ChartWatchers Newsletter

Four Things All StockCharts Users Need to Know

Hello Fellow ChartWatchers!

Short Version:  The Dow continues moving lower.  The upcoming death of Flash means everyone is getting the new version of ChartNotes.  You really need to sign up for ChartCon 2016 soon.  We have 10 once-in-a-lifetime seats available if you want to see ChartCon 2016 in person.

1.) The Dow continues moving lower: Despite the fact that stocks rallied on Friday, the Dow finished in negative territory for the fourth week in a row.  It is now below its 50-day moving average.  While weekly momentum (as measured by the MACD) is still positive, it is starting to move lower now and there will probably be a bearish MACD crossover on the weekly chart in 2 or 3 weeks.  As I said in last weekend's webinar, this looks like another down leg within a larger rectangle pattern that is forming after the long uptrend that started back in 2011.  Here's the current weekly chart:

2.) The upcoming death of Flash means everyone is getting the new version of ChartNotes:  In case you missed it, we are in the process of releasing a new version of ChartNotes that uses HTML5 instead of Adobe Flash.  As of now, the new HTML5 version is the default version of ChartNotes.  The Flash version is still available for now, but that will change soon.  The people at Google Chrome and Mozilla Firefox (and elsewhere) are eliminating their support for Flash soon which means that, even if we wanted to, we are unable to continue supporting a Flash-based verion for much longer.

To use the new version, click on the left-most "Annotate" link below your chart.  Please try to use the new version from now on.  If you run into a bug, please let us know and then use the second "Annotate" link which (for now) will bring up the older Flash version.  Here's a link to an article that details the differences between versions.

3.) You really need to sign up from ChartCon 2016 soon:  Spots for ChartCon 2016 are filling up fast - make sure to reserve your spot soon.  Because this conference is being held online, the price cannot be beat - $199.95 gets you everything you need - no additional airfare costs and no hotel expenses!  The conference is being held live on Sept. 23rd and 24th.

Here are the two important things I want everyone to understand:  Your ChartCon registration INCLUDES immediate access to the complete conference recordings AND registering for the conference is the only way to get that immediate access.

The bottom line is this:  If you want to see ChartCon 2016 live OR recorded, you need to register for the conference soon!

Another way to think about this is:  Even if you don't have time to see all (or even part) of the live conference online, you should still register so that you gain access to the conference recordings.

The theme of this year's ChartCon is "Creating Your Own Technical Trading System" and we will have lots of talks about just that.  That's in addition to presentations on the current market conditions from John Murphy, Martin Pring, Art Hill and others.  It will be both informative and educational.  You do not need to be a StockCharts expert to get a ton of great information from ChartCon!

For more information, and to sign up, please click here!

And finally, 4.) We have 10 once-in-a-lifetime seats available if you want to see ChartCon 2016 in-person!  While most people will watch ChartCon 2016 online, we have managed to reserve 10 seats at the live event itself for 10 special individuals who want to have a once-in-a-lifetime experience meeting and talking to all of our presenters during the conference.  If you sign-up for this experience, you'll meet and talk with John Murphy, Martin Pring, Art Hill, Erin Heim, myself and all the other presenters.  You'll enjoy a relaxing stay at the conference resort in Napa.  You'll even have the opportunity to play golf with Tom Bowley and Greg Schnell!

I cannot stress how limited and rare these packages are.  We only have 10 total and, so far, 4 spots have already been taken.  Each seat costs $3000.00 and we are selling them on a first-come-first-served basis.  (Hotel and airfare are not included.)  Please send me an email if you are interested.  I would love to see you in-person in Napa for ChartCon 2016!

- Chip

 

VIX Fails Breakout Attempt, NASDAQ May Be Turning Higher

My Thursday morning message showed the Volatility Index (VIX) trying to break through resistance near 17. It rose as high as 17.65 intra-day which was the highest level in two months. Fortunately, it wasn't able to close there. The good news is that the VIX closed at its low for the the day and dropped again on Friday. That left it well below the 17.00 resistance level. An upside breakout in the VIX would have signalled lower stock prices. The fact that the breakout attempt failed helped stabilize the market at week's end.

