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May 2019

ChartWatchers

Dissecting the Dow - New IT Price Momentum Oscillator SELL Signal

by Erin Swenlin

This week, all four of the Scoreboard indexes (SPX, OEX, NDX, Dow) switched to IT Trend Model Neutral signals. This is just added insult to injury, given the ST Neutral and SELL signals that posted earlier this month. Today, the Dow lost its IT Price Momentum Oscillator (PMO) BUY signal. This occurs when the PMO crosses below its signal line on the weekly chart, as seen below. Here's a look at the DP Scoreboards. Carl wrote about the new IT Trend Model Neutral signal for the SPY in his Friday DP Weekly Wrap article. Be sure to read it Read More 

ChartWatchers

Gold - Something To Love?

by Greg Schnell

As I have mentioned in the last three Market Roundup shows (which you can find here on the StockCharts YouTube channel), the Gold-related charts have been setting up for weeks now. Friday's price action to close out the month looks like an initiation move that has more room to run. While that is hard to call on the first few days, the move was a very significant one at an important zone on the charts.  Focusing in on price, Gold has been able to hold above the 40-week moving average since the December move where price originally crossed up Read More 

ChartWatchers

Strong Earnings can Fuel a Portfolio

by John Hopkins

The market has been under fire for some time now as uncertainty abounds. Even a lot of stocks that had earlier reported strong earnings haven't been able to escape the recent market turmoil. However, there are also many stocks that have held up quite well, outperforming the market and reminding us that strong earnings DO matter. As an example, we recently conducted a webinar that included unveiling 30 stocks we felt could outperform the market. These included 10 aggressive stocks, 10 "Model portfolio" stocks and 10 income/dividend stocks. 8 trading days later, the Read More 

ChartWatchers

Key Moving Average Rolls Over for S&P 500

by Arthur Hill

The 200-day moving averages for the S&P Mid-Cap 400 and the S&P Small-Cap 600 are already trending lower and this key moving average for the S&P 500 turned lower over the past week. This puts all three indexes below their falling 200-day SMAs and in potential downtrends. Chartists can use moving averages to determine the trend in at least two ways. First, the trend is up when price is above the moving average and down when price is below the moving average. The chart below shows $SML breaking its 200-day SMA on May 7th. $MID followed suit with a move below on May 22nd and $SPX Read More 

ChartWatchers

There's a Reason Why Banks and Energy Stocks are Falling Together - And That Reason May be Falling Oil Prices

by John Murphy

Editor's Note: This article was originally published in John Murphy's Market Message on Friday, May 31st at 11:14am ET. Energy stocks are one of the weakest parts of the market. So are bank stocks. There may be a reason why. The black bars in Chart 7 shows the Energy SPDR (XLE) trading at the lowest level in five months. The green bars show the KBW Bank Index trading below both moving average lines, and nearing a test of its March low. There may be a reason why both groups have been doing worse than the rest of the market over the last month. And that has to do with low Read More 

ChartWatchers

The Relative Safety Of High-Yielding Stocks - 4 Names To Ponder As Interest Rates Plummet and Markets Waffle

by Mary Ellen McGonagle

We’re in a difficult period with the markets at the moment, as uncertainty surrounding U.S.- China trade talks is weighing heavily on stocks. With both sides throwing barbs and a resumption of talks not due until later this month, the pressure on the markets may very likely continue. With daily reactions to the latest trade-related headlines, there’s been an increased risk in equities, which, in turn, is pushing Interest rates down as investors seek the relative safety of U.S. Treasuries. In fact, yields are now down to levels not seen in over a year. Read More 

ChartWatchers

Calling Market Tops Is Easier Than You Think

by Tom Bowley

There are no perfect signals that scream "GET OUT" of equities, but there are warning signs..so long as you know where to find them.  Most market participants believe in the random walk theory, which suggests that changes in stock prices have the same distribution and are independent of each other.  Therefore, the assumption is that past stock market movements or trends cannot be used to predict its future movement. I beg to differ. Sentiment swings back and forth.  I think if we're all honest with ourselves, we know that we generally grow overly bullish Read More 

ChartWatchers

Current Trend of Declining Rates Seen as Part of a Large Base

by Martin Pring

Editor's Note: This article was originally published in Martin Pring's Market Roundup on Friday, May 24th at 4:42pm ET. This week has seen many interest rate series, both in the US and around the world, breaking down from important trading ranges or reaffirming previous breaks. It seems that the bond market is responding to the recent trend of lower commodity prices. In retrospect, that rangebound action, along with any further drop in yields in the period ahead, is likely to turn out to be part of a larger trading range, the upside resolution of which will ultimately signal the next Read More 

ChartWatchers

Five Trendlines Revisited

by David Keller

About a month ago, I wrote an article for ChartWatchers titled “Five Trendlines You Should Be Watching.” The general idea was that, as long as those five trend lines held, then the market was still most likely in a very constructive phase. Revisiting those trend lines here will show that the picture has changed dramatically in just four weeks, presenting a more bearish outlook for the equity markets. 1) Nasdaq 100 Index This was a key chart for me, as it represented the mega cap technology leadership that drove the market higher in the first four Read More 

