ChartWatchers Newsletter logo

January 2016

ChartWatchers

Discussing Some Of The Technical Indicators For Long-Term Investors

by Greg Schnell

I was recently at an event where someone suggested a simple Technical Analysis 101 of the current market. Today, I want to do that in one chart. There are some simple theories in the market. When the market is going down, the volatility picks up. Using some of the most common tools of Technical Analysis, this market breakdown has been coming for a while. The point of this review is to identify signals that can help us spot the market trend and when it might end in either direction. This is the $SPX with one of the simplest indicators. The 40 Week Moving Average shown in green. When Read More 

ChartWatchers

Last Sectors Standing

by Erin Swenlin

If you go to our DP Reports blog and take a gander at the DecisionPoint Market/Sector Summary, you'll find there are only two sectors left with BUY signals. I'll give you a moment to guess which ones. Those of you familiar with John Murphy's sector rotation analysis will likely guess correctly. Both the Utilities and Consumer Staples cap-weighted and equal-weight ETFs are on BUY signals. An Intermediate-Term Trend Model BUY signal is generated when the 20-EMA crosses above the 50-EMA. Unfortunately, three of those ETFs have declining 20/50-EMAs. Let's look at the charts to determine Read More 

ChartWatchers

The One Where a 4-month Setback Freaks Everyone Out

by Chip Anderson

Hello Fellow ChartWatchers! It was "back to the future" time for the markets this week with the Dow falling over 350 points and ending up just below 16,000.  This has caused lots of consternation and teeth-gnashing in the mainstream financial press, but let's back up and get some technical perspective before drawing conclusions.  Here's my chart of the current big picture: This is this same chart I featured during last week's webinar.  (So far, I haven't needed to update the annotations either!)  There's a lot of stuff going on here so let's break it down: Read More 

ChartWatchers

Banks Lose Two Year Support Despite Solid Results

by Tom Bowley

Technical analysis doesn't try to answer why questions.  Fundamentalists are constantly bewildered by price action, especially when it seems to contradict fundamental news.  Technicians simply don't care.  The stock market looks ahead and therefore price action precedes news.  That's why it's important to look at how the market reacts to news, not to simply look at the news itself.  This past week was a perfect example.  JP Morgan Chase (JPM) reported quarterly results that exceeded expectations.  In fact, take a look at the banks that reported Read More 

ChartWatchers

Advance-Decline Turns Down, Foreign Markets Already Bearish

by John Murphy

A lot of us on this site have been warning about the fact that the fourth quarter rally was mainly driven by large cap stocks and wasn't being supported by the vast majority of stocks. That's been shown by breakdowns in small and midsize stocks and the fact that 80% of big board stocks have fallen below their 200-day averages. The best known measure of market breadth is the NYSE Advance-Decline line. Chart 1 shows that line falling well short of its 2015 high during the fourth quarter, which was an early warning. This week's drop below its August/September lows to a 52-week low is another Read More 

ChartWatchers

Will Earnings Matter?

by John Hopkins

Earning's season will kick into high gear this week and trader's are wondering how much they will matter after the market slaughter already experienced this year. Since this is the worst start to a year for stocks it's a legitimate question. Let's start with the notion that the market is extremely oversold and that technically, just about everything is broken. For example, the Russell 2000 is well below all key technical levels and has fallen 22% from its June 2015 high, putting it in bear market territory. And its fallen during a period that is generally quite bullish for small cap Read More 

ChartWatchers

Using %Above 200-day to Rank Sectors and Define the Market Environment

by Arthur Hill

Chartists can use the percentage of stocks above the 200-day EMA to rank the sectors based on component trends. Using this breadth indicator, we can separate the weak sectors from the strong and get a good idea of the current market environment. I am working under the assumption that a stock above its 200-day EMA is trending up and a stock below its 200-day EMA is trending down. Chartists want to avoid sectors where the majority of stocks are trending down and focus on sectors where the majority of stocks are trending up. The chart below shows the percentage of stocks above the 200-day EMA Read More 

ChartWatchers

Looking Back and Looking Forwards into 2016!

by Chip Anderson

Hello Fellow ChartWatchers! Happy New Year to you and yours.  Here are the results for last year in PerfChart form: All-in-all, bleh.  The Nasdaq outperformed everyone else - mainly because of a spurt back in February.  In reality, everything has been negative since the start of March.  When both the NYSE (blue chips) and Russell 2000 (small caps) are battling for last place, you know the overall market is weak. Looking Back and Looking Forwards into 2016! Long time ChartWatchers know that I also begin each year with a Read More 

ChartWatchers

Preparing for Potential Shifts

by John Hopkins

The S&P ended 2015 down slightly from the close in 2014. But to many traders, it sure felt like a downer of a year. At EarningsBeats.com we combine strong fundamentals with strong technicals to try to find the best reward to risk trading candidates for our members, the theory being the combination of the two is tough to beat. However, this past four months was extremely challenging, even for many stocks that posted strong earnings the prior quarter. Our focus since our inception has been on the long side. But we are going to need to be prepared to shift our focus to the short side if Read More 

ChartWatchers

2016 Leadership: Where Should We Look?

by Tom Bowley

2015 was a very difficult year.  We witnessed our first serious selling since 2011.  It's unusual to trade in a bull market for four years with little interruption, yet that's exactly what we did.  Despite not breaking down, the trading environment was quite challenging in 2015.  Sure, consumer stocks and technology performed better than average, but energy and material shares were tossed aside much of the year.  And if we dig a little deeper, we'll find that not even consumer stocks were broad winners.  For example, there are 23 industry groups Read More 

ChartWatchers

Industry Groups That Continue To Hold Promise

by Greg Schnell

A few industry groups that look to have upside in 2016 have been moving sideways recently. These may pull back with the averages, but they will probably perform pretty well on the recovery bounces. Due to the volatility in each of them, you may find they are trades, not long-term buys. Living with 30% pullbacks makes it hard to outperform the averages. Currently, in this risk off environment, they have not rallied. The weakness heading into the New Year was not a compelling reason to get long these groups, but keeping them on watchlists for moves could be very fruitful. Knowing what Read More 

ChartWatchers

Do Dividends Matter?

by Arthur Hill

Depending on how you measure it, the stock market was up, down or flat in 2015. It also depends on what you call the stock market. Is it the S&P 500, S&P 500 Equal-Weight Index, the Dow, the Russell 2000, the Nasdaq? Truth be told, it is a market of stocks and not really one big stock market. Chartists using the broad stock market indices will see mostly negative numbers. The Nasdaq brothers, $NDX and $COMPQ, were the only two to gain.  What happens when we add dividends to the equation? There is a total return index Read More