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May 2018

ChartWatchers

When the Market is Choppy Search for the Best of the Best

by John Hopkins

The S&P hit its all time high of 2872 on January 26, less than 4 months. ago. Two weeks later, on February 9, it touched 2532, having fallen almost 12% before recovering some. But since then the bulls have struggled to make progress with the S&P pretty much at the same level it was in early February. Though the VIX, which hit 50 on February 6, has since pulled back into the 13's, volatility has kept traders on their collective toes, which has made stock selection when trading more important than ever. Though the S&P remains 5.5% below the February high it's still over 7% above Read More 

ChartWatchers

Rising Mortgage Rates Are Weighing On Homebuilders

by John Murphy

Editors Note: This article was originally published in John Murphy's Market Message on Saturday, May 18th at 9:17am EST. The first page of today's Wall Street Journal carries the headline: "Era of Ultracheap Mortgages Ends as Rates Hit 7-Year High". The article goes on to point out that rising mortgage rates might make it harder for prospective home buyers to get mortgages or be able to afford them. And that could discourage homebuying, or at least start to slow it down. The fact that mortgage rates hit a seven-year high shouldn't come as a surprise to anyone since mortgage rates are Read More 

ChartWatchers

Rising Treasury Yields And Dollar Completely Change Investment Themes

by Tom Bowley

There's a raging bull market going on right now, but you might not realize it if you're stuck in the S&P 500.  Take a look at the chart below of the large cap benchmark S&P 500 and its small cap counterpart, the S&P Small Cap 600: The resumption of the bull market has taken shape in the form of small caps.  I fully expect that the rest of the market will follow suit eventually, but rising treasury yields and the surging dollar have money rotating feverishly into smaller companies and that relative strength is likely to continue.  In my last Read More 

ChartWatchers

Lumber Is Soaring - Timber?

by Greg Schnell

The continuous contract chart of $LUMBER has been on a tear recently. This week the price was almost $200 above the 40-week moving average. With a futures price of $650, that is 30% above the 40-week moving average!  While new highs are typically followed by new highs, this chart is clearly in blue-moon territory or rarified air.  StockCharts has $LUMBER data going back to 2006. A look over the past suggests caution. In the lowest panel I have shown the PPO with a (1,40) setting. This calculates the difference between the current weekly moving Read More 

ChartWatchers

Beat the Energy sector by avoiding XOM & CVX

by Julius de Kempenaer

In the previous RRG blog, I introduced the availability of pre-populated groups holding individual equities for each of the ten S&P sectors. This addition makes it much easier for users of the Relative Rotation Graph tool on Stockcharts.com to drill down to the individual equity level from asset class and/or sector level. In this article, I want to grab the bull by the horns and zoom in on the current equity rotation inside the Energy sector (XLE). Summary XLE leading the market and the only sector Read More 

ChartWatchers

Small-caps Lead, but Mid-caps and Large-caps Lack Leadership

by Arthur Hill

Stocks recording new 52-week highs are the leaders and a key component to broad market strength. Small-caps are doing their part with plenty of new highs, but large-caps and mid-caps are lagging in this category. The S&P Small-Cap 600 moved to a new 52-week high this week and is leading the major stock indexes. In contrast, the S&P 500 is 5.7% below its January high and the S&P Mid-Cap 400 is around 3% below its January high. In Dow Theory terms, one could argue that large-caps and mid-caps are not confirming strength in small-caps. Read More 

ChartWatchers

Small-Caps Leading the Way - Indicators for $SML Bullish

by Erin Swenlin

Small-cap stocks and indexes are quite healthy, far more than the large-cap indexes which are lagging behind. During today's MarketWatchers LIVE show and in my Wednesday "DP Alert" blog article, I discussed the SPX's short-term bearish indicators contrasted with the now bullish short-term indicators for $SML. Not many of you are aware, but the Swenlin Trading Oscillators are available for most of the major indexes including $SML which I'll cover today. For more information, go to "Your Account" and manage your ChartPacks to download the DecisionPoint Straight Shots ChartPack. There you can Read More 

