ChartWatchers Newsletter logo

November 2016

ChartWatchers

Small Caps Flying High, Now Feeling Historical Tailwinds

by Tom Bowley

The Russell 2000 is a small cap index and it had been lagging for quite awhile.until 2016.  This year the Russell 2000 is wildly outperforming the S&P 500 and now we're heading into December, its most bullish calendar month of the year by far.  Since 1987, the Russell 2000 has produced annualized returns of 38.49% during the upcoming month and December has risen 25 times while declining just 4 times.  Clearly, December is the sweet spot for small cap stocks.  Here's a look at the relative strength of small caps vs. the benchmark S&P 500 ($RUT:$SPX): Read More 

ChartWatchers

Commodity Investors Raise Their Eyebrows

by Greg Schnell

The long term chart for the $CRB continues to be a worry for technicians like me trying to understand why Commodities are having trouble staying above the 45 year trend line. Oil reached lows around $10-$12 in the 2000 period whereas now the oil low was $25. Currently oil is at $46 and this long-term commodity chart is barely holding the long term trend. The question that needs to be asked is what is changing the long-term trend in commodities that suggests the historical support level is not longer support? With the US Dollar ($USD) rising, this typically Read More 

ChartWatchers

Falling Yen Boosts Nikkei Index

by John Murphy

My October 6 market message suggested that the Japanese yen was peaking which would give a boost to export-oriented Japanese stocks which appeared to be bottoming. Since then, the yen has fallen to the lowest level in six months against the dollar, and has fallen below its 200-day average (Chart 1). At the same time, the lower box shows the Nikkei 225 Index rising to the highest level since January (based on today's higher close). But that's only part of the story. That earlier message explained that foreign investors (like Americans) buying Japanese stocks need to hedge out the negative Read More 

ChartWatchers

Move to Risk Began in July and Continued in November

by Arthur Hill

The market began its move to riskier assets in July and this move simply accelerated over the last two weeks. The chart below shows stocks (risk assets) bottoming in late June and Treasury bonds (safe-haven assets) peaking in early July. The S&P 500 SPDR (SPY) hit a new high this week and the 20+ YR T-Bond ETF (TLT) is trading at its lowest level since January. The indicator window shows the price relative (SPY:TLT ratio) bottoming in February, forming a higher low in early July and surging to its highest level since summer of 2015. This means stocks are outperforming T-bonds and this Read More 

ChartWatchers

Put/Call Ratio and PMO Analysis Intermediate-Term Bullish

by Erin Swenlin

The Dow has shattered records, small- and mid-caps are doing the same. Those that have not yet reached record highs are still participating, preparing to break above all-time highs. Indicators for some time have been leaning bearish, but in the past week DecisionPoint indicators in the intermediate term have a new decidedly bullish bias. First, here's a look at the intermediate-term indicator chart I discussed during today's webinar and found in the DP Shared ChartList. We see that the rising wedge executed and price is now pushing up against the rising bottoms line. These are my Read More 

ChartWatchers

When Market is Stretched Patience is Required

by John Hopkins

The market has been in non-stop higher mode ever since the election. The NASDAQ is up over 6%. The Dow rose 1000 points in four trading days. The small cap Russell 2000 rose over 13%. At the same time, bond yields have soared with the ten year US Treasury Note up 60 basis points from its recent low. The US Dollar index climbed over 100, hitting its highest level in 13 years. What do all of these have in common? They are extremely stretched. Let's take a look at the Russell 2000. Just look at what small cap stocks have done since the November 3 bottom. The Russell 2000 has risen 13.5%. On Read More 

ChartWatchers

Now The Bear Market Concerns Begin

by Tom Bowley

The "under the surface" signals have been quite bearish for the past 1-2 years.  Money has rotated away from aggressive areas and I've discussed it here and my Trading Places blog quite often.  But it was very difficult to think bearish thoughts as long as the combination of price and volume remained bullish.  So I've been waiting to get the bearish price breakdown before re-evaluating the market.  That breakdown came last week during one of the most historically bullish periods of the year - strange indeed.  Let's look first at the warning signs and price Read More 

ChartWatchers

Rising Bond Yields Boost Insurers, Have Negative Impact on Stock Indexes

by John Murphy

LIFE INSURERS LEAD FINANCIALS HIGHER Rising bond yields continue to give a boost to financial stocks like life insurers. Bear in mind that premium income in insurance stocks is invested mostly in fixed income markets. Higher bond yields mean higher income. Life insurers are leading the financial sector higher today. Several of the big life insurers are seeing nice gains after beating earnings estimates. Chart 1 shows the Dow Jones US Life Insurance Index ($DJUSIL) climbing more than 2% today and nearing a new 2016 high. The index is in a clear uptrend, as is its relative strength ratio Read More 

ChartWatchers

The Bigger they Surge, the Harder they Correct

by Arthur Hill

The S&P 500 SPDR (SPY) and the Russell 2000 iShares (IWM) both broke below their September lows with IWM leading the way lower. QQQ is still holding up the best because it hit a 52-week high the week before and remains above the September low. Looking at SPY first, the ETF fell around 5% from high to low over the last eleven weeks. This modest decline comes after a 22% advance from the February lows and a 10% advance from the late June low. Even though the inability to hold the breakout is negative, I still view this as a correction within a bigger uptrend. The blue trend lines mark a Read More 

ChartWatchers

NDX at Breaking Point

by Erin Swenlin

If you look at the DP Scoreboards by themselves, you would note that the NDX appears to have internal strength given that two July BUY signals are still intact in the intermediate term. However, a look at the charts reveals those signals are about to break.  The Intermediate-Term Trend Model signals are on the daily chart. They are determined by 20/50-EMA crossovers in relation to the 200-EMA. In the case of the NDX below, you can see that an ITTM Neutral signal is likely to trigger next week.  The weekly chart went final today and Read More 

ChartWatchers

The Monthly Close For October Couldn't Have Been Closer To A Sell Signal

by Greg Schnell

While the technicians usually write about the short tem, I want to zoom out a little and use a monthly chart of the New York Composite ($NYA). For those who follow my webinars, we are following the charts very closely as the market conditions are frail in my opinion. We could rally from here, but the long term charts continue to disappoint in my work. This New York Composite chart ($NYA) shows the close Friday, November 4th, 2016. While the October 31st close did not close below the 10-month Moving average or give a MACD sell signal, it only took a pullback of one more day Read More 

ChartWatchers

Examining Market Response to Earnings Reports

by John Hopkins

When the market is under fire like it has been for the past few weeks it becomes harder to trade successfully. This is particularly true if your focus is on the long side. One way we've tried to combat a difficult trading environment at EarningsBeats is to focus specifically on those companies that beat earnings expectations with the theory being they will hold up the best, no matter market conditions. But that strategy can prove to be tricky when the market moves into a "shoot first and ask questions later" mode. As an example, we issued a long alert on ETFC on October 24 after it Read More