ChartWatchers

Communication Services Shows a Strong Rotation, But GOOG Is Not Participating

by Julius de Kempenaer

Relative Rotation Graphs can help to identify threats and opportunities within groups of securities. In this article, I will be looking at the position and rotation of the Communication Services Sector against the S&P 500 and other sectors, followed by a closer look at the rotation of various stocks inside that sector, especially Google. From a Sector Perspective The RRG above shows the rotations for the 11 sectors in the S&P 500 index with Communication Services (XLC) highlighted. The rotation into the Read More 

ChartWatchers

My New Favorite Scan - Excellent Results Using SCTR and Rising PMO

by Erin Swenlin

If you watch MarketWatchers LIVE regularly, you've probably heard about my new scan. I've found, especially when the market has a bearish bias, that my original Price Momentum Oscillator (PMO) scan wasn't producing any results. I consider this a caution flag before I get too involved with the results of my new scan. The original scan is below. Its requirements are quite high, so I won't get results in a bearish market; not only do I need a PMO on a rising trend, but the EMAs need to be configured bullishly. After the market takes a serious hit, there aren't that many stocks Read More 

ChartWatchers

Weekly Sector Rankings Show a Defensive Market

by John Murphy

Editor's Note: This article was originally published in John Murphy's Market Message on Friday, May 17th at 4:49pm ET. The table in Chart 1 plots the relative performance of the eleven market sectors for the week. And they show a generally defensive market. That can be seen by the fact that REITs, utilities, and consumer staples are the three top sectors for the week. At the same time, the weakest sectors are financials, industrials, cyclicals, technology, and materials. Industrials were pulled lower by Deere and Caterpillar. Technology was held back by semiconductors with exposure to Read More 

ChartWatchers

Banks Around The World Drop

by Greg Schnell

From what I can see, global bank charts are continuing to weaken. The banks as a whole have rolled over in the last two weeks, but we have some major banks around the world making new multi-year lows. This is problematic. First of all, we have the chart for KBE below. If this is an average of the banks, that average is now below both the 10-week and 40-week moving averages. The price action is also continuing the downtrend. Notice that momentum, shown by the PPO, is rolling over at zero. This is not good.  But the world has some banks in serious trouble from a Read More 

ChartWatchers

A Bearish Failure Swing for the Russell 2000

by Arthur Hill

The bearish failure swing is a bearish RSI signal from Welles Wilder, creator of RSI. Note that this signal is NOT the same as a bearish divergence, even though a bearish divergence is also possible at the same time. A bearish failure swing has four parts: RSI moves above 70 (1), RSI falls back below 70 (2), RSI rises and fails to exceed 70 (3), RSI falls below the intermittent low (4).  The failure occurs when RSI fails to exceed 70 on the bounce. Signal confirmation occurs when RSI breaks its prior low. The failure below 70 shows waning upside momentum, while the break below the Read More 

ChartWatchers

Here's What a Double Looks Like

by John Hopkins

Every trader dreams of owning a stock that doubles. If it can happen in just six months, even better. This has been the case for Twilio (TWLO), a stock featured during our Top 10 Stock Picks webinar in November of 2018 that has doubled in price since the November 20 bottom of $71.56.  You can see in the chart below that the stock came close to revisiting that November 20 bottom when the overall market melted down in late December. However, it instead put in a slightly higher low and then went off to the races. Take note also of the Read More 

ChartWatchers

S&P 500 Reverses Off Key Support, New Leadership Emerging

by Tom Bowley

It was a brutal week, especially given the surging U.S. equity prices throughout 2019 thus far.  The benchmark S&P 500 fell 2.18%, but intraweek losses were far steeper.  There was a significant reversal on Friday as the Volatility Index ($VIX) appeared to confirm a near-term top - a bullish development indeed.  The first chart illustrates the technical strength and reversal of the S&P 500 on its weekly chart: Any time I see the PPO rising like this, I expect a 20 period EMA test to provide support.  The green arrows show several kick saves at 20 week EMA Read More 

ChartWatchers

Three Bright Spots Outside the United States

by David Keller

“The world is a book, and those who do not travel read only a page.” - Saint Augustine I recently returned home after a 10-day trip to Scotland with my family for Spring Break. We rented a car in Glasgow, made our way up into the Highlands and took a ferry over the Isle of Lewis, where we rented a house for the week. We enjoyed meeting new people and learning about Scottish Gaelic, we loved the challenge of driving a manual transmission on the left side of the road and we treasured finding cute little places to grab fresh seafood during our excursions. Most of all, we Read More 

