Don't Ignore This Chart Blog Archives

February 2012

Transports Underperforming on Up-Down Days in February

The major index market carpet shows the Dow Transports underperforming with its components showing more down days than up days in February. Since 31-Jan, the Trannies show -2 for net up days-down days for all components. This indicator counts the number of days each stock moves higher and then subtracts the number of days each moves lower during the specified time span. It is a breadth type indicator that measures the degree of participation.

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Treasuries and Commodities Moving Higher

The CRB Index ($CRB) and the 10-year Treasury Note ($UST) usually move in opposite directions. However, as the John Murphy's Intermarket PerfChart shows, this has not been the case the last six days. Even though the CRB Index is up over 2% since 17-Feb, the 10-year Treasury Note is up around a half percent. Some needs to give here because rising commodity prices could spark inflationary fears, which would be bearish for treasuries.  

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Euro ETF Retraces 50% of its Prior Decline

The rally in the Euro Currency Trust (FXE) has been rather sharp, but the ETF has still only recovered half the prior loss. Notice how FXE declined from 142 to 126 (16 points) and then advanced to 134 (8 points). Like the October surge, this advance could be just a corrective rally in a bigger downtrend.

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Heikin-Ashi Candlesticks Remain Strong for SPY

The chart below shows weekly Heikin-Ashi Candlesticks, which combine price action from two weeks to form a composite candlestick. As of this week, SPY formed nine white (hollow) Heikin-Ashi Candlesticks in a row and shows no weakness. The first long black candlestick would suggest that a corrective period is starting. You can read more on Heikin-Ashi Candlesticks in our ChartSchool.

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Bollinger Bands Narrow for Boeing

Boeing (BA) moved into a tight range the last 5-6 weeks and the Bollinger Bands contracted to their narrowest in over six months. This signals a volatility contraction, which in turn could foreshadow a volatility expansion. Watch resistance from the February highs and support from the February low for the next directional signal.

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Currency PerfChart Reflects Risk-on Environment

The PerfChart below shows the performance for ten currencies since January (year-to-date). The traditional safe-haven currencies are down (Dollar and Yen), while two emerging market currencies are up (Real and Peso). The Euro is also up, which reflects the current risk-on environment for the stock market.

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Retail SPDR Traces Out Bearish Engulfing

The Retail SPDR (XRT) hit a new high with a gap last week, but failed to hold this gap as a bearish engulfing pattern formed on Tuesday. Volume also perked up to its highest level in four days. After a rally from 52 to 59, the ETF could correct back to broken resistance in the 53.5 area.

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Gold Miners ETF Forms Big Bad Bullish Engulfing

The Gold Miners ETF (GDX) opened weak with a print below 53, but then recovered with a high volume rally and close near 55. Overall, Thursday’s long white candlestick engulfed the prior four candlesticks. At the very least, this establishes support with Thursday’s low. Follow through would confirm the pattern and argue for a move above the early February high.

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Apple Goes Parabolic and Forms Bearish Engulfing

Apple is no doubt in a strong uptrend, but the recent move went parabolic as the trendline slope steepened for the third time. The latest surge from 420 to 520 was pretty much straight up. With a high-volume bearish engulfing pattern taking shape on Wednesday, the stock could be ripe for a correction or consolidation.

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Volatility Surges as Vix ETN Moves Higher

After a sharp move lower from late November to early February, the S&P 500 VIX ETN (VXX) bounced the last seven days with its biggest move since November. Volume also surged. It appears that traders are taking out a little insurance with the stock market so overbought.

120215vxxClick this chart for a live image.

Coffee and Sugar ETFs Take a Hit

The ETF Market Summary shows commodity ETFs under pressure during the day Tuesday. The Coffee (JO) and Sugar (SGG) ETFs were leading the way down. The Copper ETF (CU) and Palladium (PALL) ETFs, which represent industrial metals, were also weak. 

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First Solar Fails at Resistance $FSLR

While the market moves higher on Monday, First Solar (FSLR) is moving lower with its second long black candlestick. Also notice that the stock failed at resistance near 50 for the second time in three months.

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Weekly MACD Keeps Traders on the Right Side of the Bigger Trend

The chart below shows the S&P 500 ETF with weekly candles and weekly MACD (12,26,9). Even though some signals may seem late, this classic indicator combines trend following and momentum to keep players on the right side of trend. Moves above the signal line favor the bulls, while moves below favor the bears. At the very least, traders should attempt to trade in harmony with this indicator.

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The Risk (Heat) is On as Commodities Lead

The PerfChart below shows a selection of intermarket related ETFs. Notice that the Commodity Index Fund (DBC), Base Metals ETF (DBB) and Gold SPDR (GLD) are up substantially year-to-date, as are stocks. In contrast, the Dollar and Treasury ETFs are down. Money is embracing risk this year.

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Offensive Sectors Take the Lead on the S&P Sector PerfChart

The stock market is clearly in rally mode this year with the offensive sectors leading the charge. Notice that the consumer discretionary, industrials, finance and technology sectors are outperforming the S&P 500. In contrast, the consumer staples, healthcare and utilities sectors, which are defensive, are lagging the S&P 500.

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Utilities SPDR Perks Up with Bounce off Support XLU

The Utilities SPDR (XLU) was relatively weak in January as it failed to partake in the broad market advance. More recently, the ETF surged in late January and again on Tuesday with moves that reinforce support in the 34-34.5 area. MACD flattened over the last two weeks and a move into positive territory would turn momentum bullish again.

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German DAX Index Leads the Way in 2012 $DAX $SPX $NIKK

Despite all the “issues” surrounding Europe, the German DAX Index ($DAX) is going strong and outperforming the S&P 500. In fact, the DAX is outperforming the Shanghai Composite ($SSEC) and the Nikkei 225 ($NIKK) as well. The chart below shows that the DAX is up a whopping 14.76% year-to-date, mre than double the gain in the S&P 500.

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Finance Shows Green in the Market Cap Market Carpet

As the Sector Market Carpet shows, the finance sector has the biggest average gain (2.4%) thus far on Friday. Technology is second with the average stock gaining 1.9% on the day. Notice that the boxes are different sizes because of market cap mode. Stocks with the highest market caps have the biggest boxes. Click the icon in the far left corner to toggle between market cap and normal mode.

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Nordstrom Shows Relative Weakness as Bollinger Bands Narrow

The stock market rallied in January, but Nordstrom (JWN) traded flat and shows relative weakness. Even though the stock has yet to break down, volatility is narrowing as the Bollinger Bands contract. Notice that Bollinger Band width is at its lowest in over six months. Watch the range for the next direction clue.

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CAT Powers the Dow Higher

According to the Wall Street Journal, "Caterpillar’s 20% stock surge this month contributed nearly 34% of the Dow Jones Industrial Average’s 415-point advance." As a price weighted "average" the highest priced issues in the Dow carry the most weight. This is also true for the Dow Transports and Dow Utilities.

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