The next chart suggests that the Nasdaq Composite Index may be poised for a rally attempt. The daily bars show the COMPQ stabilizing above its early February peak near 4650 (green arrow). The Nasdaq/SPX ratio (solid line) is starting to recover. That shows new Nasdaq leadership. The 14-day RSI line (top of chart) may be about to cross over its 50-line. And daily MACD lines (below chart) look ready to turn positive. The key, however, to a Nasdaq upturn will be its ability to clear its moving average lines. The ability of the blue 50-day line to exceed the red 200-day line would be another positive sign. The Nasdaq is getting some new help from the technology sector which is starting to show relative strength. The Technology SPDR (XLK) gained 1.2% this week versus an S&P 500 gain of 0.28%. A biotech gain of 4.5% also helped the Nasdaq. An upturn in the Nasdaq would most likely lend support to the rest of the market.

- John

Trading Tune Up Part Two

In my last ChartWatchers article I pointed to the importance of taking a time out now and then to analyze trading habits. I referred to it as a "Trading Tune Up".

The article served as a reminder to me that you need to be on your toes at all times when trading and that even a minor deviance can be costly. This led me to a full review of my E-Book, "77 Essential Trading Lessons for Life" which I wrote a few years back that contains a treasure trove of information and a few specific lessons caught my attention:

1-What kind of trader are you? Some people think of themselves as day traders, others as swing or trend traders. But what matters most; pinning a label on yourself or actual results? 

2-Are you able to be disciplined in any type of environment? When the market is trending higher it's easier to make money on the long side. But if there's a great deal of volatility what can you do to make sure you remain disciplined and don't go off track?

3-Do you know how to take a profit or a loss? This seems like such a simple notion; if you have a nice gain, you take it off the table, and if you find yourself on the side of a losing trade, you exit the position. Yet it is one of the hardest things for traders to master.

Just take a look at the chart below which shows the S&P over the past year. It's a reminder that the market has gone nowhere and that you needed quite a stomach to get through the volatility that began in August and continues today. And it's also a reminder that you need to have your "A Game" to get through difficult times.

I've decided to conduct a "Trading Tune Up" webinar on Saturday, June 4. During this event I will be addressing some of the most important issues traders face day in and day out. The webinar will include a presentation from StockCharts.com's Senior Technical Analyst Tom Bowley, who will focus on the MACD and specifically, how to spot positive and negative divergences, something when mastered can be a game changer. If you wish to learn more, just click here.

At your service,

John Hopkins

EarningsBeats 

XLK Shows Signs of Life as Key Moving Average Holds

It has been a wild ride for the Technology SPDR (XLK) since August, but the ETF is showing signs of strength by holding the 200-day moving average in May. The red line shows the 200-day SMA dissecting the chart in the 41.5-42 area. Note that XLK broke above this key moving average in early March and is now testing this breakout here in May. I consider the cup half full (bullish) when XLK is above and half empty (bearish) when below. 

Continue reading "XLK Shows Signs of Life as Key Moving Average Holds" »

Finding Great Stocks In Technology AVGO QCOM CY

Technology has been one of the worst-performing sectors recently. However, over the last three weeks, the Tech sector represented by the SPDR ETF (XLK) has been performing slightly better than the SPX.

Scanning through the carnage, I found lots of interesting charts. However, Broadcom (AVGO), Qualcomm (QCOM) and Cypress Semiconductor (CY) are charts that look investable here with close stops.

Continue reading "Finding Great Stocks In Technology AVGO QCOM CY" »

PMO Analysis - SPX Not Ready to Bottom, But NDX Is?

During today's webinar, my "Bonus Indicator Chart" was the Price Momentum Oscillator (PMO) Analysis chart for the SPX. It reveals that it doesn't have the internal strength necessary (yet) to rally out of the current declining trend. The NDX is beginning to show signs of life. Comparing these two charts will give us insight on what preparations are needed to support a new rally.

Continue reading "PMO Analysis - SPX Not Ready to Bottom, But NDX Is?" »

My New Favorite Page on StockCharts.com

Hello Fellow ChartWatchers!

