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November 2013

ChartWatchers

Banks Surge As Bull Market Rages On

by Tom Bowley

I rarely question a market move to the upside when banks are leading the charge.  And if you're wondering how the banks performed last week as the S&P 500 broke to a fresh all-time high, check out the Dow Jones US Bank Index chart: Banks consolidated since late summer while money rotated to other areas of the market, like industrials.  Over just the past three months, industrials have outperformed financials, gaining 12.1% while financials have risen just 7.6%.  Banks have been even weaker, rising just above 5.0% over the past three months.  But Read More 

ChartWatchers

Buy Japan, Sell US

by Richard Rhodes

With the equity markets hitting all-time highs in many cases, we think it prudent to look around the world and determine if there are any better risk-reward countries into which one can invest or park money for the long-term. To this end, we believe that the multi-decade decline of Japan's NIKKEI versus the US's SPX has come to an end, and a multi-year bull market has begun. Our reasoning is technically simple: a bullish wedge breakout has occurred in tandem with a breakout of the long-term 170-week moving average. Moreover, this breakout is consolidating in sideways fashion - which we Read More 

ChartWatchers

Is Crude Oil Ready To Rally?

by Greg Schnell

Crude oil has had a huge setback. It has fallen below all of the common moving averages.Is it ready for a bounce? Here is why I think it will retest the $100 level soon.For the live link to the chart. $WTIC Notice the uptrend line on crude oil off the 2012 lows. This blue line sloping upwards has been a support for the last year and a half and we would look for crude to get a bounce. The 92.5 level is also significant as the May June and July 2013 lows continually tested there. $WTIC was supported there for three months in a row. If you look up to the 98.5 dollar level you Read More 

ChartWatchers

The Great Rotation is Well Underway

by John Murphy

There's a positive side effect to rising bond yields. When bond yields rise, bond prices fall. When bond prices fall, investors start moving money into stocks. That sequence supports the view that higher bond yields are already causing a generational shift in favor of stocks. Chart 1 plots a "ratio" of the S&P 500 divided by the price of the 30-Year T-bond. [A ratio is created by inserting a colon (:) between the two symbols ($SPX:$USB)]. The rising ratio between 1980 and 2000 favored stocks over bonds. The last decade favored bonds over stocks. Until now. The ratio actually bottomed Read More 

ChartWatchers

Stocks Overvalued but No Bubble

by Carl Swenlin

As usual we are hearing many claims regarding market valuation, mostly that stocks are undervalued based upon future earnings projections. We are also seeing a lot of headlines about stocks being in a bubble. Using twelve-month trailing earnings for the S&P 500 Index, we find that stocks are overvalued, but not in a bubble. The chart below shows the S&P 500 Index (black line) in relation to its normal P/E range. A P/E of 10 is undervalue, a P/E of 20 is overvalue, and a P/E of 15 is considered to be fair value. The chart is very Read More 

ChartWatchers

Tis the Season... for Seasonality Charts!

by Chip Anderson

Hello Fellow ChartWatchers! Almost everything is at record highs right now.  Dow is above 16,000.  S&P is above 1800.  All of the S&P Sectors are higher year-to-date with Health Care being the strongest (+40.3%) and Utilities being the weakest (+13.9%).  Is it exuberance?  It is a bubble?  As technical investors, we shouldn't care.  We identify and ride trends - and the current trend is up. Check out John, Arthur, Greg, Carl, Tom and Richard's articles below for more on the current state of the market.  I, on the other hand, want Read More 

ChartWatchers

Finance Sector Leads with a Fresh 52-week High

by Arthur Hill

Three of the nine sector SPDRs hit new highs this week with the Finance SPDR (XLF) leading the way. The Energy SPDR (XLE) and the Healthcare SPDR (XLV) also recorded new highs. Even though XLF has been underperforming the S&P 500 since summer, this key sector is showing new signs of life since the flag breakout in early November. Note that XLF was the second best performing SPDR over the past week and over the last four weeks. XLV gets top honors as strength in pharmaceuticals, hospitals and healthcare providers lifted this sector. Admittedly though, offensive sector performance was Read More 

