ChartWatchers

Is Europe Getting Ready To Run?

There are big expectations for Mario Draghi this week. He is supposed to announce some form of QE. There are a lot of interesting European charts but let's start with the Euro ($XEU). This week, the Euro took out the 2006 low. One of the major things to notice is that the MACD is at the third lowest momentum level in the history of the Euro. While that by itself does not make the low imminent, history would suggest we are near the lows unless we have a complete financial breakdown like the Global Financial Crisis. 


The daily chart of the Euro is interesting. For those who study candles, today was a big hammer candle.

Continue reading "Is Europe Getting Ready To Run?" »

Key Tests Approaching in Technology

The nearly six year bull market lives on, but the bulls have been taking several body blows of late.  Whether this bull market continues could depend on a couple of key industry groups within the technology space.

First, let's take a look at computer hardware ($DJUSCR).  This is the place that  Apple (AAPL) calls home.  This index topped in late November and has been mired in a bullish wedge the past couple months.  On Friday, the DJUSCR hit price support at a time when its 60 minute MACD is just beginning to turn higher.  Take a look at the daily chart of this influential group:

From this chart, you can see that Friday's action left the DJUSCR testing key price support at 1545 while in the midst of a bullish wedge formation.  It's also easy to see that over the past several months, RSI readings in the 35-40 area have constituted excellent reward to risk entry points.  It's difficult to say whether this level will hold as support, but it certainly offers up a low risk entry opportunity.

Now check out the shorter-term 60 minute chart:

It appears as though this index is beginning to carve out a bottom very similar to the bottoms that formed in early January and mid December.  A reversal at this level would not only make sense on the 60 minute chart, but also on the daily chart where that bull wedge has carried price action down very close to key price support.

In addition to computer hardware, semiconductors are holding onto significant price support as well.  Check out the recent downward momentum and the test of price support on Friday:

Semiconductors also are in a bullish wedge pattern and on Friday printed a bullish reversing piercing candle at price support and the bottom downtrend line of its wedge pattern.  Throw in the RSI reading in the 40s and it appears that semiconductors also sport a very solid reward to risk ratio for traders on the long side.

Technology has been one of the driving forces behind this bull market so watching to see if these two leading industry groups can maintain their uptrends and stave off the bears will likely go a long way in determining how much is left in this bull market.

I'm featuring a key technology company testing major price support as my Chart of the Day for Tuesday, January 20th.  You can register for this chart and all future Charts of the Day by CLICKING HERE.

Happy trading!

Tom Bowley
Chief Market Strategist
Invested Central

S&P 500 Does Battle with a Big Round Number

Even though big round numbers should not have any technical significance, it is hard to argue with the magnetic pull of 2000 on the S&P 500. The index first neared 2000 when it broke above 1975 in July. After a pullback to the 1900 area in early August, the index made another run at 2000 and even crossed this level a few times in September. Alas, the index fell back again in October with a deep plunge below 1850, but came roaring back in November and finally got through 2000. Just as it seemed the 2000 area was going to be relegated to the past, the index fell back below 2000 in mid December. Notice how this broken resistance zone turned into support and the index again bounced back to new highs in late December. 

So here we are in mid January and the index is once again battling the 2000 level. With Friday's weak open and strong close, the 2000 area is once again acting as support. Notice that the index formed a hammer on Wednesday and a bullish engulfing on Friday. Now let's see if we can get some follow through. A move above the wedge trend line would validate the 2000 area as support once again and suggest that the January correction is ending. 

The indicator window shows the S&P 500 High-Low Line, which is a cumulative measure of High-Low Percent ((new highs less new lows) divided by total issues). The line rises when new highs exceed new lows and falls when there are more new lows. This simple indicator gives us an idea of the overall trend. The bulls get the benefit of the doubt as long as new highs exceed new lows, and the line rises. After flattening in late September and turning down in early October, this breadth indicator turned back up in late October and moved above its 10-day EMA. It has been above its 10-day EMA for almost three months now. The S&P 500 has a bullish bias as long as this line is rising (above the 10-day EMA). 

Thanks for tuning in and have a great three day weekend!
Arthur Hill CMT

How to Attend a Live StockCharts.com Webinar

Hello Fellow ChartWatchers!

TGIF!  Today's big turnaround saved us from an otherwise dreadful week as the Dow bounced off of support around 17260, the low at the beginning of the year.  Our standard chart of the Dow shows the situation the best I think:


(Click the chart for a live version)

Take a second, look at that chart and see if you can spot any significant technical signals.  Once you are done, read on to see what I spotted and then see if you agree.

