Don't Ignore This Chart

Sector Carpet Shows a Preference for Risk

Stocks moved sharply higher on Friday with the Technology sector leading and the Utilities sector lagging. As the Market Carpet shows, the average utilities stock is down .05% and the average technology stock is up 1.82%. This shows a preference for higher risk stocks (offense). Notice that the tech sector is dark green because it is the leader. Financials and materials are also showing leadership today. Click this image to see a live Sector Market Carpet. Double click on any of the sector spaces to see the individual components. 

Click this image for a live chart. 

Intel Gaps Down to Lead Semis Lower

Intel (INTC) weighed on the semiconductor group Thursday with a gap down and high volume decline. The chart below shows the stock reversing near broken support, which turned into resistance. This is classic technical analysis: broken support turns first resistance and broken resistance turns first support. 

Revving Up The Multi Utilities Industry Group

Here is a great looking industry group based on the RRG Charts. The Utility Sector has started to accelerate and this industry group looks great.

I have deleted the lines on the other charts that are not that strong by removing the check marks on the list below. This chart has three things going for it.

  • The stocks are accelerating in unison 
  • There is clear acceleration in the tails. They are very long which means they are moving quickly in price.
  • They all have a very positive direction. Both up for momentum and to the right for improving outperformance of the $SPX.

TEG has been very positive, has settled back and looks to be turning to reenter the positive momentum and relative outperformance. 

Good trading,
Greg Schnell, CMT

Never mind QE, the Yield Curve Reflects a Dovish Fed

The end of QE may be on the table, but the yield curve shows that the Fed remains dovish overall. The image below comes from the Dynamic Yield Curve. Notice that short-term yields are the lowest and the yields rise as the maturities extend. This is a "normal" or positively sloped yield curve and it means the Fed is accommodative right now. The trouble starts when short-term yields rise sharply and the yield curve flattens. Click the image below for a live chart and move the vertical red line to 2007 and 2000 to see what a flat yield curve looks like. 

Click this image for a live chart. 

Louisiana Pacific Hits the Bearish-Signal-Reversed Scan

A failed signal is sometimes as good as a signal. In other words, a failed bearish signal is sometimes just as good as a bullish signal. StockCharts users can find failed P&F signals on the Predefined Scans page. The example below shows LPX with a bearish signal when the last O-Column moved below the prior O-Column. This signal was reversed when the current X-Column moved above the prior X-Column. LPX is currently at the bearish resistance line and a break above this line is needed to trigger the next bullish signal. 

GoPro Gaps with Uptick in Volume GPRO

GoPro (GPRO) came under pressure last week as a lower high formed and the stock gapped down. Even though the Nasdaq 100 moved higher the last two days, GPRO moved lower and formed three black (filled) candlesticks. With the decline and gap over the last two days, the stock broke flag support and this targets a move to the 63-65 area. Chartists can use the gap to mark resistance at 80. 

Click this image for a live chart. 

New Highs Surge on the S&P 500

The surge in the S&P 500 over the last six days was accompanied by a surge in new highs the last few days. Notice that Net New Highs exceeded 40 the last three days and new highs exceeded 45 the last three days. There were only two new lows: Amazon (AMZN) and Southwest Enegy (SWN). 

Click this image for a live chart. 

P&F Chart Nails it for the S&P 500

The chart below shows a long-term Point & Figure chart for the S&P 500. Each box is 10 points and a 30+ point move is needed for a reversal (3 boxes). This chart starts with the rally off the November 2012 low. The blue bullish support line was drawn as soon as the X-Column surged above the red bearish resistance line (in November 2012). Rising at a 45 degree angle, this line defines the uptrend until broken. There was had a triple bottom sell signal with the break below 1930, but this occurred above the line and was countered with an immediate surge back above 1930. Support in the 1820-1830 has been affirmed with the October surge and this is the area to watch going forward. 

Click this image for a live chart. 

