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August 2017

ChartWatchers

Aerospace Has Been Strong, But It's Relative Strength Momentum Is Weakening

by Tom Bowley

Bull markets are fueled by sector and industry group rotation.  Throughout the bull market since 2009, we've seen each of the key aggressive sectors take their turn leading on a relative basis.  Within each sector, we also see relative leadership and weakness among industry groups.  For example, over the past month, aerospace stocks ($DJUSAS) have performed extremely well.  In fact, the DJUSAS is one of only two industry groups in the sector that have moved higher and its 4.17% gain over the past month easily beats defense stocks ($DJUSDN).  Take a look at the one Read More 

ChartWatchers

Stocks Have A Bad Day, August Is Living Up To Its Reputation

by John Murphy

S&P 500 FALLS TO SIX-WEEK LOW Selling pressure resumed with a vengeance today. And a lot of support levels have been broken. Chart 1 shows the S&P 500 falling back below its 50-day average to the lowest level in more than a month. Volume was higher. More serious damage was done to smaller stocks. Chart 2 shows the Russell 2000 Small Cap Index closing below its 200-day average for the first time in more than a year. Yesterday's message explained why it was important for the RUT to find support around its 200-day average. It's failure to do so is a bad sign for the market. The Read More 

ChartWatchers

With Earnings Season Winding Down Whats Next?

by John Hopkins

As earnings season winds down traders are going to be looking for new reasons to be long the market. So far, according to Thompson's Reuters, 460 of the companies represented in the S&P 500 have reported earnings with almost 74% beating expectations. This is 10% above the long term average and helps explain why the market has been so strong, at least until last week when we saw some deterioration. Take a look at the chart below to see how the S&P fell sharply late in the week. Importantly, it closed below all key technical levels, putting the bulls behind the 8 ball for the first Read More 

ChartWatchers

Two Potential Double Tops to Watch Going Forward

by Arthur Hill

Doubles Tops are forming in two key ETFs, the Semiconductor SPDR (XSD) and the Consumer Discretionary SPDR (XLY), and chartists should watch these important groups for clues on broad market direction in the coming week or two. First, let's talk about the Double Top. These patterns form with two peaks near the same level and an intermittent trough that marks support. A break below support confirms the pattern and targets a move based on the height of the pattern.  Achtung! A Double Top is just a POTENTIAL Double Top until confirmed with a break below the intermittent low. In Read More 

ChartWatchers

Are The Transports Falling Off The Rails?

by Greg Schnell

The Transportation indexes look like they are struggling here. That's not usually a good thing. There are three components: Railroads - $DJUSRR, Airlines - $DJUSAR, and Trucking - $DJUSTK. Starting with the railroads, this has all the making of a derailment. There is a double top on the price chart. The multi-month negative divergence on the MACD compared with price looks to match the 2015 top and the Relative Strength uptrend has been broken again. For the airlines, this looks a landing, not a takeoff. After trying twice to get above the 2015 highs, we Read More 

ChartWatchers

Market Is Very Overvalued

by Carl Swenlin

The market has been rising ahead of earnings for over two years, and it is very overvalued. Nevertheless, bullish investors seem unconcerned. The chart below shows the S&P 500 Index (black line) in relation to where it would be if it were undervalued (P/E 10 - green line), fair value (P/E 15 - blue line), or overvalued (P/E 20 - red line). The current price is far above the overvalue side of the range, because the S&P 500 has a P/E of 24. Earnings growth through 2018 Q1 will bring the P/E down to 21, but only if price goes no higher. If the bull Read More 

ChartWatchers

The Table has Been Set - The Earnings Smorgasboard

by John Hopkins

Everyone likes a good meal, especially an all you can eat buffet. And if you are a trader, you've just been served up an earnings smorgasboard. So far,  per Thomson Reuters, over 400 companies in the S&P have reported for Q2, 2017, with almost 73% beating earnings expectations. This is good news for traders since there could be some great reward to risk opportunities, especially for those who are patient. One stock that rose sharply after its recent report was Netflix when they released their numbers after the bell on July 17. In fact the stock rose almost 16% the day after the Read More 

ChartWatchers

Friday's Strong Job Report May Not Be As Strong As It Looks

by John Murphy

IS THIS THE REAL UNEMPLOYMENT RATE? Friday's job report saw 209,000 new jobs added during July which was well above expectations. Hourly earnings also saw a July again of 0.3% which attracted the most attention. That, however, leaves the year over year rise in wages at a relatively flat 2.5%. That's higher than the inflation rate, but well below what we should be seeing at this point in the economic expansion. Chart 8 shows the unemployment rate falling below its 2007 low of 4.4% to the lowest level in sixteen years (2001). Economists at the Fed remain puzzled as to why wages aren't Read More 

ChartWatchers

Searching For More Summertime Breakouts

by Tom Bowley

A month ago, I posted an article looking at 3 NASDAQ 100 stocks that were looking to make technically significant breakouts.  Sirius XM Holdings (SIRI) had a cup in play that, if broken, would measure to 5.90, or nearly 8%.  It broke out on heavy volume and hit a high of 5.89, essentially hitting its measurement on the day of the breakout.  Automatic Data Processing (ADP) had been sideways consolidating and, with a breakout above 105, appeared poised for a trip to 117.  One day after breaking out, ADP surged to 120, reaching its nearly 12% profit target.  Finally Read More 

ChartWatchers

An Ugly Price Relative, but a very Nice Uptrend

by Arthur Hill

The price relative, or ratio chart, is handy for measuring relative performance, but it does not always reflect the trend for the underlying securities. For those unfamiliar, the RSP:SPY ratio measures the performance of the EW S&P 500 ETF (RSP) relative to the S&P 500 SPDR (SPY). RSP leads when this ratio rises because the numerator (RSP) is increasing faster than the denominator (SPY). RSP is lagging when the ratio declines.  Let's first look at a price chart and analyze the overall trend. The chart below shows the EW S&P 500 ETF in the top window and the Read More 

ChartWatchers

Watching Support Fade

by Carl Swenlin

As the Dow Jones Industrial Average (DJIA) has been moving steadily to record highs, I have observed a persistent erosion of underlying support as expressed by 52-Week New Highs for the DJIA component stocks. The New High peak in March represents the highest level reached recently, and we can see a steady decline in the number of New Highs since then. Of particular concern is the contraction of New Highs in the last few weeks, which happened even as the DJIA squirted higher for nine days straight. In a bull market a spike in New Highs usually represents a Read More 

ChartWatchers

Looking For Some New Direction In The Market

by Greg Schnell

One of the hardest parts about investing, is staying with the constant rotation of sectors. Amazon is already down more than $100 since the high last week. Gulp! While it's only 10%, $100 a share is an ouch. As the Nasdaq 100 has been a little soft of late, I thought I would look for oversold stocks that are starting to improve on the weekly. There are a lot of them in energy and Gold, but I thought there could be some in other areas. So this ChartWatchers is a little about looking for something to start moving up and avoiding some of the selling in the names that have been Read More