ChartWatchers

How To Play The Hot IPO Market - One Sound Approach Can Help You Navigate These Fast Movers

by Mary Ellen McGonagle

The number of IPOs listed in the U.S. has picked up this year. While some high-profile companies have already come public, there are more highly anticipated companies that are due to list shortly, such as the ride-share company Uber and workplace messaging app Slack. Some of these recently public companies have performed well, making it worth your while to check out these stocks. After all, the powerhouse FAANG stocks of today all started out as new issues at some point. That said, investing in new issues is not for the faint of heart, as these generally smaller companies can be quite Read More 

ChartWatchers

Prices May Be Falling, But Bond Spreads (Confidence) are Holding in There

by Martin Pring

Editor's Note: This article was originally published in Martin Pring's Market Roundup on Wednesday, May 8th at 6:37pm ET. One area I monitor daily is the technical picture of bond spreads and other market relationships that reflect confidence. That’s because changes in their direction often lead or confirm what is actually happening to equity prices in general. One of my favorites is the ratio between the iShares High Yield and iShares 7-10-year treasury ETFs (_HYG/_IEF). When it is rising, it indicates investors and traders are growing in confidence concerning the level of business Read More 

ChartWatchers

Building A Case For SYY In The Staples Sector Using Three Relative Rotation Graphs

by Julius de Kempenaer

Relative Rotation Graphs can be a great asset in getting a high-level overview of what is going on in the markets and keeping an eye on the big picture. Beyond that, though, they can also help you to drill down to find new individual investment possibilities and trading ideas. For this week's ChartWatchers newsletter, I will use three Relative Rotation Graphs to make a case for a single stock trade idea. Starting At The Top The daily RRG for Asset Classes above shows the rotation of various asset classes against the Vanguard Balanced Read More 

ChartWatchers

Spring Savings Are Here, With A Very Special Twist...

by Grayson Roze

Hello Fellow ChartWatchers! The springtime sun is shining bright here in the Pacific Northwest, and we think that's cause for celebration. So, I'm coming to you this week with a very special announcement. For a limited time only this month, we're giving you 2 FREE months of StockCharts service when you sign up or renew for a 12-month subscription. That means you can save up to $80 off our regular subscription prices. If you're a current StockCharts Member and love the service, you can extend your existing subscription now and save. If you're not a member Read More 

ChartWatchers

Volume Ratio Charts - Climactic Attention Flags

by Erin Swenlin

My dad, Carl Swenlin, was a guest on MarketWatchers LIVE last Wednesday (here is a link to that show). He brought in some DecisionPoint indicator charts that I hadn't looked at in quite some time (truth be told, he hadn't looked at them in awhile either) and many of our viewers asked about how to obtain them. One of the ChartLists in the DecisionPoint Market Indicators ChartPack is labeled "Volume Ratios" - it's actually a very elegant indicator in its simplicity. What surprised us both was the timeliness of the attention flags that the climactic readings presented Read More 

ChartWatchers

Profiting from Pullbacks

by John Hopkins

When you're a bull, the last thing you want to see is a pullback in stocks you own. This is understandable - who wants to see something they own lose value? But, at some point, the market and individual stocks will get overheated, so instead of worrying about a pullback, try to identify those stocks that are likely to get the most attention on any selling. A perfect example is Microsoft, a company that recently beat earnings expectations, moved up nicely, got overbought and could prove to be a solid reward-to-risk trade at the right price. You can see on the chart above Read More 

ChartWatchers

Strong Jobs Report Boosts Stocks - S&P 500 Nears Another Record

by John Murphy

Editor's Note: This article was originally published in John Murphy's Market Message on Friday, May 3rd at 1:34pm ET. A surprisingly strong jobs report this morning has given stocks a big boost today. All major indexes are having a strong day with the Nasdaq and small caps in the lead (more on that shortly). Transports are also have an especially strong day which is another positive sign. All eleven stocks sectors are in the black led by energy, cyclicials, financials, and industrials. Weaker sectors include more defensive utilities and REITS. Emerging markets are leading foreign stocks Read More 

ChartWatchers

Some Sector Rotation Is Starting To Appear

by Greg Schnell

With most of the large caps finished reporting, it's a good time to take a look and see what is working. Over the last two weeks, Health Care, Utilities, Financials and Real Estate have outperformed the big growth sectors of Communications and Technology. While that can happen from time to time, it surprises me that it is happening just as Apple announces a $75 Billion buyback, Facebook and Microsoft both posted great numbers and Amazon makes a run at $2000. More concerning is the fact that these fabulous earnings are struggling to pull the broader market up Read More 

ChartWatchers

Improving the Best Six Months Strategy by Adding Months and Timing

by Arthur Hill

The "Best Six Months" strategy suggests that the best time to own stocks is from November to April, and the worst time is from May to October. Testing over the last 25 years confirms the performance differences between these two periods, but this strategy still leaves money on the table. This article will show that a "Best Eight Months" strategy outperforms the Best Six Months strategy. Furthermore, this strategy can be improved with market timing and switching to the 20+ YR T-Bond ETF (TLT) during the worst four months. Yale Hirsch developed the Best Six Months Read More