The Canadian Technician

5 Charts To Chill The Heat

The markets are at or near all time highs. The optimism is overwhelming. Consumer confidence just roared in with a triple digit positive reading of 104 and this is only the third time in history the confidence has been so high. What's not to like? Breadth is an important feature of technical analysis as it ranks how many stocks are participating. Greg Morris has written entire books on breadth, so I won't attempt to cover it all off in one blog. So what is breadth? Breadth measurements help us understand how many participants out of a group of stocks are involved. The old joke about 6 workers leaning on a shovel and watching while one worker digs a trench is a good analogy. The lack of participation means it will be a long time before the trench is finished because not a lot of people are helping.

In the equity markets, we can use groups like the S&P 500 to measure the big caps or groups like the NYSE Composite which includes all the listings on the New York Stock Exchange. To keep it simple, I will use two examples of breadth. One is the percentage of stocks on a buy signal on a PnF chart which are called Bullish Percents. More information on Bullish Percents can be found on this link to the Chartschool article. Bullish Percent Indexes. The other is the number of stocks above or below a moving average. In this case we'll use the long term average of 200 days. The indicator is specific to each group and the $SPX indicator is $SPXA200R. (The percent of stocks above the 200 DMA).

In the top panel, there are two things going on. One is the value (price) of the $SPX shaded in grey. The other is the Bullish Percent Index. When the market is above 65 it has lots of breadth and moves higher. Markets above 75 have lots of breadth with more than 75% of the stocks pushing higher. One of the issues on the chart below is the downward dotted line where every rally has less and less stocks returning to buying signals after pulling back. The current reading is marked by the lime green line. If we look left on the chart, the major declines occur when the market cannot rally back above 65. Those are the areas to worry about. Recently our rallies back up to 75 were ok, but the $SPX has waddled sideways since the beginning of the year. Not enough participation to make meaningful new highs.

Chart 1

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A Review Of The Canadian Banks

This article follows on from a look at the US Banks. The Canadian banks don't look anywhere near as bullish. Most of these charts need lines to show where support is reaching a rather critical stage. First we'll start with the RBC or Royal Bank. RY in USD terms. The Canadian chart looks as bad at RY.TO but I'll stay in USD to be consistent with the other article.

RBC (RY) is building a multi year topping structure with the 40 WMA pointing down. The SPURS in purple are declining and the SCTR rank puts RBC in the bottom quartile.

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A Review Of US Banking Stocks

Recently the US banks have been soaring like they are drinking some kind of Kool-Aid. JP Morgan (JPM), Citigroup (C), Bank Of America (BAC), Wells Fargo (WFC), US Bankcorp (USB) have all been surging higher. Goldman Sachs (GS) and Morgan Stanley (MS) have followed. Time to do a little competitive comparison as I see the building names on the skyline here in London.

Starting with the grand daddy, JP Morgan (JPM). The purple SPURS is soaring to new heights. the SCTR has been above 75 the longest since 2013. Bullish!

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A Complete Review Of Smoking Hot Cyber Security Stocks (MUST LOOK!)

Wow, is this Cyber Security Industry group on fire. What a hot looking group of charts! I had dinner last night with some risk management (Cyber Security) specialists. It motivated me to go check out the charts. Maybe they'll check out my article! I did find a listing of 25 companies to be watching for Cyber Security in 2015.  While I wouldn't buy  willy-nilly... some of these have beautiful charts. Here is the link to the top 25 to watch article I used to make my list. Cyber Security (Top 25). Some companies are not public.

First of all, let's start with the ETF covering the group, HACK. New highs every week, what's not to like about that!

In the order they came out in the ChartList, next is AVG. Looks like a Top Gun Movie....Going Ballistic!

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Manulife (MFC.TO, MFC) and Sunlife (SLF.TO, SLF) Make 52 Week Highs

Manulife has been performing well since the Fed keeps talking up the potential for them to consider raising interest rates if inflation picks up. Manulife (MFC.TO, MFC) has been shining for a while but it picked up speed recently. The SCTR for the Canadian listing is up around 83 which is excellent. The stock is enjoying a clear breakout. 

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10 Oil Majors Charts You Have To See

I picked 10 Oil Majors to review this week as June 13 marks one year since the decline in oil prices started. I think these charts are important as they do a strong job of representing the oil industry and investor sentiment towards the group. The oil industry had been responsible for 1/3 of the capital spending in 2014 across the S&P 500 and the oil majors are obviously key in that. While many of the companies reduced their 2015 spending by 10-30%, the knock on effects of that slowdown rippled across transportation, utilities, steel, valve manufacturers, data control systems, pipe layers, engineering firms, construction companies, vehicle sales and equipment sales, just to name a few. I recently did a webinar on Thursday, that went into depth on some of the main commodities and the deflationary threats that appear to be showing up. That webinar can be found by clicking this link. 20150604 Market Round Up Live.

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14 Charts From An Investors Walk Through A Retail Mall

The other day, my wife suggested we go to the mall to pick something up for our daughter. I usually give the look over the top of the glasses like 'What did I do to deserve this fate?' I went through the mall with a muted level of interest but then started to think about who is ringing the cash register as my wife and I are buying some perfumes in a very pink store. On my journey, I did notice one of the guys clothing stores had moved, Lululemon is getting a larger space, the Bay is renovating, and one of the anchor tenants continues to have the retail display skills of fatal detraction. As most of us know, spousal shopping is never go in and out for what we need. We always have to check something out on the other level at the other side of the mall.

