ChartWatchers Newsletter

Treasury Yields Continue to Climb, Investment Service Stocks Show New Leadership

I've been writing about the upturn in global bond yields, which has boosted Treasury bond yields. Chart 1 shows the 10-Year Treasury Yield trading above 1.70% in today's trading. Foreign yields are bouncing as well. One of the side-effects of rising bond yields is the recent rotation out of bond proxies like staples, telecom, telecom, and REITs and into financials like banks, brokers, and life insurers. My main focus has been on bank stocks that usually benefit from higher bond yields. Over the last month, however, the two strongest financial groups have been life insurers and investment service stocks. And both are doing very well today.

Financial stocks have been market underperformers throughout the seven year bull market in stocks. That's most likely due to the fact the Treasury yields have fallen throughout that period. Since the start of the third quarter, however, financial stocks have started to come alive -- both on an absolute and relative basis. That new interest in financials has also coincided with rising bond yields. The main financial groups are banks, brokers, and insurers. All three have turned up since July and are showing rising relative strength ratios. Along with stronger chart patterns. Chart 2 shows the Dow Jones Investment Services Index ($DJUSSB) trading at the highest level this year. Its price trend shows a bullish pattern of "rising peaks and rising troughs" since February, as well as having cleared a major resistance line extending back to last July. Its 50-day average has also climbed above its 200-day. And its relative strength ratio (top of chart) is rising. Investment service stocks have been the strongest part of the financial sector since midyear. That could be interpreted as a new sign of optimism in the stock market. I'm more inclined to view it as a sign that bond yields have probably bottomed.

Sitting on the Edge

September has a reputation of being a difficult month for traders. So far it is living up to its reputation.

The S&P started out the month pretty much like it had the prior many weeks; going nowhere. And on September 8 the S&P remained within easy striking range of its all time high. But the following day stocks got hammered with the S&P losing almost 2.5% in one session. It also closed below both its 20 and 50 day moving averages, technically wounded and unable to make much progress since.

While the S&P and Dow suffered technical damage last week, the NASDAQ outperformed, largely due to a 12% rise in Apple's stock price. But just before AAPL went on a tear, the NASDAQ was also showing signs of cracking.

The headlines throughout the week continued to focus on the upcoming FOMC meeting where Fed governors will decide on interest rates, with the hawks jawboning for an increase. However, weaker than expected economic news throughout last week likely pushed any prospects for a rate increase to the end of the year.

It does raise the question, why is September such a challenging trading month? Maybe its because the euphoria of the summer is over and its back to business as usual after Labor Day. Maybe its because traders have set themselves up psychologically to prepare for the worst - a type of self fulfilling prophecy. It is a month that precedes the October earnings season so maybe traders adopt a "show me the money" attitude. It didn't help this year that the market went into narrow consolidation mode for a number of weeks; it was a perfect setup for a big move one way or another and given September's historical reputation a move lower makes some sense.

Whatever the reason(s) the market remains vulnerable to additional selling. Maybe AAPL continues to help the NASDAQ outperform but if that begins to wane we could see tech stocks begin to falter as well. In the case of the S&P it challenged the 2120 level four different times last week and held. So that has become an important level of support. If that goes, the S&P could easily fall another 50 points near the 2070 level.

What can bring the market out of its current funk? Once we get through the Fed meeting this upcoming Wednesday we'll only be a few weeks away from the beginning of the October earnings season. And the market cares more about earnings than anything else. So we might remain in a challenging trading environment until there is further evidence that profits are growing. And even then traders might remain skeptical that higher prices are warranted.

For those who are interested, I'm going to conduct a FREE webinar this Wednesday, September 21 at 4:30 PM eastern after the Fed rate decision has been made to see where the market stands and discuss what might be next. If you want to join me just click here

How ChartCon 2016 Will Help You Make Better Investing Decisions

Hello Fellow ChartWatchers!

Markets are pulling back from their highs on increasing volume.  You can see the weekly and daily charts with my annotations by clicking here.  But even in this declining market environment, there are always possibilities.  My "Strengthening Strength" scan (included at the bottom of the page I just linked to) found several promising gems including the Biotech Products ETF (BBP), Glaukos (GKOS), Clovis Oncology (CLVS), Activision/Blizzard (ATVI) and several others.  (Read this article if you aren't familiar with my stock picking approach.)