ChartWatchers

Breadth Indicators Confirm with New Highs

by Arthur Hill

When a major index records a new high, I go straight to the key breadth indicators to see if these highs were confirmed. Breadth indicators are sometimes called "internal" indicators because they measure what is happening inside a specific index or ETF. We can see what is happening on the outside by looking at the price chart of the underlying index, but we need breadth indicators to analyze the innards. The S&P 1500 hit a new high this week and today we will see if this high was confirmed with internal strength. First, let's review the index and the breadth indicators. The S&P Read More 

ChartWatchers

Bond Bounce is up Against Charts Resistance and Looks Overbought

by John Murphy

After selling off sharply between May and September, bond prices have been bouncing for the last two months. The bounce, however, has reached technical levels that may cap the rally. Chart 1 shows the 7-10 Year T Bond iShares (IEF) having retraced 50% of its previous downtrend. In addition, the IEF is up against its 200-day moving average. The green line above the chart also shows the 14-day RSI line having reached overbought territory at 70 for the first time since April. Chart 2 shows a similar trend for the iBoxx Investment Grade Corporate Bond iShares (LQD). Chart 2 shows that the LQD Read More 

ChartWatchers

Positive Seasonality Period Begins

by Carl Swenlin

Research published by Yale Hirsch in the Trader's Almanac shows that the market year is broken into two six-month seasonality periods. From May 1 through October 31 is seasonally unfavorable, and the market most often finishes lower than it was at the beginning of the period. From November 1 through April 30 is seasonally favorable, and the market most often finishes the period higher. (See Sy Harding's bookRiding the Bear for details on this subject.) While the statistical average results for these two periods are quite compelling, trying to ride the market in real-time Read More 

ChartWatchers

Head and Shoulders for Light Crude

by Richard Rhodes

For the past 9-weeks, Crude Oil has weakened from $112/barrel to below $95/barrel. This is a rather sharp drop indeed, but the fact of the matter is that the fundamentals are bearish Crude Oil, and so is the techncial state of prices. Moreover, the technicals could very well become much worse upon further weakness in the weeks/months ahead. Quite simply, the 300-week moving average serves as a mean reversion target for prices, and in the past 5-years it has held more than 10-different times dependent upon what one would call a test or not. Regardless, this level is a very important Read More 

ChartWatchers

The Currency Commodity Intermarket Relationship

by Greg Schnell

This week had bearish overtures for my view of the markets.Probably the one I worry about the most is the commodities Index, the $CRB. The break below the 5 year trend line is particularly disconcerting.One week does not make a new trend, but one week can start a trend. After breaking out to the upside, the $CRB has made 8 weeks of lower highs. Not only has it fallen below the trend line, it has now fallen below the five year support line. So, we have had 8 weeks of lower highs, which is a trend. We have had one week closing below the 5 year support, which is not a trend. While everything Read More 

ChartWatchers

Warning Signs or Another Seasonal Rally Opportunity?

by Tom Bowley

I've maintained a bullish stance throughout this bull market, but I have to admit I'm beginning to get a little nervous.  As a stock market historian, it's difficult for me to think bearish thoughts as we enter November because November, December and January are BY FAR the best consecutive months to be invested in the S&P 500.  In fact, check this stat out.  Since 1950, the period from the October 27th close to the January 19th close has risen 53 times out of the last 62 years, including 18 years in a row from 1983 to 2000.  25 different years have seen gains of 7% Read More 

ChartWatchers

November is "Get Certified" Month at StockCharts.com!

by Chip Anderson

Hello Fellow ChartWatchers! October didn't live up to its fearsome repution this year.  The major averages were all up somewhere between 2 and 4% for the month with the exception of the Russell 2000 (which was up only 0.7%).  Will things stay in positive territory for November?  See the other articles in this newsletter for some thoughts on that. November is "Get Certified" Month! Today I want to show you how, with a little bit of work, StockCharts members can double their membership discount - guaranteed - saving themselves money (potentially lots of it) next Read More 

ChartWatchers

Surge in Yields Could Signal Resumption of Bigger Uptrend

by Arthur Hill

Basic Elliott wave teaches us that there are two types of price movements: impulse and corrective. Similarly, Dow Theory teaches us that there are primary price movements and secondary price movements. Impulse and primary moves are in the direction of the bigger trend. Corrective and secondary price moves run counter to that trend. The challenge for chartists is to distinguish between impulse-primary moves and corrective-secondary moves. The chart below shows the 10-year Treasury Yield ($TNX) with a huge advance from early May to early August. This key benchmark advanced from the 1.6% Read More