Today we have the following stock picks and signals:
- Reversal Alerts based on daily data, we have 68 Alert HQ BUY signals and 4 SELL signals
- Reversal Alerts based on weekly data, we have 1 Alert HQ BUY signal and 145 SELL signals
- We have 30 Bollinger Band Breakouts based on daily data and 19 are bullish. We also have 141 Breakouts based on weekly data and 104 of them are bearish.
- We have 648 Cash Flow Kings
- 155 Swing Signals -- every one is a BUY signal except a paltry three SELL signals
- 42 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 18 stocks that are new additions to the list and 8 that fell off the previous list.
- 107 Trend Busters based on daily data of which all but two are BUY signals. We also have 330 Trend Busters based on weekly data but in this case only 3 are BUY signals.
- 94 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. We see 44 downside gaps and 50 upside gaps based on daily data. We also have 35 Gap Signals based on weekly data or which 31 are bearish.
As the title of this post suggests, the bottom may very well be in for this current correction. I base this outlook on the fact that every one of the screens listed above that are based on daily data are showing strong bullish bias. BUY signals are in the great majority on all the lists of stock picks.
With respect to the screens that are based on weekly data, we have the opposite result with many showing large majorities of SELL signals.
It makes sense that at the beginning of a new move in the market, the most responsive indicators would show the first inkling of the changes about to unfold. I believe that is what the signals based on daily data are doing: showing the initial move from deep bearishness to the beginnings of bullishness.
Not willing to buy into the return of the bull yet? Then keep an eye on the number of BUY signals based on weekly data and when improvement begins, you will have your confirmation.
What else do we have at Alert HQ that might help the bullish case? As part of the Alert HQ process we summarize and track a number indicators across the whole universe of stocks and ETFs that we track.
In the chart below we count the number of stocks above various moving averages and count the number of moving average crossovers, as well. We scan roughly 6400 stocks and ETFs each weekend and plot the results against a chart of the SPDR S&P 500 ETF (SPY).
In this chart we see that the first glimmers of hopefulness occurred this week. The crossover of the yellow line above the magenta line (in other words, the number of stocks above their 50-DMA has increased above the number of stocks whose 20-DMA is above their 50-DMA) is something we have seen in the past as part of a bullish move in stocks. Indeed, that has sometimes preceded the move sufficiently that it can be seen as kind of a leading indicator. Welcome as this development is, however, a cautious person would not be faulted for waiting to see if improvement continues. After all, the crossover is only just beginning and is not strongly apparent yet. There is still the chance that it could reverse.
The next chart provides our trending analysis. It looks at the number of stocks in strong up-trends or down-trends based on Aroon analysis.
This chart barely shows any movement compared to the previous week. Aroon is a slower moving indicator when compared to something like MACD so it is not surprising to see this chart stuck in the same gear again this week. One positive conclusion, however, is that things are getting no worse but that is not a particularly strong peg for a bull to hang his hat on.
There is some confirmation from some of the major indexes. For example, the NASDAQ 100 and the Russell 2000 are both comfortabely above their 200-DMA and the NASDAQ Composite is at least just barely above its 200-DMA. A couple of bad days, though, and all of them would be back below the 200-DMA. The Dow Industrials and the S&P 500 both remain below their 200-DMA and though they do little to confirm the bullish thesis at the moment at least they are both heading in the right direction - up.
The outlook --
While stock prices stumbled around last week and closed with gains, we saw positive developments in reports showing increased export activity in China which were offset by shaky retail sales in the U.S. Consumer confidence improved while jobless claims declined only slightly. All told, it was a pretty mixed week.
There will be an ample number of economic reports coming this week that could have an impact on markets. We will see the Empire State Manufacturing index, housing starts, building permits, Producer Price Index, Capacity Utilization, Industrial Production, Consumer Price Index, the weekly leading indicators (last week's switch to slowing growth garnered quite a bit of attention so keep an eye out for it) and the Philadelphia Fed manufacturing index. And don't forget, there is always the weekly jobless claims report.
So the technical position is showing tentative signs of improvement (though confirmation is needed) while the large number economic reports has the potential to really move the market. Things should be interesting this week...
Oh, if stocks do rally this week, remember, you heard it here first.
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