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Stock Market Trend Analysis and Market Timing Summary for Week Ending 5/16/2008
By Geoff Green | May 17, 2008
Stock market trend analysis last week pointed to a stalling of the rally from the recent March 17th low. This weeks trend and market timing analysis showed that the stock market gained strength this week.
The stock market turned in an excellent performance this week by rising for 5 days in a row. If you are day trading you probably had a profitable week.
Nevertheless, even though many of the technical analysis indicators are gaining strength, continuing bad economic news will keep us cautious but not out of the market. This weeks stock trading system recommendations included a tightening of stop order recommendations to help protect and keep investing profits.
Current market news this week included US consumers paying 3.9% more this April than they did last April. This follows an annual reading of 4% in March. The US Government continues to claim that “core inflation” fell to 2.3% in April. Capacity Utilization dropped below 80% to 79.7%, the lowest level reported so far during this downturn.
Soaring gasoline prices and a sluggish economy caused consumers to cut back creating a drop in Retail sales of 2.0%. Not to be left out, the National Association of Realtors reports that single-family home prices dropped 7.7% in the first quarter of 2008. Read up on what the Wall Street Journal thinks about the Real Estate market here.
I am a firm believer that you’ll never go broke taking investment profits to the bank and after this stock market analysis I want to protect my profits and protect against losses. So for now the stock recommendations include a stop order modification to a 20% profit and 10% loss instead of the recent 30% profit and 10% loss.
You can examine both model portfolios for their stock recommendations, best stock picks, and profit year to date here. The Prudent Portfolio currently shows a profit of 22.61% and the Aggressive Portfolio shows a profit of 16.59% so far during this market trend cycle.
Let’s take a look at the daily stock chart of the Wilshire 5000. For beginner readers I use the Wilshire 5000 stock market index for my analysis because it is the broadest real-time stock market index available.
When performing stock market trend analysis it is best to include as many stock prices as you can. Using the Dow Jones 30 or even the S&P 500 can blur the results of any technical analysis you perform because those stock indexes don’t include enough stock prices to ensure an accurate market trend analysis.
You can see quite clearly from the stock chart above that the stock market trend continues to be up with the daily stock prices climbing the lower channel trend line.
Many technical analysis indicators are gathering strength as stock prices continue their upward trend. The MACD indicator is once again gathering strength and appears to be poised to make a new high in conjunction with a new high in stock prices.
The stochastic indicator is entering an overbought situation, however, the stochastic indicator can remain in an overbought condition as stock prices continue to move up.
On the cautionary side of this stock market trend analysis is the fact that although stock prices continued their bullish move this week, stock prices have yet to reach the middle channel trend line drawn on the stock chart above. In addition, stock prices and the current up-trend might be ready to flounder in the vicinity of the 200 day Moving Average.
As evidence of continued stock price strength I would like to see stock prices reach the middle channel trend line by following the upper Bollinger band line upwards, and break through the 200 day moving average.
Let’s take a look at the weekly Wilshire 5000 stock chart to verify the trend analysis of the daily stock chart.
A technical analysis of the weekly stock chart in some ways points to the same caution signals detected on the daily stock chart.
Stock price action was clearly in an up-trend this week although the trading volume was not as robust as I’d like to see. I’d be way more bullish on the stock market overall if the trading volume was increasing as stock prices moved up.
The fact that stock prices have almost reached a descending upper Bollinger band points to some rough trading days ahead.
Other indicators also point to a cautious analysis; the stochastic indicator is in the overbought territory and the MACD although still strong and moving up could start to weaken in the short term. However, the RSI indicator and the ADX appear to be supporting the up-trend analysis conclusion.
The bottom line? Although this weeks stock market trend analysis shows some conflicting signals, stock price action is always king. As long as stock prices continue their upward trend, we’ll continue to hold our best stock picks but we’ll be willing to sell on a reasonable profit and cover any losses quickly.
To review our best stock picks strategy please visit out best stock picks page here.
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Topics: End of Week Commentary, MACD, moving average, stock market recommendations, technical analysis, trend analysis |
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