Don't Ignore This Chart

Centurylink (CTL) Sends Off A Flare

Centurylink (CTL) is in the Utility Sector as a fixed communication broadband provider. While they have other operations, the chart is interesting today for a few reasons. It's in a top sector, it's in a top industry group, it pays a healthy dividend (7+%) and the SCTR roared above 75 for the first time in almost a year.

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Volatility ($VIX) Nearing Key Breakout As S&P 500 Nears Support

Volatility and S&P 500 performance tend to move in opposite directions.  As fear escalates and the VIX prices in higher expected volatility, equity markets sell off.  Currently, the VIX is nearing its recent resistance near 30, which is a very high level of expected volatility, one in which we can expect large, sudden directional shifts in stock prices - mostly impulsive moves to the downside.  Should the VIX clear 30 resistance, expect S&P 500 support just above 1800 to break.  That could potentially lead to more panicked market behavior as traders nerves are frayed.  Here's the current look at both the VIX and SPX as we hit the mid-point of today's trading:

If on the short side, it certainly makes sense to at least consider taking partial profits as 1800 is an area the market could once again bounce from.  Clearly, a break below price support would be bearish though as volume is extraordinarily high.  Prepare yourself for a heavy dose of whipsaw action.

Happy trading!

Tom

Chevron Stalls out Below Two Key Moving Averages

Chevron (CVX) is a long-term downtrend and looks vulnerable to another leg lower. The price chart shows CVX trading below the falling 200-day moving average and below the 50-day moving average. Also notice that the 50-day is below the 200-day. These relationships indicate that the long-term trend is down. The stock recently broke support with a sharp decline in early January and then rebounded back to the broken support zone in late January. This zone turned into resistance as the stock failed to break back above 87.5 the last two weeks. At this point, Chevron looks vulnerable to further weakness and chartists should watch for a bearish signal. A break below support at 80 would be bearish on the price chart. A bearish signal line cross in MACD would also trigger a signal. 

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Thanks for tuning in and have a good day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
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Oil Retests The Lows Of January ($WTIC)

West Texas Intermediate Crude ($WTIC) fell back under $28 to retest the lows of January. So far, the trend in price still has a pattern of lower highs and lower lows. While it would be preferable to see this low tested and hold, all of the data regarding supply inventories of crude oil, gasoline, and distillate (Diesel fuel) are trending higher, which is bearish for crude oil. Unfortunately, all the demand data forecasts are not increasing at the same rate as the inventories. At this point, there is no evidence of a reversal in the supply / demand imbalance. 

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Three Big Sectors Hit New Lows for the Year

There are nine sectors in the S&P 500 SPDR (SPY) and their weights range from 2.82% (materials) to 20.17% (technology). The technology sector is around seven times bigger than the materials sector and this means that not all sectors affect the S&P 500 the same. Looking at the charts today, I noticed that three of the nine sector SPDRs were trading at new lows for 2016. These are the Consumer Discretionary SPDR (XLY), the Finance SPDR (XLF) and the HealthCare SPDR (XLV). Together, these three account for 43% of the S&P 500.  On the close-only chart below, these three are also trading at 52-week lows. The fact that these three are the first to record new lows for the year shows relative "chart" weakness.  In other words, these three are leading on the downside. The finance sector represents the banking system and the consumer discretionary sector represents the most economically sensitive sector. It is not good to see these two sectors leading the market lower. There is a chart with the other six sectors after the jump. 

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Recreational Services Index Has A Bad Year......Last Week

The Dow Jones U.S. Recreational Services Index ($DJUSRQ) fell more than 11% last week as traders completely ignored the consumer discretionary space (XLY).  The only industry group within consumer discretionary that performed worse was Business Training & Employment Agencies ($DJUSBE), which fell a staggering 28% on Friday after LinkedIn (LNKD) provided a very strong warning about 2016 prospects.  Royal Caribbean Cruises (RCL) has lost more than one third of its market cap over the past 5-6 weeks, leading the DJUSRQ to the downside.  Check out the chart:

Heavy volume has accompanied the selling, suggesting that this move lower is for real.  A move back to test the rapidly-declining 20 day EMA would represent a solid short entry.

Happy trading!

Tom

Is The Keystone Pipeline Finally Behind TransCanada Pipelines?

After a brutal beatdown from the politicians about pipelines, TransCanada Pipelines (TRP) stock has started to demonstrate a change in trend. From a continuous decline starting in September 2014 (near oil's high), TransCanada has recently made a 5-month high. With an SCTR ranking above 75, this is really starting to outperform its peers. One particularly strong trait is the new 6-month high in relative strength.

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Disney Teetering At Critical Support

First, it's not helping that the consumer discretionary sector is down more than 10% over the past three months.  This sector weakness has manifested itself in a very weak three month performance in Walt Disney (DIS) shares, which have fallen more than 15%.  Currently, DIS trades near a critical price support zone from 90-95 and its relative strength vs. the S&P 500 is closing in on its long-term uptrend line.  Loss of both price and relative support would be very bearish for the stock, especially if accompanied by heavy, confirming volume.  Take a look at the chart:

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Dollar Breaks Wedge Support, but How Bearish is It?

The US Dollar ETF (UUP) is getting whacked on Wednesday and breaking its January lows. The trading day is not over yet, but the Dollar is on pace for its biggest daily decline since early December. On the price chart below, notice how UUP fell sharply in early December and then worked its way higher with a rising wedge the last two months. The chart actually shows two rising wedges patterns. The first extends to late January (gray trend lines) and the second extends to early February (blue trend lines). UUP broke the lower gray trend line a week ago, but surged back above 25.9 almost immediately. This called for a re-evaluation of the chart. After redrawing the wedge lines, the ETF broke the lower blue trend line today and also broke below the early January low (horizontal support based on a prior low). This support break is short-term bearish and signals a continuation of the early December decline, which was not really that deep. I will look at the Euro and the weekly chart for the Dollar after the jump. 

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Tesla (TSLA) Tests Tremendous Support

Tesla (TSLA) seems capable of staying in the headlines almost every day. While the other car manufacturers have drizzled below some trendlines on the price charts, Tesla has been able to hold above. Today, the optimism towards Tesla is being tested.

This is very important support for a company that loses money. If this starts to release below the trend line, this would be an important change in trend. Tesla reports on February 10, 2016. Usually, high-flying stocks like this have trouble in bear markets. Tesla is also being watched for its ability to become a significant player in China. Chinese data has not been beautiful lately, so this adds more caution to the earnings call. Investors should be aware of the critical support level. 

With the head/shoulders topping structure in place, a global bear market chart structure and a fantastic valuation compared to the rest of the car companies, this support line could be very difficult to regain, should it fail to hold through earnings next week. With an SCTR of 15, the price action is worse than its peers.

Good trading,
Greg Schnell, CMT

 

CBS Attempts to Buck Broad Market Selling Pressure

It was a rough January for stocks, but CBS held up quite well and shows a bullish looking chart. On the price chart, CBS sports a classic surge-correct-breakout sequence. First, the stock advanced over 20% with a move from ~39 to ~52. Second, the stock corrected by retracing around 62% of this advance. This correction appears to be ending as the CBS  formed a big hammer and followed through on this hammer with further strength.

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