How ChartCon 2016 Will Help You Make Better Investing Decisions

As you (hopefully) know, ChartCon 2016 - our online conference for all StockCharts users - starts this coming Friday!  The theme for this year's ChartCon is "Building your own customized technical trading system" and I wanted to take a moment to expand on that so you know what to expect.

Many people dive head-first into Technical Analysis and charting without understanding the context it should be used in.  I did that myself 25 years ago when I got my first copy of (DOS-based) MetaStock.  

"Wow!  These charts look great! All the lines seem useful!  And all this new terminology sounds really promising!  The Ultimate Oscillator?!  How can I lose?!?!"

Sound familiar?

Every day our Customer Support team hears from someone else in that same mental state.  They are thrilled with all the tools and options that StockCharts provides, but they have no idea (or worse a very wrong idea) about where to start.

Past ChartCons - and our webinars and our seminars - have focused mainly on how to use the tools at StockCharts effectively.  And while that is definitely important, this time we are going to focus on the bigger picture.  How can you use Technical Analysis to actually TRADE.  It turns out there is a lot more to it than what those commercials for on-line brokers show you!

Every experienced investor will tell you that success in the market is as much about your mental approach as it is about your stock picking prowess.  You need several other "puzzle pieces" in place before you will be able to successfully profit from the trading ideas and setups that StockCharts.com gives you.  Those puzzle pieces are what this ChartCon will focus on.  By the end, I guarantee you'll have a much better idea of what you need to focus on to improve your trading results.

Q: But Chip, I already have a successful trading system.  What's in it for me?

A: That's terrific! I hope our tools play a part in your success.  As an experienced investor, I'm sure you know that you can never stop learning and improving your trading.  ChartCon 2016 will include tons of tips, tricks and ideas for "tweaking" an existing system and making it even better.  And, of course, you'll hear directly from our expert Technical Titans - John Murphy and Martin Pring - about where they think things are headed.  I'm confident that every presentation will have something for everyone regardless of how experienced (or "experience-challenged") they are.

Q: This sounds great Chip.  When is it again?

A: ChartCon 2016 starts on Friday, September 23rd and runs thru the end of the day on Saturday, September 24th.  It's an on-line conference.  All you need to watch it is a computer and an Internet connection.

Q: Crud - I have to work on Friday.  Will it be recorded?

A: Absolutely!  However - and this is very important - in order to see the recording, you need to register for the conference before Friday.  Only people that register before Friday will have access to the recordings.

Q: OK, good.  But my Internet connection isn't the best.  Will I be able to watch the conference?

A: We'd be very surprised if you couldn't.  We are using one of the best streaming services out there - Livestream - to send the broadcast to your computer.  Livestream automatically provides the stream in several different bandwidths at the same time.  So if the Hi-res broadcast isn't working for you, you can switch to a less taxing setting and see if that works better.

Another nice thing is that Livestream allows you to "rewind" the live broadcast and review anything you missed the first time.

To help you test Livestream ahead of the conference, we have recorded a short test video for you to check out.  Here's the link:  https://livestream.com/stockcharts/cc-video-test

Please click on that link to test Livestream and see a short message from Grayson and myself!

Notes on this test:

  1. If you have any technical problems with the Livestream viewer, please consult this page for help.
  2. If you have Norton Security and it tells you "Livestream is a dangerous website", please just ignore that message.  Norton is referring to a completely different broadcast from ours.
  3. This test video was very hastily put together using my laptop camera.  The acutally conference will be MUCH more professional we promise!
  4. Just before the conference begins, we will send out the official video link and password to all registered participants.  It will be different from this test link and you will need a password to access it.

To see the complete speaker line-up, the conference agenda, and to register for ChartCon 2016, please click here!

