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Saturday, August 8, 2009

Tuesday signals caution - Swing Signals, Trend Busters and Trend Leaders for August 11, 2009

I'm back from New York City and the annual boys night out at Yankee Stadium with three generations of my family. The weather was hot but when I looked at the results in the market today, it looks like the rally is turning cold.

In any case, I am back in time to generate another list of Swing Signals, Trend Leaders and Trend Busters for Tuesday. They are now available at Alert HQ. All are based on daily data.

Today we have the following:
  • 53 Swing Signals -- 13 BUY signals and 40 SELL Signals.
  • 989 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have only 72 stocks that are new additions to the list and a substantial 313 that fell off the previous list.
  • 19 Trend Busters of which 7 are BUY signals and 12 are SELL signals.
The view from Alert HQ --

After two back-to-back days of declines following a couple of weeks of treading water, we are starting to see real signs of weakness in our Alert HQ signals.

Last week the number of stocks on our list of Trend leaders hit a high of around 1300 but as of today we are back below 1000. Not a good sign. The number of SELL signals is outnumbering BUY signals on our list of Trend Buster and, more significantly, on our list of Swing Signals.

When we see major changes in the results of our Swing Signals screen, it has on more than one occasion presaged a change in trend in the markets.

Over the past weekend, our Alert HQ processes generated the following charts.

The chart above shows that the number of stocks looking bullish according to our moving average analysis hit an extreme in June. It then shows performance falling back and rallying but without establishing a new high. This is enough to flash the caution signal.

The second chart shows our trending analysis. Here the story is all about excessive levels. Roughly two thirds of all stocks are in strong up trends and less that 10% of stocks are in strong down trends. At these kinds of levels we have previously seen markets reverse.

So in looking at the most recent signals and the charts from the weekend, it is difficult to be anything but cautious. Performance weakening and extreme over-bought levels coming into play imply that stocks are about to become cheaper.

If you are long term bullish, you can interpret this as an imminent buying opportunity soon coming your way. If you are just trading the market, we might very well be seeing the signal to take profits.

Using our signals --

If you're a momentum trader, the Trend Leaders list is a good place to go shopping. If you practice technical analysis, check out the Trend Busters. And if you are a short-term trader or even a day trader, our Swing Signals may provide some good trading ideas.

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