Don't Ignore This Chart

December 2018

Don't Ignore This Chart

Sector SPDRs Firm with a Few Piercing Patterns

by Arthur Hill

Stocks rebounded last week and recovered part of their losses from the prior week. Long black candlesticks formed the week before Christmas and most sector SPDRs recovered with long white candlesticks the following week. A black candlestick forms when the close is below the open, while a white candlestick forms when the close is above the open. Chartists can compare the last two weekly candlesticks to find the sectors that recovered the most. Before looking at a weekly candlestick pattern, note that the S&P 500 SPDR (SPY) is in a long-term downtrend and almost all sector Read More 

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When Technicals Talk And Fundamentals Fail

by Greg Schnell

With the exception of Brazil and India, the monthly charts are broken worldwide - and the speed of the drop since the break has been alarming. Come 2019, the charts will need to do a lot of work to rebuild a constructive shape. What are we looking for? Let's start at the top. In a bull market, the full stochastic indicator usually stays above 50. With Friday and Monday left to improve the final reading, the chart looks perilous. Note that big bear markets start with a break below and can last one or two years. A move back above 50 on the full stochastic may be slow, but it Read More 

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Okay, So You Rallied 1000 Points...? That Don't Impress Me Much.

by Julius de Kempenaer

Yesterday, on boxing day, the Dow jumped 1000 points from its 52-week low which, coincidentally, was also set yesterday. Never a dull moment. But, what does it mean? Looking at the weekly chart above, at least IMHO, it means only a (small) recovery of the damage that has been done since the start of October when $INDU almost touched 27.000. However, it is nowhere near enough to change the structure of the market back to bullish. The break below support at 23.500 last week confirmed the end of the series of higher highs followed by higher lows Read More 

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A Long-term Breadth Signal Triggers

by Arthur Hill

AD Percent for the S&P 500 dipped below -90% on Monday and this was the sixth reading below -90% this year. AD Percent equals advances less declines divided by total issues. Thus, if 25 stocks advance (5%) and 475 stocks decline (95%), AD Percent equals -90% ((25 - 475)/500). The chart below shows the S&P 500, S&P 500 AD Percent and the S&P 500 AD Line. The index fell 11 of the last 14 days and recorded new lows the last four days. AD Percent joined suit with negative readings 13 of the last 14 days. Thus, AD Percent was negative even when the index closed higher on Read More 

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A Rare Extreme for the Russell 2000

by Arthur Hill

The Russell 2000 peaked at 1740 in mid August and fell below 1300 over the last 15 weeks. The index is now down 11 of the last 15 weeks and extremely oversold. Even though the long-term trend is clearly down, this extreme oversold condition could give way to a counter-trend bounce. The chart shows the Russell 2000 falling below its 40-week moving average in mid October and recording a 52-week low in mid December. The breakdown and new low confirm the long-term downtrend.   The indicator windows show the 15-week Rate-of-Change and 15-week RSI. I chose 15 periods Read More 

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P&F Charts Plummet in Triple Bottom Breakdowns

by Greg Schnell

With the ongoing market turmoil, it seems that the P&F charts are plummeting. This style of charting does a great job of clearly illustrating support - you can see when price break downs as support is broken. The chart below demonstrates how well the price has been supported at 2600. The second-to-last column of O's briefly broke below the two prior lows, forming a pattern called a triple bottom breakdown. After a small bounce up, the price failed to make a higher high. When the final column of O's formed, the price plummeted lower.  Read More 

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Utilities are OK but it's better to avoid EIX

by Julius de Kempenaer

The Utilities sector is acting as a safe haven for a lot of investors that need to park their money in the stock market because they cannot, or are not allowed to, hold all or significant amounts of cash when markets are going down. These are the periods when relative strength analysis (and thus Relative Rotation Graphs) can really set themselves apart. The above chart shows the RRG for the members of the Utilities sector against XLU as the benchmark. If you need to beat a benchmark it is Read More 

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A Monster Momentum Shift in the 30-yr Yield

by Arthur Hill

It was not long ago that the 30-yr T-Yield ($TYX) was breaking above a three year resistance line and the outlook for yields was bullish (bearish for bonds). Admittedly, I was in that camp. The tables have turned as the 30-yr Yield failed to hold the breakout and sliced below its 200-day moving average. The chart below shows the yield breaking resistance at 32.5 (3.25%) in September. The breakout held for two months and then crumbled in December as the yield fell back towards 3% (30 on chart). The yield broke through the 200-day SMA in convincing fashion and the trend is now down Read More 