In the near term, the Dow just tested the 17262 low from the start of the month.  If it falls below that level, then the 17067 low from mid-December would be the next test.  Clearly volatility has increased significantly since the snore-fest that was November.  The most interesting thing to me about that chart however is the divergence between the MACD indicator on the top (measuring momentum) and the CMF indicator on the bottom (measuring money flow).  In general, the MACD has been moving lower since peaking in mid-November.  The CMF peaked at the same time and moved lower more-or-less together with the MACD until... the 17262 low at the start of the month.  Since that low, the two indicators have moved in opposite directions.  Will today's retest of that low change things going forward?

So who do you think will win out - momentum or money flow?  Monday should be very interesting indeed...  But until then, let's talk about webinars!

How to Attend a Live StockCharts.com Webinar

First off, did you know we now produce 3 (soon to be 4) different webinars each week?  Hopefully that's not a complete shock.  You can think of our webinars as similar to local radio / television shows.  They are live events where one or two presenters spend about an hour doing various combinations of the following activities:

  • Telling you what they think about the market
  • Backing up those opinions with live charts
  • Explaining how to use a feature on StockCharts.com
  • Talking about their background and current projects
  • Engaging in witty banter
  • Answering questions from audience members
  • Reminding you that the webinar videos are indeed archived on the site for later review
  • Apologizing for running out of time... again!
  • Conducting live audience polls
  • ...and much, much more!

The feedback we've gotten on our webinars so far has been truly remarkable - unbelievably positive.  Because of that, we are working on increasing the amount of webinar sessions.  So which webinar(s) should you try to attend?  Here's our current schedule:

So next question: Do you need to attend all of them?  I can hear it now: "Chip, that's too many!  My schedule's full enough as it is and now I have to attend all these webinars too?!?!?  Aggggggghhhh!!!!"

Fear not good reader.  I am here to explain how we see webinars fitting into things and what your priorities should be going forward.

First off, we see webinars as additional, optional content that supplements the various written articles that we have on the website.  Most if not all of the information conveyed in our webinars is also presented in written format in our blogs and help articles.  If tuning into live events just isn't your thing, then just ignore the webinars and keep using the website just like before.

Second, webinars are "live" - meaning that they are ad hoc and can contain mistakes and technical glitches.  Presenters do spend a little time preparing for their webinars, but we can't go back and do a "second take" if things don't go well on the first try.  In general, this is what makes webinars more interesting I think - but it does require a different level of tolerance from the audience than, for instance, a blog article does.

Third, webinars are archived.  We put them up on the Internet for you to review (or re-review) at any point in the future.  Here's the link:  http://stockcharts.com/webinars/archives

Finally, webinars do have other limitations.  For instance, you'll need to have the special GotoWebinar software installed on your computer/device in order to participate in the live webinar.  Also, limited time combined with lots of viewers means we cannot answer every question that is sent in.  Finally, the charts that are shown in a webinar are not clickable and thus you may not be able to easily re-create a chart that you see - although often those charts will appear in the presenter's blog later.

To sign up for a webinar currently, just watch for the appropriate announcement on our homepage and click the corresponding registration link.  Currently, you have to re-register for each webinar.  (That will change soon.)  After you register, you will get an email with specific information about joining the webinar.  If you can, try to join the webinar about 10 minutes early to ensure that your computer can connect properly.

Currently, all of our webinars are free and open to everyone.  That will change soon however.  Soon, our main market commentary webinars (i.e., Arthur & Greg) will only be available to members.

So, in conclusion: Webinars: great but optional.  Join up if you can.  Watch the archived version later if you can't.  If you are short on time, read our commentary articles.

- Chip

P.S. And please try to make it to this week's "ChartWatchers Live!" webinar this Saturday at 1pm Eastern if you can!  ;-)

 

Looking Forward to 2015

Hello Fellow ChartWatchers!

Happy 2015!  All signs point to 2015 being a very interesting year for the stock market.  The long-term rally that we've had since the lows of 2009 can't continue forever, can it?  Regardless of your opinion on that question, remember that StockCharts.com gives you the perfect perch for monitoring the strength of the market as we head into this crucial 5th year of the rally.  Your can use our long-term charts, our comparison graphs, our market commentators or, ideally, a combination of all of those things to stay on top of exactly what is going on with stocks.

Last time, I listed many of the improvements we made to StockCharts.com in 2014.  Today I'm going to pull out my crystal ball and talk about improvements that we hope to make to the website in 2015.  While I cannot state with 100% certainty that all of these things will come to pass, here's what the crystal ball is currently telling me we'll add:

  • International Stock Data - first up is the London Stock Exchange.  After than, the National Stock Exchange of India.  And after that, we'll have to see.  It depends on the feedback we get from users throughout the world.
  • Webinars - Greg Schnell and Arthur Hill already have regularly scheduled webinars on Tuesday and Thursday.  Watch for Erin Heim to begin her "DecisionPoint" webinar later this month.  And I plan on starting up my own webinar series with interviews and "how-to" tips in January also.
  • Improved Webinar Registration - The current webinar registration process is a kludge.  We'll have a dedicated webinar area of our website available soon that will make it much easier to find and register for whichever webinars you are interested in.
  • More Tom Bowley - Watch for Tom's new blog and webinar series to crank up in February.  Tom's talks on Seasonality and repeating market effects was extremely popular at ChartCon and he'll be expanding on that work here soon.
  • Wyckoff-oriented Blog - Another very popular talk at ChartCon was Bruce Fraser's talk on Wyckoff analysis.  Bruce will be expanding on that talk via another new blog on our website starting later this year.
  • More ChartPacks - Watch for Greg Schnell to release a ChartPack just as soon as I can pin him down and force him to do it.  Greg - seriously?  No ChartPack yet?
  • Paper Trading Games - This one will be huge.  (I've buried it here in the middle of my list because we still have a bunch of work to do and I don't want the casual readers to get all excited about it just yet.)  Later this year we hope to allow people to practice trading from a virtual brokerage account using either live price data or pseudo-data from the past.  In addition, we also will be allowing people to set up trading competitions between groups of friends.  Stay tuned!
  • New ChartNotes - We are in the middle of a complete re-write of our ChartNotes annotation tool.  When complete, the new version won't require plug-ins (no more Flash or Java!), will run faster, will have an easier-to-use interface, and will allow you to create better looking annotations for your charts.  That's win-win-win-win!
  • New P&F Chart Workbench - The current P&F workbench is one of the oldest pages on our website.  We'll be giving it some love later this quarter with a big update.  There won't be many changes to the charts themselves, but the workbench controls will work much better.
  • Index and Market Indicator Improvements - We will be greatly expanding the documentation for all of our indexes and market indicators (i.e., the symbols that start with "$" or "!").  We will also continue to improve the accuracy and historical data for those symbols as well.
  • Online SCU Events - Watch for us to announce webinar versions of our popular SCU seminars later this year.
  • Fundamental Data - Watch for us to add historical earnings information and other fundamental data to our charts "soon."
  • An App - OK, this one is a stretch.  I'm pretty positive all the things I've listed up to this point will happen.  This one, not so much.  But we will be seriously investigating the possibility of creating an App for your smartphone.  At the very least, we will do a major revamp of our current mobile website: http://m.stockcharts.com

And, just like last year, all of these features will be added to the website without a price increase.  Our strategy remains unchanged - we will continually increase the value of a StockCharts membership without increasing the price.  The only time we've increased prices in the past was when the stock exchanges raised their per-user-per-month fees.  Unless that happens again, we will not be raising prices this year either.

Quick Note for ChartCon enthusiasts: We probably will not hold a ChartCon in Seattle this year.  Instead, we are angling towards holding one in 2016.  That said, we are also looking into holding a one-day, webinar-based version of ChartCon online later this year but there are still several issues that need to be worked out.  Stay tuned for more later.

So happy 2015 everyone!  Now, where did I park my flying car...

- Chip

 

Industrial Machinery Index Seems Poised for 2015 Rally

It's easy to follow the crowd and buy what keeps going higher.  But generally larger gains can be found in healthy areas of the market where we've seen months of consolidation, awaiting that next breakout.  As an example, it wasn't that long ago that home construction stocks ($DJUSHB) looked like a broken group.  Take a look at the DJUSHB chart as of early October:

As our major indices struggled back in October, it was fairly clear to see that home construction stocks were not exactly desirable from a technical perspective - at least not based on this year-to-date chart.  They broke down to a fresh 2014 low on October 13 and appeared to have accelerating momentum to the downside to boot.  But astute technicians realized the big picture wasn't bad at all and the selling in October actually created opportunities within the space.  While that daily chart was looking so bearish, take a look at the longer-term bullish continuation pattern (ascending triangle) that was forming:

This longer-term view shows a much different technical picture than the 2014 year-to-date view as of October.  Home construction stocks appeared to be damaged goods, not worthy of attention based on the shorter-term view.  Yet on the long-term weekly chart, that October low was firmly within a very bullish ascending triangle pattern and showed a weekly RSI near 40 - generally a solid entry point during an uptrend.  The rest is history as home construction stocks performed among the best consumer discretionary industry groups in the fourth quarter.  In addition, a breakout on the DJUSHB above 550 triangle resistance could lead to substantial gains in 2015 so this group is worth keeping on your radar.

Now let's move on to 2015 and a group that's struggled on a relative basis in 2014, but certainly could be poised technically for a major breakout in 2015 - industrial machinery ($DJUSFE).  Look at the 4 year weekly chart:

It's clear to see a major uptrend from late 2011 through early 2014.  At the bottom of the chart you can also see that the DJUSFE was outperforming the S&P 500 throughout much of this advance.  It's also easy to see the nasty long-term negative divergence that formed on the highs in the first half of 2014.  That was a clear sign of slowing upside momentum and the DJUSFE struggled during the second half of 2014.  Put another way, money rotated away from this group for awhile as the consolidation process unfolded.  The good news - and perhaps the overlooked news - is that the DJUSFE is currently in a very bullish continuation inverse head & shoulders pattern.  Should it break above 440 with force, this pattern measures ultimately to 510, or 20% higher than where it begins 2015.

