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March 2015

ChartWatchers

Aggressive Small Cap Indices Break Out Again

by Tom Bowley

Both the Russell 2000 Index ($RUT) and S&P 600 Small Cap Index (SML) broke out to all-time highs last week as money continued to rotate towards aggressive small cap stocks and that should be seen as a bullish sign for equities.  In the case of the $RUT, a year long bullish continuation pattern - an inverse head & shoulders - finally resolved to the upside with a fresh target price of 1400 based on its measurement.  Heading into 2014, momentum began to slow for small cap stocks as a long-term negative divergence emerged in March 2014 on the weekly chart.  Many Read More 

ChartWatchers

5-EMA/PMO Scan Produces Interesting Short-Term Opportunities

by Erin Swenlin

With the market bottoming and taking a positive turn, I decided it might be a good time to review the results of one of my favorite and nicely discriminating short-term scans. It looks for stocks that are in a positive configuration of the 50/200-EMAs; meaning 50-EMA > 200-EMA which we consider the stock is in a "bull market". Then it looks for stocks with a new 5-EMA cross above the 20-EMA which is a short-term BUY signal. Finally, I whittle it down further by looking for stocks that have a Price Momentum Oscillator (PMO) that has been rising for three days and are approaching a Read More 

ChartWatchers

Behavior Modification

by John Hopkins

I made my ChartWatchers debut in the last issue and wanted to reiterate that my focus is on all things, "Beyond Technical Analysis".  In other words, my assumption is that the majority of eyeballs reading my articles are anywhere from somewhat to very skilled in technical analysis. So the good news for you is my article is surrounded by experts in technical analysis who will provide you with tons of information that you can put to good use when trading. But I'm more concerned with all of the other things you need to concern yourself with when trading. From setting price targets, to Read More 

ChartWatchers

Fed Effect Continues on Friday

by John Murphy

After a brief pause on Thursday, global markets resumed the bullish tone that started after the Fed's dovish statement on Wednesday. With the Fed scaling back on its plans to hike short-term rates later this year, markets acted accordingly. Treasury yields plunged to the lowest level in more than a month (see Chart 1). That pushed the dollar lower and contributed to a bounce in commodity markets. The drop in yields also gave a big boost to dividend paying stocks like utilities and REITs which had a very strong week (Chart 2). Homebuilders were also strong on the prospect for lower mortgage Read More 

ChartWatchers

Gold Starts To Glimmer, Silver Surges

by Greg Schnell

With a pull back in the US Dollar ($USD), both Gold and Silver started to move this week. We have been discussing it in the webinars, but these are meaningful moves that are just starting as the $USD takes a breather. On Chart 1, I have used the GLD chart to show the move on Friday at midday. It has made a nice double bottom base and the MACD has given a positive crossover signal. The relative strength line in purple has not broken out to the upside yet. The volume has not surged meaningfully yet, but it is an options expiration which usually creates a high volume day so I would Read More 

ChartWatchers

Utilities Get their Mojo Back

by Arthur Hill

It was a big week for Treasury bonds, the 10-YR Treasury Yield and the Utilities SPDR. XLU fell sharply as yields surged in February, but rebounded this week as Treasury yields fell. Overall, the big trend for XLU appears to be up with a series of higher highs and higher lows since November 2013. The green dotted lines mark a rising price channel and the ETF hit a 52-week high less than two months ago. It also appears that a higher low is taking shape because XLY is reversing well above the August 2014 low. Notice that broken resistance, the 62% retracement and November 2012 trend line Read More 

ChartWatchers

Free Market Analysis! Get your Free Market Analysis Right Here!

by Chip Anderson

Hello Fellow ChartWatchers! The market gave back ground this week, especially on Friday as a good Jobs report led to fears that the Federal Reserve would raise interest rates soon.  It definitely seems like a turning point in the market just occurred as the Sector Rotation picture is now muddier.  Compare last week's Sector Rotation PerfChart to this week's edition:           (Note: I've removed Utilities from these charts since they are very heavily skewed downward at the moment.) In the Read More 

ChartWatchers

The Life and Full Line Insurance Groups Start To Perk Up

by Greg Schnell

The Full Line Insurance Group Is one of the top 5 industry groups over the last month.  With the market pulling back hard on Friday, this group turned up higher. The Full Line group continues to anticipate better times ahead if the interest rate changes. Another group moving up fast is the Life Insurance group.  They also rallied on Friday with expectations of a change in rates as a driving cause. This interest rate change could be a major catalyst for the financials that are interest rate sensitive. We'll be watching these Read More 

ChartWatchers

Gold Tumbles on Rising Rates

by John Murphy

Gold got hit hard Friday on two fronts. One was the sharp jump in U.S. interest rates. The other was the surge in the U.S. Dollar to the highest level in eleven years. The chart below shows the price of gold tumbling $29 (-2.4%) on Friday to the lowest level for the year. And it did so on rising volume. [Gold stocks lost -7.4% and were day's and week's biggest losers]. The green line is the 2-year Treasury yield. The chart shows gold trending inversely to the 2-year yield. That's been especially noticeable since the start of the year. A peak in the yield line at the start of the year Read More 

ChartWatchers

Internet Stocks Showing Renewed Relative Strength

by Tom Bowley

When we look back at last week's action, a few things stand out to me.  First, the aggressive sectors - financials, consumer discretionary, technology and industrials - held up quite well on a relative basis.  That should be seen as a positive.  The worst performing group was utilities, which makes sense as the yield on the 10 year treasury ($TNX) soared.  The fear of rising interest rates spooked the market last week, but I don't believe we've necessarily entered a long-term period of higher interest rates.  Instead, we're likely seeing a bounce in treasury yields Read More 

ChartWatchers

Stocks are Down, but Not Broken

by Arthur Hill

Stocks came under selling pressure in early March and this selling pressure intensified on Friday as the S&P 500 lost 1.42%, which was the biggest one day decline since late January. Even so, it is just one week of selling pressure and not enough to affect the long-term uptrend. As the chart below shows, the S&P 500 hit new highs in November-December, consolidated with a triangle into January and broke out in February. As far as the trend is concerned, the new highs affirm the long-term uptrend and I do not see a major topping pattern taking shape. The index is well above the Read More 

ChartWatchers

DecisionPoint Trend Model Generates NEUTRAL Signal on TLT

by Erin Swenlin

DecisionPoint has been on an Intermediate-Term Trend Model BUY signal since January 17, 2014, so a Neutral signal is a big deal as far as our timing models are concerned. The signal was generated when the 20-EMA crossed below 50-EMA. It was not a SELL signal because the 50-EMA was above the 200-EMA which implies it is in a "bull market".  The steep continuation of the decline Friday made the breakdown from the foundation of the rising bottoms line "decisive". It is nearly a decisive move from support denoted by the blue line below. Given the new Intermediate-Term Trend Read More 

ChartWatchers

Beyond Technical Analysis

by John Hopkins

This is my first article as a new contributor to ChartWatchers. I'm a founder and president of Invested Central and many of you know my good friend and co founder of Invested Central, Tom Bowley, who recently joined StockCharts.com and has been a contributor to ChartWatchers for many years. At Invested Central one of our key missions is to educate traders. We've been doing this for over ten years and as a result I get a lot of feedback from members who share with me some of their struggles as traders. From deciding when to enter a trade, to deciding when to take a profit or deciding when Read More