Phil's Stock Market Blog

Stock index futures traders, you should take a look at these signals. You can actually use them to trade things like e-mini and nasdaq futures.

The accuracy is surprising. Fortuitously, the signals work particularly well on the broad market indexes and the larger volume stocks. And we have the key market breadth indicators for confirmation. You can save yourself the trouble of stock-picking, and focus strictly on the overall market.

Check it out at the Gigascanner. Here's the new stock screener intro page. Posting the url here will help it gain credibility with Google.

It's been pretty quiet lately, but finally yesterday there was a nice spike upwards in the Number of Climax Lows indicator. There were 245 Climax Lows yesterday to be exact.

There was also a Climax Low signal in the Ishares Russell 3000, which is our main stock index chart these days. The symbol is IWV.

Check it out with the GigaScanner. Here's a link to the new stock screening cover page. Click on "quick charts and screening" link at the top for the single-page stock-screening interface, which has IWV set as the default chart.

The short index ETFs are breaking out. Here's a chart showing a nice cup-and-handle bottom in the Short Russell 2000 ETF.

The symbol is RWM, in case you'd like to check it out on the GigaScanner free chart-based intraday stock scanning and screening tool.

I was checking out that "holy grail" buy signal historically. The ultimate stock scan seems to be combination of a Climax Low plus a Pristine Buy signal, above the 200-day Xma (exponential moving average) and with an RS ranking > 60, sorted by percent of all-time high. We also want to make sure the accumulation / distribution on the major indexes is above 50%. EPS doesn't matter, and neither does price - in fact the cheap stocks usually make the biggest percentage moves.

This stock scan is fairly restrictive. There weren't any symbols that came up scanning Friday's data, but there were 7 symbols that came up scanning Wednesday's data. All of them have moved upward since, some more than others. A scan of Tuesday's data produced just one symbol, as sort of leading indicator for Wednesday's signals. Consistent with the "leader" theory, this stock has done very well, moving from 15.26 on Wednesday morning to 17.38 on Friday's close. By the way, the symbol was PHH.

Market-wise, we appear to have survived a drawn out but non-catastrophic correction. Leading stocks pulled back to support levels on Tuesday and Wednesday, and bounced toward the end of last week. So far so good, except we may be vulnerable on Monday after several days up in a row.

I looked again at that chart mentioned below, and the signals were gone! This is good to keep in mind. Things change during the day, and signals will come and go. Trading signals based on the entire trading day, especially the close, are the most reliable.

This is one I've been meaning to research. The scan is for a combination of Climax Low and Pristine Buy signals, sorted by Accumulation / Distribution Percentage. I just now gave it a run (11:12AM Pacific) and some pretty interesting stuff came up.

The first one in the list is PATR, which broke out and pulled back just to the pivot price.

Here's a link to the chart showing the Climax Low signal (at the moment).

Actually - let's not panic. It's probably too late to matter. I see what's going on = the indexes broke out of a base, but then failed to follow-through and keep going up. We like to see volume pick up, but instead it quieted down. Then on June 5th we saw a swing upward in the Number of Climax Highs indicator, which coincided with a Climax High signal in the Russell-3000 index ETA (symbol IWV) which we've been using as our main market index ever since the volume data on symbols DJIA and NASDAQ quit working.

The Climax High signal marked the exact top (as it tends to do with amazing regularity).

The markets all broke out of handle-like formations a few weeks ago, as noted below, but then didn't really go anywhere. Instead, the numbers of stocks up and down on big volume both went quiet, and the indexes traded in a relatively narrow (flat) range. Meanwhile we saw a number of leading stocks pulling back mildly on contracting volume. Then yesterday we saw a sharper drop (finally).

Interestingly, the number of stocks down on big volume did not spike upwards yesterday, but the number of Climax Lows did increase. Not dramatically, but significantly.

Today could be the bounce. Leading stocks by now have mostly pulled right back to their recent pivot points, and should either rebound from here, or break down. We'll know more about 8 hours from now, after the day has transpired.

