Technology stocks (XLK) produced gains of more than 10% in the third quarter of 2016, more than double that of any other sector. Industrials (XLI) were the second best group, posting a quarterly gain of 4.80%. We all know the bigger names in technology, so this article will focus on other names in key technology industry groups that perhaps you haven't been paying attention to. Let's start with computer hardware ($DJUSCR).
Hello Fellow ChartWatchers!
Well, after 18 years of writing these newsletters - and doing webinars and hosting conferences and writing educational articles - I am reliquishing those duties to others so that I can focus (re-focus?) on my real passion - making the technology behind StockCharts.com really great.
Last week's ChartCon event - which was amazing and went off with almost zero glitches - marked a milestone in my development as a writer/educator. It feels like I've said most of what I needed to say and that continuing forward in that space would just involve lots of repetition. In addition, there are many, many behind-the-scenes technical things here that haven't gotten the attention they deserve and it is pretty clear that the only way that's going to happen is for me to focus on those things full time.
So, from a practical perspective, I will be handing over the reins of this newsletter and its corresponding webinar to Grayson Roze. Watch for great things from Grayson in the coming weeks. We will also be re-packaging some of my better articles into a "greatest hits" series that can help you continue to get the most out of StockCharts.com. Finally, I am challenging the other commentators here to up their game and include even more educational "how to's" and "step-by-step" help in their articles and webinars.
Pretty much everything I've said over the years boils down to a couple of key points:
- Keep it simple - narrow your focus. John Murphy uses 4 indicators, why do you need 37?
- Focus on Momentum (MACD) and Relative Strength (SCTRs). They are easy to understand, easy to use and work great.
- Reject any kind of "get rich quick" approach. Learning to trade successfully takes time and patience.
- "Why" doesn't matter. Focus on what the charts are saying. Find trends and ride them until they weaken. Forget about why.
- Focus on "actionable information" and reject anything that leads to analysis paralysis. Always ask yourself "Will this information cause me to make any changes?"
Hopefully you got a chance to see me expand on these ideas in my ChartCon talk.
Moving forward - John, Martin, Arthur, Tom, Greg #1, Greg #2, Julius, Erin, Bruce, Gatis, Grayson and all of our other commentators will give you lots of great articles to read for the foreseeable future. And I'll be in the background, coding up a host of new tools and capabilities that will make StockCharts.com even better.
While the world continues to debate the path of every pipeline, investors are not debating the path of the pipeline companies.
Three of the larger pipeline companies are in focus this week as another LNG project on the west coast was approved in Canada. One of the major pivot points on these approvals is that the pipelines required to feed them would also need to be approved.
With three majors working on access to get Crude Oil and Natural Gas products to tidal water for exporting, it is timely to look at the stocks.
Kinder Morgan (KMI) made new 9-month closing highs on Friday.
Deutsche Bank dominated the news late in the week, but US banks have been largely unaffected and bullish flags are taking shape in two bank-related ETFs. The charts below show the Bank SPDR (KBE) and the Regional Bank SPDR (KRE) in long-term uptrends. Notice that the 50-day EMAs are above the 200-day EMAs and both ETFs hit their highest levels of the year in late August. Both ETFs pulled back in September, but I view short-term pullbacks as opportunities when the bigger trend is up.
Hopefully I won't be stepping on Greg Schnell's Canadian toes, but as I was going through charts from last Wednesday's webinar, I saw that $TSX just had a new LONG-TERM Price Momentum Oscillator (PMO) BUY Signal. These are incredibly infrequent; for the last twenty years, we've only had nine long-term PMO crossover signals...that's BUY and SELL signals combined.
I've been writing about the upturn in global bond yields, which has boosted Treasury bond yields. Chart 1 shows the 10-Year Treasury Yield trading above 1.70% in today's trading. Foreign yields are bouncing as well. One of the side-effects of rising bond yields is the recent rotation out of bond proxies like staples, telecom, telecom, and REITs and into financials like banks, brokers, and life insurers. My main focus has been on bank stocks that usually benefit from higher bond yields. Over the last month, however, the two strongest financial groups have been life insurers and investment service stocks. And both are doing very well today.
