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Stock Market Trend Analysis And Market Timing Indicates Continuing Bullish Action - Use Our Best Stock Picks For Profitable Investing
By Geoff Green | May 2, 2008
The stock market continued its upward trend in spite of continuing bad economic news. Our market timing model portfolios using our weekly best stock picks pulled back slightly but still show healthy investing returns since our latest bullish market timing analysis.
Investors continued to rotate out of leading industry groups and leading stocks and into beaten down groups & stocks as another interest rate cut and the lure of stimulus spending increases hopes for a stronger economy.
This investor rotation has caused both the model investing portfolios to pull back slightly from last weeks gains.
The Prudent investing model portfolio currently has a gain of 10.36% with the Aggressive Investing portfolio shows a gain of 9.94% since the beginning of April. Even though rotation out of leading stocks has hurt the investing return of these portfolios our strategy of holding strong stocks from our up-trending best stock picks list will not change.
In the economic news this week…
As part of the continuing quest to aid the economy, the U.S. Federal Reserve lowered its key interest rate, as expected, by a quarter point to 2%. Gross Domestic Product grew by a weak 0.6% in the first quarter of 2008 as the housing and credit problems are forcing both people and businesses to hunker down.
The Conference Board’s Consumer Confidence Index fell again in April to 62.3, down from March’s 65.9 reading and February’s 76.4 reading. While this reading was better-than-expected, the index is still at its weakest point since March 2003 and is the eighth decline in the last nine months.
The Standard & Poor’s/Case-Shiller Home Price Index fell by 12.7% year-over-year in February, the steepest decline since its inception in 2001. Nationwide reported that the number of homes facing foreclosure in the first three months of 2008 was 649,917, up 112% from the same quarter last year. Home mortgage interest rates have remained volatile but drifted slowly downwards for the week.
Stock market action for the week was fairly quiet for the first 3 trading days following the gains of the previous week. Thursday saw a huge jump in stock prices which helped keep the up-trend channel in place. Friday’s trading was mostly lacking any discernible trend which would be expected as the stock market digested it’s recent gains.
As you can see from the following chart of the Wilshire 5000 stock market index, stock prices have traced out an up-trending channel that has closely followed the bullish upper Bollinger band upwards.
Stock prices have trended their way firmly upwards since mid March and have moved into the broad area of resistance shown by the yellow band in the above chart.
In addition to increasing resistance to further gains, prices are now approaching the resistance of the 200 day moving average. Although stock prices are firmly above the 50 day moving average, this recent up-trend should still be considered a bullish bounce in a longer term bearish market until prices are firmly above the 200 day moving average and the 50 day MA has crossed the 200 day.
At that point trend analysis would indicate a transition back to a bullish market. However, trend analysis is keeping us invested in this market until real price weakness surfaces.
The MACD and the RSI indicators are also supporting this bullish trend analysis and the ADX lines are widening and showing an increasing potential for an even stronger up-trend.
Let’s take a look at the weekly chart and see if the longer term supports the daily trend analysis.
The weekly chart also supports the daily analysis that this bullish up-trend has some strength left.
Our last bullish market timing call will remain in place until there is increasing evidence that this bounce is coming to an end. If that happens mid-week I’ll send an email alert to tighten up stops and to take or protect profits.
If you are wondering if there is still time to take advantage of this trend analysis and jump into the market you may want to take a look at our weekly list of best stock picks and take initial positions in stocks that have pulled back from their highs. Our weekly list of best stocks represent undervalued stocks that are in up-trends and are growing in size and earnings.
If you are not a subscriber you can obtain a free trial to our market trend analysis information, market timing data and best stock picks by entering your contact information in the form on the right.
Topics: Bollinger bands, End of Week Commentary, Federal Reserve, MACD, bullish, indicators, interest rates, model portfolio results, moving average, stock market recommendations, stock market strategy |
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