However, as July approaches, I like to look at retail to see what has held up well through the spring and get positioned for what might work this fall. Here is a question. Can you tell from walking through the mall who is doing well or not well? I cannot make decisions with my infrequent visits and lack of knowledge of the latest fashions. I have to bundle up the stock charts for the retailers and products to decide from there. So after downloading the store listing for the retail mall off the website, I worked through what was public and private to create this list. It took a little research to figure out Luxottica owns Oakley, Sephora is private etc. But this is a simple template. Now, you might sort them alphabetically, or in the order they are in the mall. Personally, I just want to know who is successful and if I want to invest in retail, who is ringing the register day in and day out. So I sorted on the SCTR. If a stock is doing well now, we can pick a selection of stocks from the top area and we'll probably do ok heading towards Christmas. This will change a lot through the summer, so keeping a retail ChartList makes it very simple to continuously review the leadership.

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The Fabric of Fiction - Dow Theory Using $INDU

Dow Theory. Is it drama? Is it the current reality? Perhaps distorted reality? I have given up on Dow Theory using $INDU as a timing tool. The start of Dow Theory was by Charles Dow and his interpretation was if the transports price action diverged from the industrial companies, we have a problem till resolved. Well, the game changed long ago on the Dow Industrials. Do we have a divergence? yes. We have a confirmation of a divergence. However the current name of the Dow Jones Industrials Average couldn't be more misleading. You won't find American Express (AXP), JP Morgan (JPM), Goldman Sachs (GS), Travelers Co, (TRV) and Visa (V) in the Industrials sector but you might find them in the financials. You won't find Disney (DIS), McDonalds (MCD), Walmart (WMT), Procter and Gamble (PG), Johnson and Johnson (JNJ), Home Depot (HD), Nike (NKE) and Coca-Cola (KO) in Industrials but you will find them in Consumer Cyclicals or Consumer Staples. Verizon (VZ) is best described as a telecom or a utility, not an Industrial. You might find UnitedHealth (UNH), Pfizer (PFE), and Merck (MRK) in Healthcare,  not Industrials. I have always looked for Exxon Mobil (XOM) and Chevron (CVX) in Energy. Then we have stocks like Microsoft (MSFT), Apple (AAPL), IBM (IBM), Cisco (CSCO) and Intel (INTC) that are Technology not Industrials. Good ol' Dupont (DD) is a Materials Company, not Industrials. That leaves me 3M (MMM), Boeing (BA), Caterpillar (CAT), General Electric (GE) and United Technologies (UTX) in Industrials. 

So that leaves me 5 of the 30 Dow Jones Industrial Average ($INDU) companies as real Industrials in the Industrial average. There is actually a Dow Jones Index for Industrials ($DJUSIN). There is also the Industrial SPDR ETF (XLI). Those are representative of Industrial companies so lets lose the $INDU as the representation of the Industrials and call those big 30 the Dow Too Big To Be Sold or something else. Now that we have that cleared up, let's get back to Dow Theory. The Transports have fallen below the 200 DMA. 

Blackberry (BB.TO, BBRY) Traders Reach The Fulcrum Decision Point

For one of Canada's most storied stocks, Blackberry (BB.TO, BBRY) continues to write new story lines. We can see three major setups in Blackberry.  The pattern as Blackberry failed at the top is shown, but the SCTR ranking was dismal in 2010. The same consolidation is occurring now, but this time, Blackberry is one of the top 25% in performance based on the Toronto SCTR ranking. This is an important distinction because the Oil and Gas as well as materials are very low ranking. This means that BB.TO is doing well compared to the rest of the Canadian stocks, but in this case, the rest of the stocks are not doing so well. The real decision for investors is approaching.  If this breaks up and out, this will be an important entry. If Blackberry can not accelerate from here, the $10 level would mark the lower boundary of a sideways consolidation.

Notice the MACD going to sleep on the chart. It has been flat lining for 2 years on the big picture (weekly 10 years) with almost no emotion. The zoom box shows a slight upturn but not a weekly bullish cross yet. Sitting just above zero, this would be a great place for Blackberry to find support and move higher.  

The US Version of the chart is a little different. First of all, the SCTR in this ticker is compared to the Mid-cap stocks as shown in the Full quote screen at the top. With BBRY only at 40.2 it is still one of the lower performers. I wanted to illustrate the difference in the SCTR. You can not compare SCTR rankings between different groups.  The price action of BBRY is very similar inside the red boxes. The same viewpoint I expressed on the Canadian chart above holds true here on price and on the MACD. 

Blackberry really needs to show some power here if it is going to change the long term trend. There is lots to focus on, but this would be the time to show acceleration.

I have started to tweet a little more (@schnellinvestor), so if you follow Twitter, I hope to post some timely charts there. I also will try to link articles or webinars through there to help you understand what I think about the markets from my lens. Tomorrow is webinar day for me (every Thursday at 4:30 EDT) and we have lots to cover. Martin Pring will join me and we will probably continue the format we tried May 14th. Two presentations, then an open dialogue about the charts. The previous one was well received, so my plan would be to continue that style. Feedback on blogs and webinars is greatly appreciated. Click here to register for Tomorrows Webinar. Thursday May 28th Webinar.

If you would like to subscribe to the blogs to receive an email or use an RSS feed, the subscribe box is top right. 

Good trading,
Greg Schnell, CMT.

Canadian Financials Muddle Along

The Canadian Financial Sector ($SPTFS)  continues to hover in the middle of the trading range for the last year. It is currently trading where it was last July. In the Month of May, the financial stocks have started to underperform the $SPX which I use as a reference point because the S&P 500 has so many industry groups to stabilize it. The $TSX is 1/3 banking, so as the Canadian banks go, the $TSX follows closely. The other 2/3 are energy and materials, which are both in terrible shape. So showing banking outperforming those two groups would not help us. Using the $SPX as the pivot point does a better job.

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