See you on Friday!
- Chip

 

Combining Seasonality And Strong Technical Patterns

This is the final ChartWatchers newsletter before all of us here at StockCharts.com descend upon Northern California to produce what I believe will be one of the most educational online financial conferences of our time.  Leading technical experts will be divulging their best kept secrets to hopefully add weapons to your arsenal as you trade and invest for higher profits.  You still have time to register, but that window is closing FAST!  A small investment in education can go a long way toward higher profits, so please be sure to check out our information page.  That page lists the speakers - and the time(s) they'll present - and the agenda, along with REGISTRATION information.  I've been to a large number of financial conferences and believe this one will BY FAR exceed the educational content of all of my prior conferences combined.

Continue reading "Combining Seasonality And Strong Technical Patterns" »

Grocers Sit On A Knife Edge On The Weekly Time Frame

The Grocery chains are usually a free cash flow machine and are in the Consumer Staples Group. Walmart is an exception sitting in the Consumer Cyclicals group. Walmart started as a Broadline Retailer and added groceries.

However, the grocers are not having a good year and major support levels are in play. Kroger (KR) is an example. After being in a fabulous uptrend through 2013-2014, Kroger went sideways in 2015 and is breaking support in September 2016. One could argue they broke support in August, but they are now surging away from that level. Either way, the chart looks broken. With an SCTR of 3.9%, this looks dismal. The fact that the SCTR has been weakening since the beginning of the year may just reflect the bounce in all the other sectors. My main concern with this chart is that the lower commodity prices are starting to filter into the grocers are their revenues are declining as eggs, beef and milk get cheaper.

Continue reading "Grocers Sit On A Knife Edge On The Weekly Time Frame" »

Tech Sector Breaks Away from the Pack

There is the tech sector, and then there is the rest of the stock market. It is not that bad, but the tech sector is clearly head and shoulders above the other sectors. This is true with the Technology SPDR (XLK) and the EW Technology ETF (RYT). The first SharpChart shows the nine sector SPDRs in performance mode. Since May, XLK is up the most, by far. XLK accounts for around 21% of the S&P 500 and this is clearly helping the broader market. 

Continue reading "Tech Sector Breaks Away from the Pack" »

Finding Trading Opportunities in a Flat Market

The market has been in consolidation mode for over six weeks now. The S&P closed at 2173 on July 20. It closed at 2179 on Friday. During that period of time any pullbacks have been shallow and short-lived with the S&P topping twice at 2193 and getting as low as 2157 on Thursday before roaring back on Friday to close back above all key moving averages. So on the surface, very bullish action; no one is really selling. Yet trying to trade successfully and make money during a flat market like we've experienced the past six weeks is a tricky proposition.

During this period of time I have urged members of EarningsBeats to be cautious and to allocate more of their capital to cash. Why? Because to me the reward to risk favors the bears, in spite of the stubbornness of the bulls. I might change my mind if the S&P clears 2193 because it would represent a new all time high and might spark renewed interest in stocks., But until that happens there's too much risk to the downside if all of the sudden traders decide in unison to unload their positions.

For those individuals who prefer to trade no matter the market conditions, it becomes important to zero in on those stocks that might stand out during a period of consolidation and hold up the best in the event of a sudden downturn. This is why we search for those companies that beat their earnings forecasts and have solid charts, the type of stocks traders will gravitate to if looking for some added safety.

As an example, we issued a trade alert to our members on August 11 on Cienna (CIEN) that beat earnings expectations and held nicely after an initial sell off after they reported their numbers. Our price target was $23.60 which is the exact level it touched on September 1. You can see in the chart below that CIEN held just fine even when the market did pull back, ultimately hitting our price target.

Obviously not every company that beats earnings expectations will outperform the market but it makes sense that traders would be interested in finding stocks that have solid fundamentals. And even better if there is a solid chart formation to back up those solid fundamentals.

As part of our service at EarningsBeats we conduct regular searches to find stocks that meet the specific criteria of beating earnings and have good looking charts. We provide stocks that make the cut to our members via our "Candidate Tracker" which includes annotated remarks so they can decide if they want to trade those stocks. Some end up as trade alerts like CIEN did. In fact, we've just added 100 new stocks to our Candidate Tracker and I am going to conduct a free Webinar this Wednesday, September 7 at 4:30 pm eastern. I will discuss the process of finding stocks that meet our criteria and will be joined by StockCharts.com Senior Technical Analyst Tom Bowley who will comment on some of the trading candidates. If you want to participate in this free Webinar just click here.