ChartWatchers

Rising Dollar Should Change Your Investment Strategy

by Tom Bowley

Throughout 2017 the U.S. Dollar Index ($USD) was falling and aiding profits on multinational companies found on the S&P 500.  But it was time for the dollar to rise, as evidenced by a surging U.S. 10 year treasury yield ($UST10Y) vs. Germany's 10 year treasury yield ($DET10Y).  Check out this chart: I anticipated the dollar strength back in my February 28, 2018 Trading Places article titled, "3 Takeaways From Tuesday's Renewed Selling.And Why I'd Avoid Gold", where I discussed potential ramifications and opportunities given the rare inverse correlation that had Read More 

ChartWatchers

Climactic Breadth Readings: Buying Exhaustion or Initiation? - Whipsaw BUY Signal for SPX

by Erin Swenlin

The SPX whipsawed into a Price Momentum Oscillator (PMO) BUY signal, suggesting a short-term rally is up next. Climactic breadth indicators popped on Friday and the VIX penetrated the upper Bollinger Band. When I see these types of readings, I classify them as a buying exhaustion or buying initiation.  Below you can see in the thumbnail that the PMO triggered a SELL signal on Thursday, but Friday it went back on a BUY. I've been discussing in prior blogs and on the MarketWatchers LIVE show that if the market is to avoid a bear market, it needs to bounce off the rising bottoms Read More 

ChartWatchers

Toys Are Starting To Surge Again

by Greg Schnell

The toy business has been in a massive uptrend if you are in the right stocks. It is a fickle business group as they seem to treat the shares aggressively. Buy the good ones quickly, sell the weak ones even faster.  This week, Activision (ATVI) closed above 5-week highs on the strongest positive volume in a year. This stock seems to give one full stochastic signal a year, and it just gave us a signal here. The three year weekly chart is shown. Electronic Arts (EA) also had a strong week. With huge volume Thursday and above average volume on Read More 

ChartWatchers

The Bird's Eye View: Big Advances Deserve Big Corrections

by Arthur Hill

2018 has been a tough year for stocks with the S&P 500 SPDR (SPY) basically unchanged (+.08%) for the year. During this journey to unchanged, SPY was up around 7% at its late January high and down around 5% at its February low. The index has since gyrated within the range set from this high and low.  The chart below shows this year's price action with a large triangle taking shape as the range narrows. The overall trend is still up because the 50-day SMA is above the 200-day SMA, the 200-day SMA is rising and price is still above the 200-day SMA.  Read More 

ChartWatchers

Stocks Are Ending The Week On a Strong Note

by John Murphy

Editor's Note: This article was originally published in John Murphy's Market Message on Friday, May 4th at 3:50pm EST STOCKS REBOUND OFF 200-DAY LINES Chart 1 shows the Dow surging more than 300 points after surviving another test of its 200-day average yesterday. Chart 2 shows the S&P 500 doing just as well. Both indexes still need to exceed their 50-day average and their mid-April peak, however, to signal that stocks are turning higher. The Nasdaq market is doing even better. Chart 3 shows the PowerShares Nasdaq 100 (QQQ) trading back over its 50-day average. The Technology Read More 

ChartWatchers

Profiting from Weak Earnings

by John Hopkins

Analysts will tell you that this earnings season has been a great success. In fact, many companies exceeded earnings expectations and were handsomely rewarded by the market. However, there were also plenty of companies that missed earnings expectations and/or provided worse than expected guidance, taking those stocks lower, and some very substantially. For example, take a look at the chart below on SNAP, a company that reported its earnings after the bell last Tuesday. As you can see, the stock lost 25% of its value in just two days at its low on Thursday, predominantly because it Read More 

ChartWatchers

Commodities Taking Over From Equities?

by Julius de Kempenaer

For a very long time equities have been the dominating asset class, stuck at the right-hand side of the Relative Rotation Graph showing six different asset classes. That situation is now changing. Equities (SPY) is still at the right hand (positive) side of the RRG but inside the weakening quadrant, since seven weeks, and heading towards the lagging quadrant. Fixed income related asset classes are all inside the improving quadrant and rotating towards leading while Real-Estate is showing a very wide rotation with a very long tail and showing up at the highest Jdk Read More