The market moved lower this week, retreating from its failed assault on the highs of last August.  Optimists can conclude that more consolidation is needed before the market will be ready to put in new highs.  Last week's earnings announcements certainly played a roll as well and more time may be needed to fully digest those.  Pessimists will trot out the "O" word - "overbought" - and they are correct - the market is overbought from a purely technical perspectives right now.  Add in the fact that we are heading into the summer doldrums - a period with lower volumes (and political conventions) - and things could get very interesting very quickly.  I'm more cautious now than I was during our last ChartWatchers webinar, that's for sure.

My New Favorite Page on StockCharts.com!

OK, that's a bit of a fib.  Just like a parent with several children, I cannot have a "favorite."  But I do have a brand new contender for the title.  See if you agree. Here's a screenshot:

This is our newly updated "Market Overview" index collection displayed in our brand new "P&F Percent" CandleGlance mode.  Let me take you through it...

First off, you can see the "big three" market indexes at the top - the Dow Industrials, the Nasdaq Composite, and the Wilshire 5000 (the broadest market index we have).  On the next line, we suppliment things with the S&P 500 Large Cap Index, the Nasdaq 100 Index, and the Russell 2000 Small Caps.  Those six charts will give anyone a great overall picture of what's happening in the US stock market.  Finally, to round things out, we included three non-stock charts - Commodites, the Dollar and Gold.  If you study these nine charts on a regular basis, you'll always know where things really are and (hopefully) where they are headed!  Just click on the "CandleGlance Groups" link on the right side of our homepage to instantly access this chart collection.

Q: "Hang on Chip - what's with all the X's and O's on your charts above?"

Good point!  In the screenshot above, I've shown you the Point & Figure version of that CandleGlance page.  To see it, select the "P&F (Percent)" setting from the "Duration" dropdown below the charts.

If you are new to P&F charts, here is a super-short list of things you need to know when looking at them:

  • When prices rise significantly, a new column of "Xs" is added to the chart.  If prices continue to rise without a significant decline, more Xs are added to the top of the column.
  • Similarly, when prices fall, a new column of "Os" is added and, if prices continue to fall, more Os are added to the bottom of the column as needed.
  • The chart's volatility (not time) determines how quickly more columns are added to the right edge of the chart.
  • The red numbers and letters inside the chart represent the start of a new month.
  • Trendlines are always drawn at 45 degrees.
  • P&F Patterns are objectively defined (no guesswork) and therefore can be automatically detected.

So, when evalutating a P&F chart, there are a couple of things to look for:

  1. Is the final column a rising column of Xs (bullish) or a falling column of Os (bearish)?
  2. Is the most recent trendline rising (bullish) or falling (bearish)?
  3. Is the most recent P&F pattern green (bullish) or red (bearish)?
  4. Is the current price marker ("<<") pointing at the very top or very bottom of the current column?  If so, that column will probably continue to expand (i.e. the current trend will continue).

There are more, but those are some of the more important basics to focus on.

(For the P&F Geeks out there, I'm also using the new "Percent" scaling option for these CandleGlance charts.  It makes each box on the chart represent a 1% move.  This works much better for comparing different charts - which is exactly what you do with CandleGlance.  We really should have added this a long time ago - doh!)

So...  given all that.  What does my new favorite page say about the markets right now?

  • The Dow is still in breakout mode (a tall rising column of Xs), but could reverse into a falling column of Os if it falls below 17,730.
  • The broad Wilshire index is also in a tall rising column of Xs and also is close to its reversal point (21,207).
  • Both the Dow and the Wilshire have bullish patterns on their charts (for now).
  • ALL of the other stock indexes have already reversed into a falling column of Os with the Nasdaq 100 and Russell 2000 also having bearish P&F patterns.
  • While all of the stock indexes have uptrend lines on their charts, those trendlines are still well below the current price action.
  • The Dollar has just broken down below a key support level at 94 and may test its uptrend line soon.
  • Gold is looking pretty positive with a bullish pattern and a rising column of Xs.
  • (I'll leave Commodities as an exercise for the reader. :-)

Hopefully, you will find this page as useful as I do for getting a mid- to long-term view of the market.  Again, simply click "CandleGlance Groups" on the right side of the StockCharts homepage, then select "P&F (Percent)" from the "Duration" dropdown below the charts.