The Hang Seng Gears Up for a Move

Protests and weakness in global markets weighed on the Hang Seng Composite ($HSI) in September as the index fell to its prior resistance zone. The index stabilized in October and got a nice bounce on Wednesday. This is an interesting area because it also represents a 50-62% retracement of the prior advance. If the Hang Seng is going to reverse, this is as good a place as any. The Percentage Price Oscillator (PPO) is turning up from oversold levels and a break above the early October high would be quite bullish.  

Click this image for a live chart. 

L Brands (LB) Gets A Lift

L Brands (LB)  has been trying to break through previous highs over the last month. After chopping around it finally broke out conclusively yesterday and continued the acceleration today. There are just so many comments to make for a company with brands of La Senza and Victoria Secret. We'll let you laugh about those on your own.

Continue reading "L Brands (LB) Gets A Lift" »

Homebuilder and Retail ETFs Make Big Relative Moves

The table below shows the StockCharts Technical Rank (SCTR) for our ETF universe. This table is sorted by "change" with the biggest gainers at the top. In particular, the SCTR for the Home Construction iShares (ITB) surged 23.5 points and moved above 75 and the SCTR for the Retail SPDR (XRT) surged 15.1 points and moved above 60. These two are suddenly showing relative strength and this is a positive sign for the consumer discretionary sector. You can read more about the SCTR calcuations in our ChartSchool article

Click this image for a live chart. 

Microsoft Bounces off Key Retracement

The chart below shows Microsoft (MSFT) falling to broken resistance, firming for two days and bouncing over the last two days. Also notice that this bounce occurred at the 62% retracement. Even though the decline looks steep, support held where it should and the stock is above the rising 200-day moving average (long-term uptrend). The indicator window shows 10-period RSI becoming oversold for the first time this year and moving above 30 on Friday. 

Click this image for a live chart. 

Alibaba (BABA) Stops Resting And Steps Above The Trend Line

Alibaba (BABA) has been sliding sideways since the IPO. The $SPX made its high on Alibaba (BABA) initial public offering day which was September 19, 2014. Most stocks have been pulling back since the quadruple witching day of September 19, 2014. The stock has gently pulled back while other sectors fell faster than stones on a mountainside. Today, Alibaba gapped up and broke above the horizontal resistance. It also gapped above the Volume Weighted Average Price (VWAP) which I have circled in the full quote panel above. At the time of writing it has pulled back below the VWAP level. However, investors looking for Alibaba to become the next great growth stock might have got a clue today. After a month of pulling back, Alibaba was able to gap above the trend line resistance on the first strong day for the broader markets.

Coming out of a low is always volatile, but maybe a glimmer of hope has shown up on the NYSE's largest IPO. Now that the IPO baby is awake, will it walk or run?

Good trading,
Greg Schnell, CMT

Hammers, Hollow Reds and Dragonflies Hit the Predefined Scans

With weakness in early trading and a strong close, a number of bullish candlestick patterns formed on Wednesday. These include hammers and dragonfly doji. There were also hundreds of hollow red candlesticks. These form when the close is above the open, but the close is still below the prior close. This candlestick reflects a bounce after a weak open. One day does not a trend change make and this is why one and two day candlestick patterns require follow-through to confirmat a reversal. Also keep in mind that candlesticks are short-term in nature and these patterns will not affect the medium or long-term trends.  

EOG hits Big Volume-by-price Bar

Most energy stocks have been in a free fall this month and EOG resources is no exception. The stock plunged over 25% from its summer highs and retraced 50-62% of the prior advance (Apr-2013 to July-2014). The stock shows signs of capitulation as downside volume surged for three days and the stock advanced on the fourth day with even higher volume. Also notice that the longest volume-by-price bar resides in the 82-86 area. Combined with the Fibonacci retracements, this area could offer support and lead to at least an oversold bounce. 

Click this image for a live chart. 