Financial stocks have been market underperformers throughout the seven year bull market in stocks. That's most likely due to the fact the Treasury yields have fallen throughout that period. Since the start of the third quarter, however, financial stocks have started to come alive -- both on an absolute and relative basis. That new interest in financials has also coincided with rising bond yields. The main financial groups are banks, brokers, and insurers. All three have turned up since July and are showing rising relative strength ratios. Along with stronger chart patterns. Chart 2 shows the Dow Jones Investment Services Index ($DJUSSB) trading at the highest level this year. Its price trend shows a bullish pattern of "rising peaks and rising troughs" since February, as well as having cleared a major resistance line extending back to last July. Its 50-day average has also climbed above its 200-day. And its relative strength ratio (top of chart) is rising. Investment service stocks have been the strongest part of the financial sector since midyear. That could be interpreted as a new sign of optimism in the stock market. I'm more inclined to view it as a sign that bond yields have probably bottomed.
September has a reputation of being a difficult month for traders. So far it is living up to its reputation.
The S&P started out the month pretty much like it had the prior many weeks; going nowhere. And on September 8 the S&P remained within easy striking range of its all time high. But the following day stocks got hammered with the S&P losing almost 2.5% in one session. It also closed below both its 20 and 50 day moving averages, technically wounded and unable to make much progress since.
While the S&P and Dow suffered technical damage last week, the NASDAQ outperformed, largely due to a 12% rise in Apple's stock price. But just before AAPL went on a tear, the NASDAQ was also showing signs of cracking.
The headlines throughout the week continued to focus on the upcoming FOMC meeting where Fed governors will decide on interest rates, with the hawks jawboning for an increase. However, weaker than expected economic news throughout last week likely pushed any prospects for a rate increase to the end of the year.
It does raise the question, why is September such a challenging trading month? Maybe its because the euphoria of the summer is over and its back to business as usual after Labor Day. Maybe its because traders have set themselves up psychologically to prepare for the worst - a type of self fulfilling prophecy. It is a month that precedes the October earnings season so maybe traders adopt a "show me the money" attitude. It didn't help this year that the market went into narrow consolidation mode for a number of weeks; it was a perfect setup for a big move one way or another and given September's historical reputation a move lower makes some sense.
Whatever the reason(s) the market remains vulnerable to additional selling. Maybe AAPL continues to help the NASDAQ outperform but if that begins to wane we could see tech stocks begin to falter as well. In the case of the S&P it challenged the 2120 level four different times last week and held. So that has become an important level of support. If that goes, the S&P could easily fall another 50 points near the 2070 level.
What can bring the market out of its current funk? Once we get through the Fed meeting this upcoming Wednesday we'll only be a few weeks away from the beginning of the October earnings season. And the market cares more about earnings than anything else. So we might remain in a challenging trading environment until there is further evidence that profits are growing. And even then traders might remain skeptical that higher prices are warranted.
For those who are interested, I'm going to conduct a FREE webinar this Wednesday, September 21 at 4:30 PM eastern after the Fed rate decision has been made to see where the market stands and discuss what might be next. If you want to join me just click here
Hello Fellow ChartWatchers!
Markets are pulling back from their highs on increasing volume. You can see the weekly and daily charts with my annotations by clicking here. But even in this declining market environment, there are always possibilities. My "Strengthening Strength" scan (included at the bottom of the page I just linked to) found several promising gems including the Biotech Products ETF (BBP), Glaukos (GKOS), Clovis Oncology (CLVS), Activision/Blizzard (ATVI) and several others. (Read this article if you aren't familiar with my stock picking approach.)
How ChartCon 2016 Will Help You Make Better Investing Decisions
As you (hopefully) know, ChartCon 2016 - our online conference for all StockCharts users - starts this coming Friday! The theme for this year's ChartCon is "Building your own customized technical trading system" and I wanted to take a moment to expand on that so you know what to expect.
Many people dive head-first into Technical Analysis and charting without understanding the context it should be used in. I did that myself 25 years ago when I got my first copy of (DOS-based) MetaStock.
"Wow! These charts look great! All the lines seem useful! And all this new terminology sounds really promising! The Ultimate Oscillator?! How can I lose?!?!"
Every day our Customer Support team hears from someone else in that same mental state. They are thrilled with all the tools and options that StockCharts provides, but they have no idea (or worse a very wrong idea) about where to start.
