ChartWatchers Newsletter logo

June 2017

ChartWatchers

S&P 500 Seasonality and the Dog Days of Summer

by Arthur Hill

The chart below shows the seasonal tendency for the S&P 500 over the last twenty years (1998 to 2017). The number at the top of each bar shows the percentage of months the S&P 500 advanced for that particular month, while the number at the bottom shows the average gain/loss (percentage) for that month. For example, the S&P 500 rose 55% of the time in June and the average gain is actually a loss (-.5%).  These numbers further reveal that the next three-month stretch was the weakest three-month stretch over the last 20 years. First, the Read More 

ChartWatchers

DecisionPoint Bulletin: New PMO SELL Signal on Weekly Chart for SPX

by Erin Swenlin

Price trends may be up, but momentum is clearly down in the in the short and intermediate terms. The NDX escaped a weekly PMO negative crossover SELL signal by only a small amount and that is because techs had a great run over the past month or so. FYI - LT PMOs are still rising nicely on the monthly charts so the long term still . To see daily, weekly and monthly charts annotated for these four indexes, go to the DecisionPoint ChartList. The link is at the top of the DecisionPoint blog. The NDX didn't miss a PMO SELL Read More 

ChartWatchers

Some Commodities Had A Nice Bounce This Week

by Greg Schnell

Commodities have been trying to rally recently, and this week they really kicked in to high gear. Industrial Metals had a great week, led by $COPPER. I particularly like when the big global miners react, and 4 of 4 crossed above the 10 week moving average. Two of them made new 3 month highs! But wait, there's more! $COPPER broke above a 6-year trend line and closed the week, the month and the quarter there. That is a very bullish signal for the long term charts. Looking at the suppression of the mining stocks, quite a few could be a double just to get back to where they were Read More 

ChartWatchers

Narrowing Spread Between Treasuries and Foreign Yields Are Bad For the Dollar

by John Murphy

The U.S. Dollar has had a bad six months. And things got even worse this week. The driving force between currencies is the relationship between global interest rates. The 10-Year Treasury yield remains higher than foreign developed yields. The problem is that the difference between them is narrowing. The green bars in Chart 1 show the U.S. Dollar Index over the last year. The blue line plots the difference between the 10-Year Treasury yield and the 10-Year German Bund yield. After rising during the fourth quarter, they peaked together in December and have both fallen to the lowest level of Read More 

ChartWatchers

What the Market Needs now is...Earnings

by John Hopkins

The market moved into a rare funk last week as traders decided in unison to take profits, especially in the tech heavy NASDAQ. This is quite understandable with all three of the major indexes hitting record levels during the month of June. There are various theories as to why stocks took a tumble from being overpriced to worries about the lack of progress with the health care bill to quarter end window dressing to a more aggressive Fed. Whatever the reason, there's always one good remedy that seems to cure all market ills; solid earnings. Just take a look at the chart below of the Read More 

ChartWatchers

Why Breadth Matters Today

by Greg Schnell

The US markets and Canadian markets are totally different beasts right now, but it makes a great learning moment to look at both of them to understand how markets break down. The chart below is the Bullish Percent Index for the Nasdaq Composite ($BPCOMPQ). I have two other plots on the chart. On top is the plot of the Nasdaq Composite ($COMPQ) and the other is the Percentage Of Stocks Above The 200 DMA ($NAA200R). To read more about the Bullish Percent Index, read the ChartSchool article here. Bullish Percent Indexes (BPI). As a quick comment, the BPI keeps track of the Read More 

ChartWatchers

Summer Generally Means Trading Quality, Not Quantity

by Tom Bowley

History tells us many things.  One of the lessons is that making money on the long side is much more difficult during the summer months.  Why?  It's rather simple.  On the S&P 500 since 1950, here are the annualized returns by calendar months over the summer: June:  -0.02% July:  +12.21% August:  -1.07% September:  -6.01% Including the current month, three of the four summer months above have produced negative annualized returns over the past 68 years.  This tells me that you need to narrow your focus, exercise patience and remain Read More 

ChartWatchers

Charles Dow and Leonardo Fibonacci Walk into a Bar

by Arthur Hill

The bar was 61.8 inches off the floor, but Leondardo still did not see it. All (bad) joking aside, I would like to look at corrections through the eyes of Charles Dow and Leonardo Fibonacci. These two may seem miles apart at first glance, but the numbers suggest otherwise. In fact, Dow and Fibonacci are pretty much on the same page when it comes to retracement amounts. Charles orders a frosty mug of beer, Leonardo orders a glass of Tuscan red wine and they start talking technical analysis.  Charles starts out by describing the trend according to Read More 

ChartWatchers

S&P 100 Flips Back to IT PMO SELL Signal - DP Scoreboard Weekly Charts

by Erin Swenlin

On the last trading day of the week, the DecisionPoint IT Price Momentum Oscillator (PMO) signals go "final". Today saw a new weekly PMO SELL signal on the OEX. Some may recall that just last Friday the OEX triggered a weekly PMO BUY signal. Don't let the very "green" Scoreboards fool you, there is deterioration in momentum on nearly all daily and weekly charts for these four indexes. To see the daily, weekly and monthly annotated charts for these four indexes, you can go to the DecisionPoint LIVE shared ChartList here or use the link at the top of the blog. Read More 

