Phil's Stock Market Blog

The market endured several days of distribution, but prices didn't really go down. Today things finally caved in. The other shoe dropped, so to speak.

The distribution was characterized by the powerful spikes upward in the Number of Climax Lows indicator. You can see it at the new clone site www.GigaStockPicks.com. The indicator as at the top of the chart, shown in red with the default page settings.

The rally stemming from the Climax Low signal in the DJIA index on 3/10/09 was a lot more than anybody expected, with considerable staying power.

So was that really the bottom? It didn't quite fit the classical pattern. The Number of Climax Lows indicator (plotted in blue on the default chart) was conspicuously quiet around that time. There was also a surprising lack of a Follow-Through day subsequent to the low (the Follow-Through is the market index signal based on the Canslim theories of William O'Neil).

But stocks went up anyway. Then came a robust round of selling over the past couple weeks, as indicated by the obvious spikes in the Number of Climax Highs indicator (plotted in red). And the market didn't get hammered. Things could change, but for now I take it as a sign of strength.

Stock-pick wise, our timing was perfect. Naturally, the fresher stocks closer to their highs or making new highs at the time are doing the better. NFLX and AZO are doing the best. A number of Auto-Repair stocks have all been doing well. There was also a surprising run in the Restaurant stocks. By the way, you can easily get a feel for the group activity just by watching the default stock scan results table daily (or more frequently).

Website-wise, traffic is pretty slow. But beginning to pick up. We're getting a pretty good position in Google for search terms like Stock Scanner and three-word phrases like Stock Market Scanning and Intraday Stock Scanner. But unfortunately it turns out that some other phrases like "Stock Picks" are vastly more popular. Stay tuned for the cool new Stock Picking version the web site at GigaStockPicks.com. If I can get it on the first page of Google it should be pretty effective.

Well... after 4 days up in a row on declining volume, I'm guessing it'll go down tomorrow. Prices could gap up on the open, then sell off. If so, it would be good to see the volume contract and price quiet down on a pullback.

Was that the real bottom the other day? Maybe. If the market has another day of consecutive rally left in it that would be extremely bullish.

There was a big rally today across the markets on a good increase in volume, following yesterday's depressing no-hope-in-site lows. The DJIA formed a Climax Low signal. These signals have picked up over the past few weeks and this time they're not being countered by they typical waves of Climax Highs we've been seeing.

I noticed a bunch of auto parts stocks in the list today. Our pick AZO (Auto Zone) over the weekend is the leader of the pack, "driving" to new highs again today.

Also there were a bunch of resturant stocks that turned up in the list. Of course this is just the default stock screen. You can screen for whatever you want, free. And it all gets updated every 1/2 hour during the trading day.

Free stock scanner: stock scanner

Another stock that looks very interesting is Geoeye Inc., symbol GEOY. The trend has turned upward out of a 6-month correction marked by a relatively flat, rounded out bottom, especially toward the end of the pattern in the second half of January where we saw the charatcteristic volume dry-up as the price quieted down along the lows.

After a correction, this kind of action (actually lack of action) can indicate that all the weak hands have been wrung out and the stock is now set for a rally. Sure enough, the quiet time came to an abrupt end with a huge shot volume and a sharp move upward past the initial pivot point at the apex of the handle established on 1/28.

This is just the type of cup and handle pattern we like to see. We see them prior to new high breakouts, but also they happen as bottoms are formed.

The Relative Strength Rank is 77, which is high but with room to expand. Plotted as an indicator it shows a series of higher highs and higher lows, confirming the new uptrend, and indicating that it's outperforming 77% of all the stocks in the database (approximately 3000 symbols are currently being updated, with many more for historical research).

To top it all off there was a small, subtle Climax Low signal on Friday. This would be the perfect entry point on a classic cup and handle bottom, basically an entry on a pullback in a confirmed uptrend. Too good to pass up, so we're adding it to the list for Monday's buy in the hypothetical portfolio.

We plan to invest 33% of the hypothetical 100k portfolio between this and the symbols mentioned below, leaving room for additional buy signals.

That last little pathetic blip in Cliamx Lows didn't amount to much, but the undertone of the market has actually improved. I thought I would mention some stocks I'm looking at. These are names that have been turning up frequently in the scans. Watch the list at least daily for best results.

PCLN
AZO
NFLX
LANC

We'll be buying these stocks (hypothetically) on Monday. It will be the starting position in our hypothetical portfolio. Trade them for real at your own risk.

Check it out at gigascanner.com