Past ChartCons - and our webinars and our seminars - have focused mainly on how to use the tools at StockCharts effectively. And while that is definitely important, this time we are going to focus on the bigger picture. How can you use Technical Analysis to actually TRADE. It turns out there is a lot more to it than what those commercials for on-line brokers show you!
Every experienced investor will tell you that success in the market is as much about your mental approach as it is about your stock picking prowess. You need several other "puzzle pieces" in place before you will be able to successfully profit from the trading ideas and setups that StockCharts.com gives you. Those puzzle pieces are what this ChartCon will focus on. By the end, I guarantee you'll have a much better idea of what you need to focus on to improve your trading results.
Q: But Chip, I already have a successful trading system. What's in it for me?
A: That's terrific! I hope our tools play a part in your success. As an experienced investor, I'm sure you know that you can never stop learning and improving your trading. ChartCon 2016 will include tons of tips, tricks and ideas for "tweaking" an existing system and making it even better. And, of course, you'll hear directly from our expert Technical Titans - John Murphy and Martin Pring - about where they think things are headed. I'm confident that every presentation will have something for everyone regardless of how experienced (or "experience-challenged") they are.
Q: This sounds great Chip. When is it again?
A: ChartCon 2016 starts on Friday, September 23rd and runs thru the end of the day on Saturday, September 24th. It's an on-line conference. All you need to watch it is a computer and an Internet connection.
Q: Crud - I have to work on Friday. Will it be recorded?
A: Absolutely! However - and this is very important - in order to see the recording, you need to register for the conference before Friday. Only people that register before Friday will have access to the recordings.
Q: OK, good. But my Internet connection isn't the best. Will I be able to watch the conference?
A: We'd be very surprised if you couldn't. We are using one of the best streaming services out there - Livestream - to send the broadcast to your computer. Livestream automatically provides the stream in several different bandwidths at the same time. So if the Hi-res broadcast isn't working for you, you can switch to a less taxing setting and see if that works better.
Another nice thing is that Livestream allows you to "rewind" the live broadcast and review anything you missed the first time.
To help you test Livestream ahead of the conference, we have recorded a short test video for you to check out. Here's the link: https://livestream.com/stockcharts/cc-video-test
Please click on that link to test Livestream and see a short message from Grayson and myself!
Notes on this test:
- If you have any technical problems with the Livestream viewer, please consult this page for help.
- If you have Norton Security and it tells you "Livestream is a dangerous website", please just ignore that message. Norton is referring to a completely different broadcast from ours.
- This test video was very hastily put together using my laptop camera. The acutally conference will be MUCH more professional we promise!
- Just before the conference begins, we will send out the official video link and password to all registered participants. It will be different from this test link and you will need a password to access it.
To see the complete speaker line-up, the conference agenda, and to register for ChartCon 2016, please click here!
See you on Friday!
This is the final ChartWatchers newsletter before all of us here at StockCharts.com descend upon Northern California to produce what I believe will be one of the most educational online financial conferences of our time. Leading technical experts will be divulging their best kept secrets to hopefully add weapons to your arsenal as you trade and invest for higher profits. You still have time to register, but that window is closing FAST! A small investment in education can go a long way toward higher profits, so please be sure to check out our information page. That page lists the speakers - and the time(s) they'll present - and the agenda, along with REGISTRATION information. I've been to a large number of financial conferences and believe this one will BY FAR exceed the educational content of all of my prior conferences combined.
The Grocery chains are usually a free cash flow machine and are in the Consumer Staples Group. Walmart is an exception sitting in the Consumer Cyclicals group. Walmart started as a Broadline Retailer and added groceries.
However, the grocers are not having a good year and major support levels are in play. Kroger (KR) is an example. After being in a fabulous uptrend through 2013-2014, Kroger went sideways in 2015 and is breaking support in September 2016. One could argue they broke support in August, but they are now surging away from that level. Either way, the chart looks broken. With an SCTR of 3.9%, this looks dismal. The fact that the SCTR has been weakening since the beginning of the year may just reflect the bounce in all the other sectors. My main concern with this chart is that the lower commodity prices are starting to filter into the grocers are their revenues are declining as eggs, beef and milk get cheaper.