I was testing out the new Volume Dryup flag, and noticed HTLD. This is not the hottest thing around, but has been swinging back and forth between about 14 1/4 and 16. The Pristine buy signals have been working well (I did not check the sell signals). But the interesting feature yesterday was a cool little volume dryup flag after a pullback exactly to both the 50-day Xma and the 200-day Xma. If it's going to bounce, this would be the setup.

The handle that was forming in ESRX has now broken down back into the lower half of the cup, so it's one of those that didn't move up and break out. This is typical of the later stages of a rally. The hot stocks have broken out a long time ago and put on a good run, and the laggards with low relative strength (like ESRX) haven't quite made it. It usually doesn't pay to anticipate a breakout.

ESRX came up on the default scan this morning (at 11:00 Eastern time). I noticed it appears to be forming up a small cup-and-handle pattern for about the past 6 weeks. Accumulation took a nice shot in the arm off the low of the handle. There is some potential overhead supply from back in 2008, unless it all got flushed during the decline.

I also noticed the Russell 3000 index has broken out of a cup-and-handle base, and has simultaneously crossed above the 200-day XMA, which also has rounded out a bottom and has just now turned up. Some people use the direction of a moving average to define a trend. If so, the trend is now officially "up" (actually it's been "up" for quite a while, ever since March 10th.)

The symbol for the Ishares Russell-3000 Index is IWV. I set this to be the default chart for the gigascanner main page, since the volume data for the DJIA and NASDAQ indexes is screwed up these days.

It's a strange problem. I have tried tons of different data feeds over the years, and virtually every one of them has intermittent problems with the volume data on the stock indexes. I wish somebody could tell me why this is, and how to get it fixed!

I noticed the SP500 broke out to a new high a couple days ago, accompanied by a nice pickup in the number of stocks Up on Big Volume.

All signs remain good. I could see a short-term down day or two but it will take more than that to kill this powerful bull market.

Some guys at lunch today were trying to figure out why the market could or would go up given all the economic issues and bad news. But obviously it is going up! That's an important thing to realize. The market does what it will, notwithstanding anybody's thinking or economic theories.

It can't be predicted on this basis. Even Warren Buffet says so. But surprisingly, we CAN determine what the market's doing with technical analysis, by analyzing price and volume patterns, and we can rely on the statistical tendency of a trend to continue trending, at least in the short term.

It has to be taken in the right context, with the right underlying assumptions. For example, things like moving averages are popular with novice traders to frame the price motion. But it's oversimplified. Really there's absolutely no reason why a given stock would swing with a given period, other than coincidentally. And it turns out that most every other trading system has some fundamental flaw too. There's very little that actually works.

So I favor a behavioral-based research approach, i.e., study how stocks and markets behave on a statistical basis, and see what if anything really does work. And what works is a context involving horizontal support and resistance lines, basing patterns, breakouts, follow-throughs, climax reversal days, volume action, and indicators like Accumulation / Distribution. We try to play things how they really move, instead of forcing the market into an arbitrary framework. If stocks are going up we get in. If the market starts topping out, and we see a pattern of leading stocks breaking down, we get out. If a stock's going to double, that's going to take a few weeks or months. How often do you get a double? Trading stocks short-term, for for peanuts, makes no sense. You can wind up selling a big winner for peanuts, and buying a dog instead.

The gigastockpicks and gigascanner web sites are dedicated to technical analysis of stocks and the market. There's a nice set of basics for free, or there's a minimal subscription charge for deeper research.

There was a Climax High signal in CUB today. In some markets the Climax High can mark an intermediate or a long-term top perfectly, to the exact day, but it can also be a killer buy signal if the high gets taken out.

I have a feeling that's exactly what's going to happen with CUB. See it at gigastockpicks.com or gigascanner.com. The default chart shows the signal in red (once you pull up the symbol that is).