USO Prepares to Test 2011 Lows

United States Oil Fund (USO) is one of the "big four" that I analyze on a daily basis in the DecisionPoint Daily Update which you can find in the "DP Reports" blog. The other three of the "big four" are UUP (Dollar), Gold and TLT (20-yr Bonds). 

USO has been in a very long basing pattern since 2009 following the parabolic price move and subsequent crash. Right now price is preparing to test long-term support along the 2011/2012 lows. Next stop would be the all-time low in 2009. The weekly Price Momentum Oscillator (PMO) has a clear range of +5 to -5. Unfortunately for USO, the weekly PMO hasn't even reached the lower end of that range which makes it vulnerable to further decline. Reaching the 2011/2012 lows looks likely, but now it seems plausible that the 2009 all-time low could be taken out as well.

Happy Charting!

Energy-related ETFs Hit Historical Extremes

By most metrics, the energy related ETFs have hit oversold extremes with big declines over the last 31 days. The Oil & Gas Equip & Services SPDR (XES) is down around 25%, the Oil & Gas E&P SPDR (XOP) is down almost 30% and the FirstTrust Natural Gas ETF (FCG) is down around 34%. Note that 14-day RSI for FCG and XES is below 10, while 14-day RSI for XOP is below 15. These RSI readings are the lowest since the ETFs began trading, which was in 2006 and 2007. 

Click this image for a live chart. 

The HomeBuilders ETF (XHB) Breaks Down to 52 Week Lows

The Homebuilders ETF (XHB) is usually considered a broad indicator of the housing market. The housing market is usually associated with being an indicator of overall economic strength in the USA. We can see all of the major pullbacks in the $SPX have also shown up on the XHB. The XHB was a new ETF in 2006. It immediately started a downward slide leading into the the sub prime fallout in the USA and the global financial crisis. This was a significant precursor to the overall pullback the market ($SPX) suffered later in 2007. In 2010 and 2011, the top of the XHB coincided with the top in the $SPX. Now this chart has been making lower highs and lower lows since the Market run up into the February 2014 high. More importantly, it failed to get above the 40 WMA on the last rally. 

Investors in this space should be aware of the trend of lower highs and lower lows. This is the primary condition for a down trend. We are also making 52 week lows for the first time this week.

Good trading,
Greg Schnell, CMT

Consumer Staples Stocks Lead the Market

The Consumer Staples SPDR (XLP) shows more "chart" strength than the S&P 500 SPDR (SPY) because it broke out to new highs this week. SPY, on the other hand, remains well below its September high. The CandleGlance chart below shows six leading consumer staples stocks. Five surged above their September highs and show chart strength. Procter & Gamble, the sixth, is less than 2% from its September high. Relative strength in the consumer staples sector shows a penchant for defense in the stock market. 

Click this image for a live chart. 

Twitter Starts To Outperform

Twitter (TWTR)  has been an interesting IPO. It showed great promise coming to the market and the stock behaved much better technically in the first few months than Facebook. After that, the two appeared to be the same pain for buyers. Twitter lost 60% from its highs. Now we are almost a year into the Twitter trade and it has resumed the upside momentum much like Facebook did. Facebook built more of a base, but nonetheless both are now trading above the first day of trading close. We can see that TWTR now has an SCTRT ranking better than 97% of the stocks in the large cap universe. It has been outperforming the $SPX since June based on the purple area chart.

With the RSI pointed higher and the stock continuing to climb while the overall market looks weaker, Twitter is not one to be ignored here. Investors are tweeting their admiration for it one daily character at a time. Higher highs and higher lows have the character of an uptrend.

Good trading,
Greg Schnell, CMT

The Noose Tightens on Apple

After a big advance from April to August, Apple (AAPL) turned dull as a tight consolidation takes shape. Notice that the Bollinger Bands are narrowing and a triangle is taking shape. The indicator window shows BandWidth below 5% for the first time since early July. This volatility contraction suggests that traders should prepare for a volatility expansion. Watch 103 for an upside breakout and 97 for a downside break. 

Click this image for a live chart. 

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