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Counting the Gaps for Clues on Earnings Season

There were dozens of gaps today with most coming to the upside. Down gaps in Akamai (AKAM) and Lumber Liquidators (LL) were countered with up gaps in Apple (AAPL) and Buffalo Wild Wings (BWLD). At midday on Wednesday, the Predefined Scan results showed 22 up gaps on the NYSE-Nasdaq, and 15 down gaps on the NYSE-Nasdaq. The net is +7 for the up gaps. Chartists looking for clues on how the market is reacting to earnings can look no further than this page. More up gaps than down gaps suggests that the market is reacting positively to earnings. I will show a chart of Unisys (UIS) with a massive breakout gap after the jump. 

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T-Mobile (TMUS) Hangs On To New Highs

T-Mobile (TMUS) is never short of attention-getting advertising. In the stock world, nothing garners more attention than new 52 week highs. Last week T-Mobile moved to new highs but never really had a breakout size bar. It pushed above the new highs and then just inched higher each day. Today it pulled back all day but still made a higher high earlier on. If it pulled back to support this could be a nice entry around $43.50. 

The Relative Strength line shown in purple is trying to push 10-month highs so this will garner even more attention.

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Tesla Gets a Relative Strength Surge ahead of Earnings

Tesla (TSLA) caught my eye on Monday because its StockCharts Technical Rank (SCTR) surged over 20 points. The image below shows the SCTR tables for large-cap stocks and ETFs. Notice that I clicked the Top Up tabs to view those with the biggest SCTR gains. Micron (MU) is the top gainer and Tesla is second in early trading on Monday. You can find these tables mid-way down on our homepage.  We will look at the chart after the jump. 

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Here Are The Two Best Performing Industry Groups In August

The summer months can be very difficult for U.S. equities, as history has proven over time.  But there's always a bull market somewhere and the consumer electronics space seems to find a sweet spot in August.  There are only two industry groups that average more than 5% monthly gains during August.  One is the Dow Jones U.S. Consumer Electronics Index (+7.5% over the past 17 years) and the other is the Dow Jones U.S. Gold Mining Index (+6.3% over the past 17 years).  However, seasonality patterns over the subsequent two months clearly favor the DJUSCE as September is typically flat while October is easily the second best calendar month of the year for the group.  Take a look at the historical performance this century:

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Carmax (KMX) Drives Off The Lot

Carmax (KMX) has a great technical chart today. With the SCTR soaring to 88, the price action shows it is one of the best stocks out there. But there is a little more history on the SCTR that is important. One of the best parts about the SCTR is we can look at how it performs relative to its peers over time. To my knowledge, this is the only plottable indicator that keeps track of the relative ranking compared to its peers. It was over a year ago that KMX fell out of the top performer range above 75. That makes the stock difficult to hold to me. If it is not a top performer, why hold it through the down period? We can see that today marked a climb back to top performer status after a year. The Relative Strength compared to the $SPX is shown in purple. This is trying to break out to six-month highs. 

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Encana Breaks Downtrend On Strength Of Earnings

Actually, Encana (ECA) has broken two downtrends - a short-term trend and a long-term trend.  ECA hit its all-time high of roughly 42.50 just before this bull market began.  Shareholders of ECA haven't seen much bullish action since this seven year bull market began, but technically things are improving on both their daily and weekly charts.  Check them out:

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QQQ Sets Sights on All Time High with Channel Breakout

The surge in stocks entered its fourth week with QQQ extending its channel breakout. The chart below shows the ETF surging earlier this year and then embarking on a correction with a falling channel into June. This correction clearly ended with the breakout near 110 and this zone now becomes the first support level to watch. A strong breakout should hold so a break back below 108 would call for a re-evaluation. With the breakout dominating the chart right now, QQQ is set to challenge its all time high around 115. 

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Kinder Morgan Stock Starts Flowing (KMI)

Kinder Morgan (KMI) is a large energy transporter with pipelines and storage across North America. This vast network of systems is a key component to the energy infrastructure and flow of key commodities. After struggling with some debt ratio issues last year, the stock was beaten down. Recently, the stock was pinned in a range after bouncing off the lows. Last week, KMI broke out in classic fashion, surging above the 40 WMA and looks to have lots of potential for moving higher.

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Small-caps Continue to Outperform Large-caps

The S&P Small-Cap 600 has been leading the S&P 500 since mid February as a key ratio chart hit a multi-month high last week. The main window in the chart below shows the $SML:$OEX ratio, which plots the performance of the S&P Small-Cap 600 relative to the S&P LargeCap 100. This ratio rises when small-caps outperform large-caps and falls when small-caps underperform. Note that this ratio bottomed in mid February and zigzagged higher the last five months. Thus, relative strength in small-caps is nothing new for stocks. On the chart, each peak was higher than the prior peak and each trough was higher than the prior trough. This is classic outperformance by one symbol against another. Relative strength in small-caps shows a strong appetite for risk in 2016 and this is positive for the market overall. 

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--Arthur Hill CMT

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"All Aboard!" The Railways

This week all the railways accelerated higher and the Railway Index broke out to new highs. But the breadth across all the railways is particularly important.

I've chosen Kansas City Southern (KSU) to demonstrate the railways are breaking out. Recently KSU surged above and then pulled back. It continued to get support over the last two months at the 200 DMA. This week the stock broke back above the trend line. The SCTR has surged above 75 and the Relative Strength is breaking out from a three-month downtrend. The volume has surged the last two days and the MACD has moved above zero. This looks very bullish. 

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