ChartWatchers

Falling Commodity Prices Are a Big Reason Why Inflation Is So Low

by John Murphy

Ever since Wednesday's Fed rate hike, and the press conference by Janet Yellen, I've been thinking a lot about inflation. I believe the Fed is underestimating how weak inflation really is. I also believe that's because it's looking in the wrong places. Or, more to the point, it's ignoring the weak signals hiding in plain sight. Namely, falling commodity prices. Chart 1 shows the Reuters/Jefferies CRB Index falling this week to the lowest level since the spring of 2016. Ms. Yellen may refer to that falling trend as "noise". To a chart reader, it's called a downtrend. The CRB Index includes Read More 

ChartWatchers

Managing Risk - Identifying Strong Reward to Risk Trading Candidates

by John Hopkins

If you are looking for ways to manage risk in an increasingly volatile environment then you should start by searching for the "best of the best"; those companies that beat earnings expectations and have solid charts. This makes an awful lot of sense if you think about it; riding the coattails of those stocks that are both fundamentally and technically sound. For example, take a look at the chart below on H&R Block. They recently reported earnings and the stock shot up over 10% after the numbers were released. Look at that huge volume that came into the stock when traders learned of Read More 

ChartWatchers

Latest Members Dashboard Update - #AWESOME!

by Chip Anderson

Hello again, everyone!  Just a quick note to tell you about an awesome new feature that we just rolled out.  We've updated the Members' Dashboard so that it is now even more customizable and useful.  The change is subtle - you would probably miss it if you weren't reading this article - but it is very powerful. There is now a new little "Gears" button in the top right corner of the Members' Dashboard.  If you don't see it, click on "Members" and then look above the top right corner of the "Market Movers" panel next to the "ChartLists" button.  See it?  Good Read More 

ChartWatchers

Internet Stocks Overbought Amid Slowing Momentum

by Tom Bowley

Internet stocks ($DJUSNS) have climbed roughly 44% since their bottom in late June 2016.  But there are now negative divergences appearing across various time frames and that suggests the summer time could be a period of consolidation, or even a correction.  First, let's take a look at the daily chart: The daily RSI is currently at 73 and there's gap support near 1330 and the rising 50 day SMA support (pink arrow)  - a likely target given the negative divergence in play - at 1339.  Also, Friday's breakout was accompanied by volume that was just below average - another Read More 

ChartWatchers

Finding New Opportunities in an Overbought Market

by John Hopkins

The market has been on fire lately with all of the major indexes hitting all time highs. In spite of some recent weak economic reports, including a miss on Friday's jobs report, and in spite of all of the political "noise" swirling around, stocks have powered higher. In fact, both the NASDAQ and S&P are technically overbought with the Dow not far behind. And the VIX is right near all time lows as it dipped back into the 9's on Friday showing traders are very willing to own stocks. When the market gets stretched like it is now it starts becoming harder to jump in; who want to jump in Read More 

ChartWatchers

Midcaps May Show Truer Picture of US Stocks

by John Murphy

Several of my recent messages have focused on the divergence between large and small cap stocks. Wednesday's message suggested that part of that divergence was due to stronger foreign markets. Large cap multinationals do better when foreign markets are strong, which is the case at the moment. Small stocks are more closely tied to the U.S. economy. So which one is giving us the right story? Midcap stocks may be giving us the truest story of the state of the U.S. market. That's because they're right in between the two other extremes. So far this year, midcaps have gained 4% which is half as Read More 

ChartWatchers

Are You Watching Energy Stocks?

by Greg Schnell

Energy stocks have been declining since December for the most part. This would be one of the best clues that the investors do not like the trends inside the industry. Now the Bullish Percent Index for Energy is under 20%. Here is the good news. The sector can stay down here for a while, but eventually, these stocks will come to life. As a matter of fact, there is a nice rhythm in the momentum for energy stocks. Let me put a few charts up to whet your appetite for a little black wine sometime later this year. First of all, here is the Bullish Percent Index for Energy ($BPENER). We can Read More 

ChartWatchers

The Most Important Assumption in Trading

by Arthur Hill

Trading and investing are all about putting the odds in your favor, and chartists can increase their odds with one key assumption: the trend will remain in force until proven otherwise. Coming from the writings of Charles Dow, this assumption means a trend in motion is expected to stay in motion. In other words, assume that the trend will extend, not end. Using a top-down approach, you can incrementally increase your odds of success by starting with the broad market trend, and then extending your trend analysis to the sector, the industry group and the stock. This article will show Read More 

ChartWatchers

S&P 500 and SPY Trigger New Weekly PMO BUY Signals

by Erin Swenlin

The S&P 500 garnered a new PMO BUY signal on the weekly chart. Now we have two Scoreboards that are completely green. Technology has been a darling for quite some time so it is no surprise to see the oldest BUY signals residing on its Scoreboard. The two SELL signals remaining on the Scoreboards are on the Dow and OEX. The weekly charts for all four Scoreboards are below. Price has stayed consistently over the 17-week moving average since the election. Price is testing the top of the rising trend channel, but of course could move higher and remain within it. My Read More