It's always easier to make successful trades when the market is on an upward trajectory; it's much trickier when the market is in consolidation mode. So you either need to move to the sidelines to preserve your capital or develop a different trading strategy so you can take advantage of those stocks that have greater upside potential, no matter the market conditions.

At your service,

John Hopkins
EarningsBeats

S&P 600 Hits New Record, Hong Kong IShares Reach Two-Year High

While most of the media focus is on sideways action in large cap stocks, smaller stocks have been rising. The weekly bars in Chart 1 show the S&P 600 Small Cap Index ($SML) ending the week at a new record high. The solid matter is a relative strength ratio of the SML divided by the S&P 500. It shows smaller stocks leading large caps higher since the February bottom. Smallcaps had been market laggards since the middle of 2014. Their relative strength ratio is close to a two-year high. That's a positive sign for them and rest of the market. Small cap leadership is a sign that investors are more optimistic on the economy and willing to assume more risk. The Russell 2000 Small Cap Index ($RUT) has yet to achieve a new high. I've pointed out in the past, however, that the SML has a history of leading the RUT higher.

Emerging markets ended the week on a strong note. I keep reading that Chinese stocks have not participated in the EM rally. That may be true in Shanghai, but not in Hong Kong. The green line in Chart 2 shows Hong Kong iShares (EWH) ending the week at the highest level in two years. I recently suggested that a more stable Hong Kong dollar was attracting money (versus mainland stocks that are denominated in Chinese yuan). A more international audience and better liquidity is another factor. So is the fact that Hong Kong stocks yield more than 3.5% which makes them attractive for yield-chasing investors. I believe it's just a matter of time before mainland Chinese stocks start rising as well. The red line plots the CSI 300 China A-Shares ETF (ASHR) which just recently hit an eight-month high. Rising Chinese shares would also be good for emerging markets in general.

ChartCon 2016 Preview

Hello Fellow ChartWatchers!

The markets continue to move sideways causing trend and momentum indicators to gradually lose their usefulness.  The best way to see that is to look at the "2000 DJIA - Daily Analysis" chart on the new "ChartWatchers LIVE ChartList"  (click on the link and then scroll down).  This is a list of charts that I track for the ChartWatchers Live webinar (which happens every other weekend).  I haven't updated the annotations on those charts since my last webinar back on August 13th and, frankly, I haven't needed to.  Sideways consolidation periods can be frustrating, but they usually resolve themselves in the same direction as the original trend - upwards in this case.  Time will tell.

  

ChartCon 2016 Preview

As you hopefully know by now, ChartCon 2016 is right around the corner (Sept. 23rd & 24th) and things are really busy here as we prepare for our biggest conference ever.  At this point we have over 800 people registered for the conference.  That's almost triple the number that attended our previous conference!  And registrations are still coming in - we hope to have over 1000 attendees registered by the time things get started on Friday, September 23rd.

Behind the Scenes
I want to take a moment and give you a quick behind-the-scenes look at all of the preparations that are underway right now so that you will have a better sense of what ChartCon 2016 will be like.  What should attendees expect to see from our first ever on-line conference?

First off, ChartCon will be broadcast via the Livestream video platform, so ChartCon viewers will use a web browser (or app) connected to the special Livestream video page to see the conference.  You can test out the Livestream platform right now to make sure that it works well for you - just click here and select any of the free streams that are currently going on (Ironman World Championship anyone?).  Livestream works really hard to optimize the stream to work with whatever bandwidth you have and so hopefully you will see a good, quality video when you run this test.  If you have any problems, click here for help.

Now, in addition to the video broadcast, ChartCon 2016 will also feature a mobile app created by a service called GuideBook.  The ChartCon Mobile app can be installed on any smartphone or tablet - we will be sending out the link later next week.  Once complete, you'll be able to use the ChartCon Mobile app to see the conference schedule, submit questions, chat with presenters, chat with other attendees, see social media posts, and much more.  We think that the ChartCon Mobile app will really help ChartCon attendees get the most out of the conference.

Finally, we have assembled a top-notch crew of video engineers, designers and technicians who are all working very hard to make the ChartCon broadcast as smooth, useful and informative as possible.  ChartCon 2016 will be very different from the one-persion webinars we have been doing up until now.  We're talking sets, lighting, audio designers, pre-recorded videos, you name it!  I am seriously considering having a credits scroll at the end - that's how many people are involved in helping make this ChartCon great.

