Market Trend Is Still Up, But . . .
by Carl Swenlin

The overall trend of the market is still up, but there are very few new opportunities surfacing. Taking a look at our primary mechanical timing models below, we can see that nearly all of the broad market and sector indexes are on profitable buy signals, but most of the signals are relatively old and do not offer ideal conditions to put new money to work.

                                     Days   Index     03/31   Points  Percent
Index               Posture     Date Elap  @Start     Close      P/L      P/L
------------------- ------- -------- ----  -------  -------  -------  -------
S&P 500                 BUY 11/04/05  147  1220.14  1294.83   +74.69    +6.1%
Dow                     BUY 11/07/05  144 10586.23 11109.32  +523.09    +4.9%
Nasdaq 100          Neutral 02/13/06   46  1645.83  1703.66     ....     ....
S&P 100                 BUY 11/07/05  144   563.30   587.75   +24.45    +4.3%
S&P Equal Wt (RSP)      BUY 11/04/05  147   160.84   176.40   +15.56    +9.7%
S&P 400 MidCap          BUY 11/07/05  144   715.78   792.11   +76.33   +10.7%
S&P 600 SmlCap          BUY 11/10/05  141   347.03   394.83   +47.80   +13.8%
Wilshire 5000           BUY 11/09/05  142 12227.02 13155.42  +928.40    +7.6%
Consumer Disc (XLY)     BUY 11/01/05  150    31.66    33.76    +2.10    +6.6%
Consumer Stpl (XLP)     BUY 03/01/06   30    23.53    23.69    +0.16    +0.7%
Energy (XLE)            BUY 03/29/06    2    54.56    55.17    +0.61    +1.1%
Financial (XLF)         BUY 11/02/05  149    29.95    32.54    +2.59    +8.6%
Health Care (XLV)       BUY 11/10/05  141    30.47    32.16    +1.69    +5.5%
Industrial (XLI)        BUY 11/07/05  144    29.80    33.81    +4.01   +13.5%
Materials (XLB)         BUY 10/31/05  151    27.13    32.66    +5.53   +20.4%
Technology (XLK)        BUY 11/07/05  144    20.75    22.27    +1.52    +7.3%
Utilities (XLU)     Neutral 03/24/06    7    31.55    31.06     ....     ....

Another problem is that, while the signals are showing a profit, in many cases (like the S&P 500) the profit is rather narrow for the age of the signal, and much of it would be lost if the trend were to change. (It takes about 3% to 4% to generate a signal change.) Nevertheless, I am pleased with how the models have been performing under the circumstances.

The problems reflected by the timing models is also evident in the following chart of the S&P 500. We can see that the trend has been up since the price low in late October; however, the index has been stalled by the resistance at the top of the shallow rising trend channel, which could continue to impede progress for some time to come. And, even in the context of the rising trend channel, prices are due to correct back to at least the bottom of the channel, and that is not a situation that invites renewed risk taking.

While prime opportunities may be few, there are two worth considering. First, the S&P Energy Sector has generated a new buy signal after a short correction. Note that it is bouncing up off the bottom of a rising trend channel.

Also Interesting is the Nasdaq 100 Index. It still failed to pass all the screens necessary to generate a new buy signal, but it is very close to doing so. It too is bouncing off the bottom of a rising trend channel.

While both charts are promising, they represent the modest opportunities found after a correction in an established rising trend. They are not likely to result in the kind of gains we see from deeply oversold bear market lows.

It is especially interesting that the Nasdaq 100 is looking positive at this time. It could provide the required push to keep the broader market rising for a while longer.

I must emphasize, these are not recommendations, and the timing signals are not infallible.

BIO: Carl Swenlin is a self-taught technical analyst, who has been involved in market analysis since 1981. A pioneer in the creation of online technical resources, he is president and founder of DecisionPoint.com, a premier technical analysis website specializing in stock market indicators, charting, and focused research reports. Mr. Swenlin is a Member of the Market Technicians Association.