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April 2014

ChartWatchers

Rising Volatility and Bearish Technical Patterns a Double Negative

by Tom Bowley

Last week's gains may have been more about options expiration and an oversold bounce than anything else.  I have my eyes set squarely on the NASDAQ right now, waiting either for a resumption of the five year bull market or a breakdown of its current head & shoulders topping pattern that could spell LOTS of trouble ahead.  I believe we're going to see the latter.  Take a look at the chart: That was a powerful channel that NASDAQ prices remained in for 17 months.  Since the breakdown, however, the NASDAQ printed equal lows - February and April - to form a Read More 

ChartWatchers

The QQQ ETF Has Fired Off A Warning Shot

by Greg Schnell

The QQQ is the tracking ETF for the Nasdaq 100. It has lots of messages this week. Other indicators also exist for the Nasdaq 100. The $NDXA50R is a sweet indicator. Its even better paired with its mate the $NDXA200R. When the are used together they produce the gold/black plot pane below in Chart 1. The gold area represents the number of stocks above the 50 DMA in %. The Black represents the number of stocks above the 200 DMA on the left scale in %. So the dark gold is where the black is shadowing behind the gold histograms. Here is how I like to use it. When the Gold is nice Read More 

ChartWatchers

A Key Breadth Indicator Holds Strong During April Dip

by Arthur Hill

The AD Volume Line held strong during the April pullback and formed a small bullish divergence over the last few weeks. The AD Volume Line is a cumulative measure of AD Volume Percent, which is advancing volume less declining volume divided by total volume. In this example, we are looking at the S&P 1500 AD Volume Line ($SUPUDP). I like to use the AD Volume Line instead of total volume because it represents net buying pressure. Advancing volume represents buying pressure and declining volume represents selling pressure. AD Volume Percent, therefore, is net buying pressure. The AD Read More 

ChartWatchers

Home, Home on the "Ranger" - StockCharts' New Interactive Zoom Control

by Chip Anderson

Hello Fellow ChartWatchers! After a couple of big down days, the market had 3 nice up days in the middle of the week to retest the 16450 level on the Dow before closing mixed on Thursday just before the Good Friday holiday.  After my article, you can see what John, Greg and the rest of our commentators think of these developments.  (Arthur Hill is on vacation this week.)  But before that, I need to tell you about two very important happenings here at StockCharts: The "Ranger" Brings More Interactivity to SharpCharts I'm thrilled to announce that we've Read More 

ChartWatchers

Sector Rotation Picture Quickly Changes to Defensive Outlook

by Chip Anderson

Hello Fellow ChartWatchers! If you are looking for lots of near-term optimism, I'm afraid the rest of this newsletter will be very disappointing.  There are numerous technical reasons to think the market is overdue for a pull-back.  And here they are Sector Rotation Points to Defensive Outlook I've written on numerous occasions in the past about how anyone can quickly and easily use our Interactive PerfChart tool to study sector rotation effects.  Rarely however has the picture changed so quickly from a clearly "offensive" (bullish) situation to a clearly "defensive" Read More 

ChartWatchers

This Market Is Officially Overvalued

by Carl Swenlin

On any given day we can find a wide range of opinions as to whether the stock market is undervalued or overvalued, and the bases for these assessments are also wide ranging and sometimes overly optimistic. I think a good starting point for estimating value is to use a price to earnings ratio (P/E) based upon twelve-month-trailing “as reported” or GAAP earnings (calculated using Generally Accepted Accounting Principles). I do not assert that this is necessarily the best method, but it is simple, easy to understand, and doesn’t rely on assumptions about future earnings. The normal range for Read More 

ChartWatchers

Watching for a Spring Top

by John Murphy

Last December 14 I wrote a message warning of the likelihood of a market correction during 2014. Midterm election years are the most dangerous of the four-year presidential cycle. ["The Four Year Presidential Cycle Suggests That 2014 Could Suffer a Major Downside CorrectionThe Strongest Six Month Period Ends in April"]. The message points out that midterm year peaks usually start in the spring. Since April ends the "strongest six month period" that starts in November, that makes April a good time to take some money off the table. It may also make the "sell in May" maxim more meaningful Read More 

ChartWatchers

Warning Signs Piling Up

by Tom Bowley

In earlier 2014 articles, I've discussed warning signs that emerged from Volatility indices, behavior in the treasury market, relative weakness of banks and relative strength of defensive areas of the market like utilities and REITs.  In addition, the S&P 500 has shown a propensity to struggle during calendar years in which it shows January weakness - and we were very weak in January 2014.Well, let's add a couple more concerns to this list - one a short-term concern, the other longer-term in nature.The short-term concern relates to the 60 minute negative divergence that emerged Read More 

ChartWatchers

Unconventional Oil and Gas Stocks Have A Good Week

by Greg Schnell

FRAK is an Unconventional Oil and Gas ETF. It spurred up to new 2 year highs this week and closed above the previous high. While it did pull back on Friday, this chart suggest a renewed push into these plays. As this ETF only has 100000 shares a  week, it is a little light to trade with. With the SCTR ranking pointing straight up and above 90, this sector should get some momentum here but investors may choose to look at individual stocks or other energy ETF's breaking out. Another Read More 

ChartWatchers

Bullish Bond Patterns Could Foreshadow Stock Market Correction

by Arthur Hill

The 7-10 YR T-Bond ETF (IEF) is tracing out two potentially bullish patterns and chartists should watch these patterns for clues on the stock market. The chart below shows IEF hitting resistance in the 102.25-102.5 area and then correcting with a falling wedge. With Friday's big surge, "correcting" could be the key word here because a breakout would signal a continuation of the January advance. Note that stocks were weak when Treasuries advanced in January. Taking a step back, notice that the ETF is also forming a big cup-with-handle, which is a bullish continuation pattern. A break above Read More 

ChartWatchers

GOLD Reverse Head and Shoulders

by Erin Swenlin

While I was reviewing the Gold daily 1-year chart, I noticed after Friday's close that we could be looking at a bullish reverse head and shoulders pattern forming up. I've annotated what I view as a left shoulder and head along with where we would look for a right shoulder. As most of you know, this is a bullish pattern. I don't want to get to far ahead of myself, but here's how it would play out if the right shoulder comes to be. Once price has risen to form the right shoulder, price would then need to break through the neckline. I've annotated the neckline in the weekly Read More