Blog Post On: 3/7/2010
The markets closed a volatile week with the major indexes reaching new highs for the 2010. Last week the markets hit an indecision point and that was evident in the price action when a Gravestone Doji appeared. The underlying trend of the market, including the Advance/Decline Lines were still bullish, but the price action was a concern.
Stock Market Timing Model (MTR-TM): Market Up Signal on 2/17/2010
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Value Line Arithmetic Index reached a new high for 2010
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MTR Indicator is bullish (> 0)
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RSI bullish (> 50)
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RSI reaching oversold levels (70+). This can indicate a market retracement is due or flat trading
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MACD bullish (> 0)
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If the market pulls back it can be an opportunity to add to positions. A pull back would have to be accompanied by the Advance/Decline Lines holding support.
All the major indexes had bullish breakouts to the upside and reaching new highs.
The Advance/Decline Lines (ADLines) for the major indexes continued the uptrend. All broke out to new highs except NASDAQ. If the ADLines hold support on price pullbacks would indicate the uptrend had strength.
MTR Economic Model (MTR-EM): Update with January 2010 Data
Year over Year (YoY) real-wages (Green Line) are down almost -8% compared to last year. Secondly employment levels (Blue Line) are down further.
The primary concern is the continued deterioration in real-wages. Even if unemployment levels are high, if real-wages are up YoY consumers will spend and this will support economic growth and stock prices follow. The MTR-EM shows that consumer spending will slow since YoY real-wages have fallen substantially.
The MTR-EM can be seen as a leading indicator of what can be expected in 3 to 6 months in the market. Since the MTR-EM has continued a downward trajectory it ties into the outlook from Ned Davis Research that the market will trend downward in Q3.
