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September 2014

ChartWatchers

Know Your Browser

by Chip Anderson

Hello Fellow ChartWatchers! Several indexes including the Dow and the S&P 500 hit new all-time highs on Friday before pulling back slightly before the close.  People who have been waiting for the market to correct are still waiting.  This is a great time to be a technical analyst because T/A removes the burden of "Why?" from your mind.  Most of the "Why?"-based investors pulled out of this market a long time ago and are stuck on the sidelines waiting for their predicted pullback. In contrast, technicians can stay in the market knowing that "Why?" is not nearly Read More 

ChartWatchers

Rising Rates Help Insurance Portfolios

by John Murphy

Financial stocks are starting to show upside leadership at the same time that bond yields are starting to rise. Banks usually benefit from rising bond yields because they can charge higher rates for their loans. Two other financial groups have actually done better than banks this week. They include investment services (brokers) and life insurance. Let's start with life insurance. The black bars in Chart 1 show Prudential Financial (PRU) surging today to a new record high. It's the strongest stock in that group. The black line shows the stock's relative strength ratio turning up this month Read More 

ChartWatchers

Remodeling Your Portfolio With Home Improvement Stocks

by Tom Bowley

You should know by now that I'm a HUGE fan of the Moving Average Convergence Divergence (MACD) indicator.  Other than the combination of price/volume and the use of candlesticks, it's probably my "go-to" indicator.  As a case study for this weekend, let's take a look at the Dow Jones U.S Home Improvement Retailers Index ($DJUSHI).  Let's take a look at the bigger picture via a weekly chart: The first thing that catches my eye here is that home improvement stocks began to labor in the second half of 2013.  The long-term negative divergence that appeared is NEVER a Read More 

ChartWatchers

Bullish Percent Indexes Close The Week Lower As New Highs On The Indexes Are Made

by Greg Schnell

Bullish Percent Indexes ( BPI's) are helpful in telling us the underlying sentiment of a group of stocks.  Here is the  Bullish Percent Index for the Nasdaq Composite ($BPCOMPQ). The chart is a little busy, but follow along. The gray area with the pink line is the Nasdaq Composite.It is very close to recent highs. The blue large squiggle line is the main title of the chart so the scale for that is shown on the right side of the chart. As the market is moving higher, the percentage of stocks on a PnF buy signal ($BPCOMPQ) is waning. I have put two red lines and a Read More 

ChartWatchers

Possible Double-Bottom On Monsanto

by Erin Swenlin

This afternoon while going over the DP Tracker Report for the S&P 500, I checked the new Price Momentum Oscillator (PMO) BUY signals on the SPX-Plus Tracker to see if there were any signals that looked promising. There was one--Monsanto (MON). First glance at the thumbnail, we see the positive PMO crossover its EMA which generated the PMO BUY signal. What are the other positives about this chart? There is a positive PMO divergence, meaning that while price was making a lower price bottom, the PMO bottoms were rising. A PMO bottom in oversold territory is also favorable Read More 

ChartWatchers

Using the Raff Regression Channel to Identify Trend Reversals in FDN

by Arthur Hill

Today's article will show how the use the Raff Regression Channel to define the trend and identify reversals using the Internet ETF (FDN). I am particularly interested in FDN because internet stocks represent the appetite for risk. An uptrend in FDN signals a strong appetite for risk and this is positive for the technology sector. A downtrend in FDN signals a weak appetite for risk and this is negative for the technology sector.  The middle line of the Raff Regression Channel is a linear regression, which is the line of best fit for closing prices. The outer lines are set equidistant Read More 

ChartWatchers

New Industry Certification Gives ChartWatchers More Reasons to Improve

by Chip Anderson

Hello Fellow ChartWatchers! The rally-that-just-won't-end continues.  The S&P 500 is up over 8% for the year.  It is up over 40% since the start of 2013.  It is up over 58% since the start of 2012.  Etc., etc., etc. And speaking of rallies, did you know that Large Cap stocks have outperformed Small Caps by over 7.5% since the start of the year?  And that's no fluke - over the past year, Large Caps are up 5.5% more than Small Caps.  In fact, you have to go back to May 2nd, 2013 in order to find a point where Small Caps outperformed both Large Read More 

ChartWatchers

All Three Dow Averages Are Rising Together

by John Murphy

My Wednesday message showed the Dow Industrials and Transports testing their summer highs. The bars on top of Chart 7 show that the Dow Transports have hit new highs (led by rails and truckers). The Dow Industrials, however, are still testing their July peak. The Industrials need to hit a new high to confirm the upside breakout in the Transports. Odds for an upside breakout appear pretty good however. It's usually a good sign for the industrials when the more economically-sensitive transports are leading it higher. The bars below Chart 8 show the Dow Utilities ending the week at a Read More 

ChartWatchers

Trading Gaps

by Tom Bowley

Identifying a tradable gap can be quite profitable, but also frustrating at times.  Awful news hits the wires and a stock gaps lower.  The immediate question becomes "Should I sell at the open?"  Well, conventional wisdom may suggest that you sell and your emotions may suggest it as well, but just keep in mind that when supply is strong on the sell side, market makers are on the other side, gladly buying all the shares you want to unload.  And market makers rarely lose money.  So what does that tell you?  It should tell you that the highest probability after a Read More 

ChartWatchers

$NATGAS - Will It Be Different This Time?

by Greg Schnell

Natural Gas ($NATGAS) is the heartbeat of Western Canada's economy and a huge part of the US Energy supply. Earlier in the spring, I felt $NATGAS might just be the biggest momentum trade of the year. After having a parabolic spike and a pullback, natural gas is sending off chart signals that duplicate the price action before the last downslide. Can it reverse the trend? First of all, the RSI is near the bottom of the range where we would expect it to bounce from. It needs to get back above 50. The two red lines on the chart from from 2005 and 2012 have the same slope. They both finished Read More 

ChartWatchers

Key Breadth Indicators Affirm Long-term Uptrend

by Arthur Hill

The S&P 1500 AD Line ($SUPADP) and the S&P 1500 AD Volume Line ($SUPUDP) hit new highs to confirm the overall uptrend. This is significant for two reasons. First, a bearish divergence is not possible. A bearish divergence forms when the indicators fail to confirm a new high and turn lower. Second, new highs signal broad internal strength within the S&P 1500. Keep in mind that the S&P 1500 consists of the S&P Small-Cap 600, S&P MidCap 400 and S&P 500. This makes the S&P 1500 a very broad and balanced index that represents the "stock market". Even though the Read More 

ChartWatchers

Gold Sentiment Hits Bearish Extremes

by Erin Swenlin

Central Gold Trust (GTU) is a closed-end mutual fund, which means that it trades like a stock on the NYSE. The fund owns only gold -- the metal, not stocks. Closed-end funds trade based upon the bid and ask, without regard to their net asset value (NAV). Because of this, they can trade at a price that is at a "premium" or "discount" to their NAV. By tracking the premium or discount we can get an idea of bullish or bearish sentiment regarding gold. Currently and for over a year, GTU has been selling at a substantial discount, so we could say that sentiment is sufficiently bearish for a Read More