the last hour also created a topping tail.  This could lead to further weakness for Monday’s opening.

Trading Strategy:

Our market timing signals are indicating a continuation of downward pressure on stock prices for the near term.  Our top stock picks contain a mixture of stocks to short and Contra ETF’s for retirement accounts and traders who are not comfortable shorting stocks.

New short positions and Contra ETF positions should be considered on market down days.  Markets down days are characterized by prices being down after 10am market time and heading lower.

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.