ChartWatchers Newsletter

Currencies Are At An Important Inflection Point

The Yen ($XJY), the Euro ($XEU) and the US Dollar ($USD) are all at important inflection points this week. Stay tuned as this could really decide the direction of Gold, Silver and other commodities this week.

Starting with the Yen, this is a critical one to watch, Gold tracks it quite closely. With this close tracking, a break to the upside in the Yen could lead to a big move in Gold.

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Which Global Markets Have The Biggest Influence On The U.S. Market And Why?

When considering this question, I believe the correlation indicator tells us most of what we need to know.  After all, we're pondering which global market movements tend to be reflected in similar movements in the U.S. market.  For purposes of the U.S. market, I'll focus on the benchmark S&P 500.  Correlation measures how two asset classes, indices, sectors, stocks, etc. move in relation to one another.  Positive correlation suggests that the two move similarly, while negative correlation would suggest the opposite.  The time period used is a variable as is the degree of positive or negative correlation.

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Uptrends: What to Ignore and What to Watch?

An uptrend means prices are advancing and higher highs are the order of the day. We do not know how long a trend will persist, but there is clear evidence that trends persist. Just look at the S&P 500 since early 2016 for a recent example. The 50-day EMA crossed above the 200-day EMA in April 2016 and this golden cross remains in play - some 19 months later and 25% higher. Dozens of stocks tell similar stories. Note that the 50-day EMA has been above the 200-day EMA for at least a year for 40 stocks in the S&P 100. Thus, 40% of stocks in the S&P 100 have been trending higher for at least a year. Trend identification is important because it dictates what we should ignore and what we should watch. 

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Crude Oil is Trading Over $55 For First Time in Two Years

My Wednesday message showed Brent Crude Oil trading over $60 for the first time in more than two years. Brent is trading over $62 today. It also showed West Texas Intermediate Crude Oil (WTIC) trying to break through overhead resistance at $55. Chart 1 shows WTIC trading slightly above that resistance barrier today ($55.69). If it's able to hold above that level, that would mark its first close over $55 in two years. That would be an impressive upside breakout and would lend more support to energy shares.

My Wednesday message also showed the Energy Sector SPDR (XLE) on the verge of reaching a new six-month high. The XLE has actually been rising faster than the S&P 500 over the last two months. It should do even better if WTIC completes its bullish breakout. But there's another energy ETF that's doing even better than the XLE. Chart 2 shows the S&P Oil & Gas Exploration & Production SPDR (XOP) already trading at the highest level since May. And it just cleared its 200-day moving average. What caught my attention, however, was the fact that the XOP is rising much faster than the XLE. That can be seen by the XOP/XLE relative strength ratio in the top box which has experienced an upturn of its own. Since the start of September, the XOP has outpaced XLE by an 18% to 10% margin. Both have outpaced the 5% gain in the S&P 500 over the same two month period.

Energy Surges To New Two Year Highs

The price of oil closed above all the weekly closing highs for the last two years to kick off November. West Texas climbed on Friday above all the intraday highs and all the daily closes to put an exclamation mark on the breakout. A weekly close is more important than a daily close so Friday's action was a big positive for energy related trades.

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New BUY Signals on DP Scoreboards for NDX and OEX - LTTM BUY Signal for USO

I've been expecting a new PMO BUY signal on both the SPX and the OEX. The OEX managed to wrangle the PMO above its signal line, but the SPX is struggling to garner its PMO BUY signal. Big news on Oil! We just got a new Long-Term Trend Model BUY signal which technically means there is a bull market bias in the long term for USO.

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Earnings Opportunities - No Chasing Allowed

 

Earnings Season is winding down. So far it's been quite positive. How do I know? Just look at the overall market.

We certainly saw strong earnings from the tech giants including Amazon, Apple, Facebook and Google. In fact all of these are ripe for nice trades IF you are willing to be patient.

As an example, take a look at the chart on Amazon below  which rose sharply on massive volume after they reported their earnings.

It would have been great to have owned the stock into the earnings report but we have found this to be a risky proposition; there's no telling how the market might respond to an earnings report. But the next best thing is to let an earnings event take place and then wait for a strategic place to get involved in a trade. In the case of AMZN it was higher by 15% within two days of its earnings report. It has pulled back some since then but could pullback even further where it could become a high reward to risk trading candidate.

There are MANY stocks that have beaten earnings expectations and risen sharply. So it becomes a matter of identifying the "best of the best", determining proper entry, price target and stop loss levels, then executing the trade while being very disciplined. This means taking profits on those trades that are successful and taking losses on those that do not work out. In fact I've decided to conduct a webinar this Monday, November 6, that will include StockCharts.com's Senior Technical Analyst, Tom Bowley, where I will be revealing specific stocks that beat earnings expectations and could become high reward to risk trading candidates. Tom will also discuss how you can create your own Chart Lists while identifying those characteristics you feel are most important when trading. If you want to join us, just click here for additional information.

Earnings season brings with it additional excitement while presenting many opportunities for those who do their homework. The first step is identifying those companies that beat earnings expectations and then exercising patience while getting involved in trades on your terms.

At your service,

John Hopkins
EarningsBeats

Here Are The Best Seasonal Stocks During November In The S&P 500

There are different ways to view best seasonal stocks depending on whether you're interested solely in average returns for a particular month or time period or if you're interested in the percentage times that a security rises for a particular month or time period.  Thus, is consistency more important or the absolute returns?  I'll concentrate on the latter.  The following list of stocks highlights the best performing stocks during the month of November on the S&P 500 (average November returns):

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Small-cap ETFs Lag in October, but Break out of Flag Patterns

The EW S&P 500 ETF, S&P MidCap SPDR and S&P 500 SPDR moved to new highs this week, but the S&P SmallCap iShares and Russell 2000 iShares are lagging and remain below their early October highs, which were 52-week highs. The PerfChart below shows the performance for seven major index ETFs this month. SPY, MDY, QQQ and DIA are leading with gains exceeding 2%. IJR and IWM are lagging with gains around 1%. 

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