"Sounds good Chip, but what about the presentations.  What will I learn from them?"

Great point!  All of this behind-the-scenes stuff is pointless unless we have great presentations to show, right?  So first off, let me describe the general format of each talk and then I'll go over more details about what the conference will look like.

The General Presentation Format
In general, each presentation will last about 60 minutes.  During each presenter's talk, you will see them on the main stage as they lead you through their slides and charts.  At some point, they will probably switch over to the web and do some live demonstrations as well.  While the presenter is presenting, you will be able to send in your questions via the mobile app on your smartphone or via social media (Twitter or Facebook).

After the presention is complete, there will be a 5-minute break as we move over to the "Interview" stage where the presenter will then answer the questions that were sent in during their talk.  That Q&A segment should last about 20 minutes and then we will be ready for the next presenter.

After they are done presenting, presenters may hang out for a bit online (via the app and social media) to answer even more questions depending on time.

Between presentations, we'll have short breaks so you can get up and stretch, etc.  In addition, attendees have the option of pausing the Livestream broadcast at any time on their computer just like it was a DVR recording.  During the short breaks, we will be showing pre-recorded videos with lots of tips and tricks on how to get the most out of the tools on our website.

Click here to see the official Conference Agenda

A Quick Overview of the Presentations
So the theme of the conference is "Creating Your Own Technical Trading System" and we will spend much of the first day showing off several different ways that anyone can use StockCharts.com to make better trading decisions based on charts and visual analysis.

The conference will kick off with myself and Grayson Roze helping everyone get up-to-speed with Livestream and the ChartCon Mobile App.  After those formalities, I'll talk about what a "Technical Trading System" is, what goes into make one and how you can tell if your system is working well for you.  I'll present my own relatively straightforward system as an example and explain how and why I think it works.

After my talk wraps up, Arthur Hill will present a much more thorough example of a technical trading system with automated rules and backtesting results.  After Arthur, Greg Morris will change things up somewhat by going over common mistakes that make people make when trading using technicals.

Next up will be Erin Heim who will show us yet another technical trading system - her DecisionPoint system that is now built in to StockCharts.com.  And after Erin, Gatis Roze will take the stage and talk to us about his compehensive technical trading system - Tensile Trading - and how he uses it successfully every day.

So, right off the bat, you will see at least 4 different, successful technical trading systems that use StockCharts tools to make buy and sell decisions.  But, more than that, you'll also be able to evaluate each of those systems and determine what parts best fit into your own investing.  Remember, our goal here is to empower you to make your own investing decisions based on your own, customized, investing strategy.

Wraping up the first day will be our first keynote presenter, Martin Pring, with a big announcement about his Special K indicator and how it can be used as part of any technical trading system.  Martin will also be reviewing the current state of the markets from his unique multi-market perspective.

And that's only the first day!  The second day includes talks about RRGs, SCTRs, Wyckoff and Seasonal Trends with another keynote presentation from Sir John Murphy who will talk about Intermarket Analysis and the current technical state of the markets.  The conference wraps up with a panel discussion that will include lots of Q&A from the audience and a final "put-it-all-together" talk from Grayson and myself that will be focused on concrete "next-steps" that you can take to bring the lessons from the conference into your own trading routines.

If you have registered for the conference already, you should have gotten your first "ChartCon Insider" newsletter the other day.  We'll be sending out more of those as the conference gets closer.

(If you haven't registered for ChartCon 2016 yet and want to join us for all the fun on Friday, September 23rd and Saturday, September 24th, simply click here to register for ChartCon 2016.  We'd love to see you there!)

- Chip

P.S. One last thing - we still have 3 open VIP seats available if you'd like to attend ChartCon in person.  If you will be in the Napa area later this month and would like to join us in person, please send me an email message and I'll get you all the details.  This once-in-a-lifetime experience includes seats for the presentations, a reception dinner with the presenters and either 1.) a round of golf with Tom Bowley and Greg Schnell, or 2.) a hot air balloon ride over Napa with Erin and myself!