Enjoy!
- Chip

 

Two Versions of the New York Advance-Decline Line Giving Different Signals

THE TRADITIONAL NYAD LINE HITS NEW RECORD... Chartists look to the NYSE Advance-Decline line to help determine the trend of the stock market. The NYAD line is simply a running cumulative total of the number of advancing stocks minus decliners on the big board. And it has a good track record of leading turns in the stock market itself. Chart 1 shows the traditional version of the NYAD line peaking last May which warned of a market downturn that started last summer and lasted into this year. Chart 1 also shows the advance-decline hitting a record high this spring. That's a very positive sign for the stock market. Not all chartists agree, however, that the line in Chart 1 truly represents the market. That's because it includes a number of issues that aren't true common stocks -- like preferred stocks and entities more closely tied to the bond market. Those chartists believe that a correct version of the advance-decline should include only common stocks.

NYSE COMMON STOCK ONLY AD LINE ISN'T AS STRONG... Chart 2 shows the NYSE Common Stock Only (CSO) Advance-Decline line. As the name implies, this version of the AD line includes only common stocks. That version of the line also peaked last May and bottomed during February. It has since then exceeded its fourth quarter high and reached the highest level since last July. What the AD line hasn't done is move above last May's peak to a new record. So it doesn't look as impressive as the more traditional version in Chart 1. Although its intermediate trend is clearly higher, the fact that it hasn't hit a new record leaves in some doubt the issue of whether stock indexes will reach new highs. Historically, however, it should be pointed out that this version of the advance-decline usually lags behind the more traditional version.

- John

StockCharts members: Click here to see the rest of John's AD comments.

Energy Resting At Key Pivot Area

2016 has been a very good year thus far for the energy sector (XLE) as it's gained 17.51% in just the last three months alone.  Unlike many of the other sectors that have been battling slowing momentum in the form of negative divergences, momentum remains very strong for the XLE on the daily chart.  Check out the three month chart:

Continue reading "Energy Resting At Key Pivot Area" »

Trading Tune Up - Lessons Learned

If you've been trading for a decent period of time you know how quickly things can turn against you. Sometimes with no warning, all of the good work you've done seems to disappear and before you know it, profits quickly disappear as well. 

As a trader for many years I have experienced the same thing. But each time I stumble I step back and try to figure out what I might have done differently to change the outcome and I have found that I always learn from my mistakes. 

For example, from time to time I will trade Leveraged ETF's in a particular sector that I think is extremely overbought or oversold. This allows for the possibility of a substantial gain in a short period of time. However, I learned the hard way when the market was under fire early in the year- let's say I let my guard down - that these ETF's really aren't meant to be held for long periods because they can deteriorate dramatically over time. Plus, if the trade doesn't go the way you think it will, the losses can mount quickly, putting a serious dent in the pocketbook.

Here's another example, one that I know even the most experienced trader falls trap to. It happens when you buy a stock for a trade and set a specific stop loss in case the trade goes against you. It's a requisite to trading. But sure enough, when the stock falls through the stop loss, you simply ignore it, thinking it will reverse in your favor, and when it doesn't, your losses continues to grow.

Here's a great example that has to do with earnings season; holding a stock into its earnings report. Some traders like to do this to feel the "thrill" that comes if the stock soars after it reports its numbers. But what if the opposite happens, and the stock gets clobbered? Just look at the chart below on FireEye, a company that reported its earnings this past Thursday, and ask yourself how you would feel if you held a substantial position in this stock when it reported its numbers:

The point is this. Trading successfully takes a lot of hard work. And it requires you to brush up from time to time, what I call a "Trading Tune Up" in order to stop making the same mistakes. In fact, I am considering conducting a Trading Tune Up webinar sometime in the next few weeks, depending on the level of interest. Accordingly, you can click here if you are interested and want to learn more. 

We're all going to make mistakes when we trade; it's part of the risk of being involved in the stock market. But when it becomes more regular than from time to time, you've got to look at making some serious adjustments.

At your service,

John Hopkins

EarningsBeats.com