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January 2014

ChartWatchers

Some Legendary and Eventful Additions to StockCharts

by Chip Anderson

Hello Fellow ChartWatchers! The last two days of last week caused everyone to pause and re-evaluate their market opinions.  That includes our stable of ChartWatchers analysts.  Glancing over the headlines for their articles below, you'll see lots of use of the "B"-word "Bearish."  Clearly if the market continues to drop like it did on Thursday and Friday, more and more technicians will be taking their profits and moving to the sidelines. But before we get to all the potential gloom and doom, here is the low-down on two new features we've just added to SharpCharts Read More 

ChartWatchers

Plunge in Emerging Markets Causes Global Downturn in Stocks

by John Murphy

My Wednesday message showed the close correlation between weak emerging market currencies and emerging market stocks. It showed the WisdomTree Emerging Currency Fund (CEW) threatening to break an important support line. The green line in Chart 1 shows that happening. After falling sharply on Thursday and Friday, the CEW closed just below its 2012/2013 lows. While all emerging currencies tumbled, the most notable collapses took place in Turkey and South America. Argentina and Venezuela were hit especially hard, with the latter suffering a de facto currency devaluation. Why that poses a Read More 

ChartWatchers

January Reflecting a Neutral to Bearish 2014 Forecast

by Tom Bowley

This bull market has been humming along since March 2009, but we cannot ignore the storm clouds building on the horizon.  The technical conditions have slowly deteriorated with the highly influential banking industry ($DJUSBK) reversing hard last week with a long-term negative divergence present on its weekly chart.  Those weekly negative divergences tend to be much more significant than those found on daily or intraday charts.  Have a look at the momentum issue: You'll notice two things on this chart.  First, as prices on the DJUSBK move higher on the weekly chart Read More 

ChartWatchers

Bearish Weekly Key Reversals for US and World Indices

by Richard Rhodes

Last week's trade was rather bearish from a technical perspective, for many of the US and world indices forged "bearish weekly key reversals" to the downside. To us, this suggests that a larger correction is underway - perhaps -10%but perhaps a greater percentage. For now, one can only say that a correction is warranted; it appears here - the question is only one of depth. To this end, we are focused upon the Dow Jones Transportation Average ($TRAN), for it was a leader for the rally higher. Quite simply, longer-term trendline resistance connecting the 1998-2007 highs has been tested Read More 

ChartWatchers

Possible Head and Shoulders Developing

by Carl Swenlin

The head and shoulders pattern is frequently how a price index puts in a top, and, while it may be a bit early to start talking about it, it is one possible scenario that we can anticipate. A few weeks ago we identified a rising wedge pattern, which believed would resolve downward because that is what that pattern usually does. The expected breakdown happened today, and now we look for signs of what may happen next. There is a line of support drawn from the May 2013 top that has a lot of credibility because it engages three tops and two bottoms. That line is the most obvious place for Read More 

ChartWatchers

Commodity Currencies Present A Global Conundrum

by Greg Schnell

Recently, the IMF Leader - Christine Lagarde - talked about deflation. She announced we must do all we can do prevent deflation from occurring. In Davos, the IMF released their 2014 World Economic Outlook. Look at the trend they predict for commodities. That report can be found here. IMF WEC Davos Even presidents don't trust economists. Truman asked for a one armed economist so they could stop referring to 'On the other hand' The charts are our best tool to see the current picture in relation to the past. Unfortunately for the commodity Read More 

ChartWatchers

Consumer Discretionary and Finance Sectors Fall in Sector Rankings

by Arthur Hill

It has been a rough year for stocks and two key offensive sectors are leading the way lower. I like to group the sector SPDRs into three groups: offensive, defensive and other. The consumer discretionary, technology, finance and industrials sectors are offensive because they are key to market performance. The consumer discretionary sector is the most economically sensitive sector, the technology sector represents growth stocks, the finance sector reflects the health of the banking system and the industrials sector makes the capital goods required for capital spending. The utilities Read More 

ChartWatchers

Registration Now Open for ChartCon 2014 in Seattle this August

by Chip Anderson

Hello Fellow ChartWatchers! Happy New Year!  2013 was very, very good to technical investors.  Let's hope 2014 continues that trend. As we mentioned in the previous newsletters, we've put together an amazing line up of speakers for our upcoming ChartCon conference.  Today, I'm please to announce that registration for this great event is now open.  If you already know you want to attend, click here to get an early jump on the registration process.  If you aren't sure, read on. Announcing ChartCon 2014 in Seattle on August 8th and 9th Read More 

ChartWatchers

Bond Yield Plunges on Weak Jobs Report

by John Murphy

Friday's news that American employers added only 74,000 jobs in December didn't have much of an effect on the broader stock market, but did shock bond investors. Chart 1 shows the 10-Year Treasury Note Yield ($TNX) suffering the worst drop since September. In so doing, the yield fell back below its early September peak just below 3%. Friday's plunge kept bond yields within its second half trading range between 3% on the upside and 2.5% on the downside. Bond prices jumped sharply as yields fell. Stocks tied to bonds also had a strong day. They include bond proxies like utilities and REITS Read More 

ChartWatchers

Sizing Up Earnings Season

by Tom Bowley

It's my favorite time of the quarter - as a trader.  I approach it like an offensive or defensive coordinator on one of the NFL playoff teams this weekend.  I study recent history to find strengths and weaknesses of the market and then I anticipate "plays" (price action) before they happen.  Let's talk about the planning phase first.Analysts are constantly visiting companies throughout the quarter, discussing prospects, goals, outlooks, etc. with management teams.  They generally have a sense of how a company is going to report before they report.  They use this Read More 

ChartWatchers

Major Breakout on Hold

by Richard Rhodes

Friday's US Employment Situation Report was much less-than-expected at +87k. Many believe this to be an aberration given recent strong employment data, but the aberration may be a longer-than-expected aberration given 10-year note yield may be telling us that a "soft patch" is directly ahead. Quite simply, let us preference this with the fact that 10-year note yields have indeed broken out above long-term 200-week moving average, which tells us yields are going higher over the longer-term. However, major trendline resistance is once again starting to prove its merit, with distance above Read More 

ChartWatchers

Interest Sensitive Issues Get Interesting

by Greg Schnell

Recently the Municipal Bond ETF started to turn higher. It has been a leading indicator for some of the actual government bond issues.  You can see it has broken above the 40 WMA and has started to turn the MA's from down to flat. We'll see if it can extend. Looking at the TLT ETF on the chart below, we can now look for trend changes here. So far, we have a textbook double bottom with positive divergence showing up. We are above the 10 WMA. The first target would be the 40 WMA at 107.25 with the follow on targets at the three fibonacci Read More 

ChartWatchers

Flags are Flying Around and Within the Dow

by Arthur Hill

The Dow Diamonds (DIA) and several key stocks within the Dow formed bullish continuation patterns over the last two weeks and traders should watch these patterns for breakouts. DIA formed a falling flag and this pattern represents a rest after a sharp advance. Such a rest or pullback is actually healthy because it alleviates short-term overbought conditions. We could use a momentum oscillator, such as the Stochastic Oscillator or the Commodity Channel Index (CCI) to quantify overbought conditions, but a simple look at the price chart shows us that prices moved quite far quite fast. DIA Read More