I've searched to find an individual stock within this space that could be poised for a significant move higher if, in fact, this breakout in the DJUSFE occurs.  I'm including it as my Chart of the Day for Monday, January 5th.  CLICK HERE to sign up for my Chart of the Day for FREE!

Happy New Year and Happy Trading!!!

Tom Bowley
Chief Market Strategist
Invested Central

 

Deflationary Forces Should Hold Treasury Yield Down

One of the biggest concerns for 2015 is the prospect for higher interest rates in the U.S. While it's true that the Fed may start to hike rates later in the year, that doesn't mean that bond yields will rise very much. The Fed controls short-term rates, while bond yields are determined by economic strength, inflation expectations, and foreign markets. The chart below shows two deflationary forces that should keep U.S. bond yields under control this year. The plunge in the CRB Index during 2014 suggests that any threat from commodity inflation is nowhere in sight. [The fact that the U.S. Dollar Index is nearing a ten-year high should also keep commodity prices from rising much this year]. The second factor weighing on Treasury yields is the plunge in foreign yields. The blue line in Chart 4 shows the German 10-year yield falling to 0.50% which is the lowest in history. [The five-year German yield has turned negative for the first time ever]. The spread between the 10-Year U.S. and German yields has reached the widest level in 15 years. Foreign money moving into higher-yielding Treasuries (also attracted by a stronger dollar) should keep Treasury prices from falling too far and yields from moving too high. All of which suggests that fears of rising rates this year may be somewhat overblown.

Russell 2000 Survives Bollinger Band Head Fake

A month ago in ChartWatchers I wrote about the bullish seasonal pattern for small-caps and featured a big flag pattern on the chart for the Russell 2000 ETF. Trading turned volatile in mid December, but the bullish seasonal pattern held up and the Santa Claus rally ultimately materialized. The Russell 2000 gained 2.68% in December and outperformed the S&P LargeCap 100, which lost .86%. So what now? First, let's review the price action in the Russell 2000 over the last few weeks. The index consolidated from early November to early December and the Bollinger Bands narrowed as volatility contracted. Notice how BandWidth was below the 3% threshold in early December. The Russell 2000 appeared to break down in mid December, but formed an inverted hammer on 16-Dec and confirmed this bullish candlestick reversal pattern with a surge and gap the next two days. This head fake is not as uncommon as one might think. In fact, John Bollinger advised chartists to beware the "head fake" in his book, Bollinger on Bollinger Bands. 

Thus, with the head fake and subsequent breakout in mid December, the Russell 2000 is on the bullish track and showing relative strength. Chartists should now look for levels that would invalidate the bullish case. My first important level is in the 1180 area. A move below 1175 would put the index back below the breakout and fill the gap. This would negate the breakout and call for a reassessment. The bottom indicator shows the Russell 2000 relative to the S&P 100 ($RUT:$OEX). This ratio has been rising since mid October and recently broke above its October-November highs. This means the Russell 2000 (small-caps) is outperforming the S&P 100 (large-caps). A move below the early December low would signal a return to relative weakness in small-caps. 

Thanks for reading and best wishes for 2015!
Arthur Hill CMT

Is Gold The Golden New Years Ticket?

Last year, the bond market surprised us by making its low on December 31 and it went on to rally all year. Gold and the gold miners made a tradeable low December 2013 and rallied for a few months. So I though I would dive into the gold charts today to see if this might happen again.

One thing we want to see happen is Gold Miners (GDX) outperform Gold (GLD) . Here is the ratio chart. If it is turning up, the gold miners are starting to outperform the metal. That is usually a precursor to at least a good rally. When this moves above the 50 DMA its a good place to pay attention. Notice the big rally off the December 2013 low and June 2014. December-June-December has a nice spacing. A particular point of interest for me is the higher MACD on the most recent low even though the ratio made a lower low. This positive divergence is nice to see. 


Chart 1

Continue reading "Is Gold The Golden New Years Ticket?" »

The DecisionPoint Trend Model Picture for 2015

Now that 2014 has drawn to a close, analysts are reviewing history and hoping to prognosticate about 2015. I'd like to review some of the DecisionPoint Trend Model charts for not just the S&P 500 (SPY), but also for the dollar, gold, oil, commodities and bonds. We can see what the current long- and intermediate-term Trend Model signals are going into 2015. 

Continue reading "The DecisionPoint Trend Model Picture for 2015" »

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