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Monday, September 6, 2010

Stocks surge to resistance -- real momentum or just another head fake?

It's been over a month since the last time I wrote a post like this so I'm taking the opportunity today to provide an overview of this weekend's stock market BUY and SELL signals available at Alert HQ and to take a look at what our indicators are saying.

This weekend we had the following stock picks and signals:
  • Reversal Alerts based on daily data, we have 98 Alert HQ BUY signals and 1 SELL signal
  • Reversal Alerts based on weekly data, we have 7 Alert HQ BUY signal and 3 SELL signals
  • We have 72 Bollinger Band Breakouts based on daily data and 59 are bullish. We also have 101 Breakouts based on weekly data of which 86 of them are bullish.
  • We have 578 Cash Flow Kings
  • 31 Swing Signals --  every single one is a  BUY signal
  • 112 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 41 stocks that are new additions to the list and 14 that fell off the previous list from Thursday.
  • 81 Trend Busters based on daily data of which all but 1 are BUY signals. We also have 46 Trend Busters based on weekly data  of which 24 are BUY signals.
  • 136 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. We see 45 downside gaps and 91 upside gaps based on daily data. We also have 39 Gap Signals based on weekly data of which 27 are bearish.

The view from Alert HQ --

The data for the following charts is generated from our weekly Alert HQ process. We scan roughly 6040 stocks and ETFs each weekend and gather the statistics presented below.

In this first chart below we count the number of stocks above various moving averages and count the number of moving average crossovers, as well. We then plot the results against a chart of the SPDR S&P 500 ETF (SPY).

Despite how erratic the market has been lately, this chart looks like a slow uneven improvement has been underway since early July. As negative as many bloggers are on the prospects for the market, what we see here is that roughly half of all stocks are now above their 50-day moving average. That is certainly not a sign of a bear market.

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 clearly shows the bipolar nature of the market these days. Almost every month, the number of stocks in down-trends surges to a peak and then, just as quickly, drops off while the number of stocks in up-trends surges. You couldn't have a better picture of a market that is stuck in a trading range. Be that as it may, it looks like another cycle started this week with the number of stocks in up-trends beginning to increase, reflecting a week where stocks racked up solid gains. This suggests at least one or two more weeks of bullish follow-through before the cycle turns again.

I kicked off this post by listing the weekend's results at Alert HQ. Pretty much every single screen was bullish. Some, like the Swing Signals, Trend Busters and the Reversal Alerts based on daily data were extremely bullish. The Trend Leaders list, which includes Aroon analysis in its combination of indicators, shows improvement but also shows that we are not yet at a point where the rally is exhausted.

So far, only one of the major indexes (the NASDAQ) has just managed to rise above its 200-day moving average while the others (the S&P 500, the Dow, the Russell 2000) are just below that important point. So with the backdrop quite bullish now, we'll see if the indexes can break through resistance and regain their important levels above the 200-DMA.

What other catalysts could provide the boost that stocks need? That's where the uncertainty lies. Earnings season is over, the economic calendar this week is relatively empty. Nevertheless, it seems the bias is now to the upside. It looks like "wall of worry" time again.

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