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Railroads Start To Come Off The Rails

by Greg Schnell

One of the nice traits about the railroads is they are one of my indicators to help with general market direction. I have found that when the railroads start to underperform the $SPX, that is typically a confirming signal of broader market weakness. While I have been bearish for a while, the railroads starting to break the trend line of relative performance indicates that this will be a bigger than average breakdown. The PPO on the weekly chart is also breaking below zero. That doesn't happen very often.  Here is a longer term picture. Be careful out there! Read More 

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Momentum Turns for Big Blue

by Arthur Hill

IBM is one of the worst performing stocks in the S&P 500 this year with an 18% decline year-to-date - and it could get worse. First and foremost, the long-term trend is down because the stock recorded a 52-week low in late October, the 50-day moving average is below the 200-day moving average and price is below the falling 200-day moving average. IBM plunged in October with a 25% decline from October 3rd to October 31st. We do not need a momentum oscillator to know that the stock was severely oversold in late October. IBM then worked off this condition with a bounce into early Read More 

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Banks Are Bleeding Profusely

by Greg Schnell

The banking sector has been drilling holes in the bottom of empty Christmas stockings this year. All the big name US stocks are making new lows, but the real concern is the sheer size of the drop. Citi (C) is down 16% in just 2 weeks! BAC is down 25% from the annual highs! Wells Fargo (WFC) is down 28% this year! With the $SPX just slightly negative on the year, you can see the real pain for investors. While these banks are bleeding, there might be some hope showing up next week in the form of the Fed meeting. You'll notice BAC is plotted on the lower half of this chart. The Fed Read More 

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Oh WELL... What Can I Say?

by Julius de Kempenaer

On the Relative Rotation Graph, the Real-estate sector is one of the better performing sectors vis-a-vis the S&P 500 index. The RRG above shows the rotation of all the stocks in XLRE against XLRE. This gives us a picture of the relative positions for all these stocks against XLRE and against each other. A few names stand out in a positive way. EXR, VTR, HCP, and WELL are all traveling higher on both axes and in a relative uptrend against XLRE. One stock, in particular, is sending very bullish signals. Read More 

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Mind the Gaps in L Brands

by Arthur Hill

A long-term downtrend, two gaps down and a move back below the falling 200-day could spell trouble for L Brands. The stock has been quite volatile since summer, but the overall trend remains down. LB hit a 52-week low in early September, the 50-day SMA (not shown) is below the 200-day SMA, the 200-day SMA is falling and price is back below the 200-day SMA. The stock gapped above the 200-day SMA in mid November, but this gap did not hold as the stock gapped down twice. The second gap was back below the 200-day SMA. Even though LB bounced after this gap, the bounce again failed to hold Read More 

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Is Shopify On Your Shopping List?

by Greg Schnell

Shopify appears to have all the makings of a stock ready for its next move. Relative strength is starting to rise, full stochastics are striding higher, the stock is about to break a 6-month resistance line and the PPO is resetting at zero! This high growth stock is really looking good. Considering how tight a stop under this week's low would be, this looks all set to rise. If it needs more time, I want out anyway. This stock is listed in Canada as well at SHOP.TO. Here are some of my videos from the last week. The Final Bar video discusses what to look for Read More 

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Southwest Airlines Reverses with a Gap

by Arthur Hill

Southwest Airlines (LUV) is in a long-term downtrend and the recent failure near the death cross points to further downside. First and foremost, the long-term trend is down because LUV hit a new 52-week low in late October and price is below the 200-day SMA. In addition, the 50-day SMA just crossed below the 200-day. After gapping down and hitting a new low, the stock bounced back to the 55 area in early December. This bounce, however, just retraced 50% of the prior decline, which is normal for a counter-trend bounce. The bounce hit resistance Read More 

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Is This Stock About To Collapse?

by Greg Schnell

Canopy Growth Corporation (CGC) sits at support to close out the weekend. Is it about to collapse or surge? If you are interested in the most recent parabolic trading industry, marijuana legalization, it matters, as Canopy is widely seen as a leader in the group. For most investors, the sudden surge in August caught them off guard. Now would be the time to monitor CGC for a possible entry with a close stop. There is nothing on the chart that is a buy signal as of Friday, but there are lots of technical reasons to consider trading this stock in the near future. Read More 

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Why Is Everybody Talking About The Yield Curve? What Is All The Fuss About?

by Julius de Kempenaer

The yield curve has become a popular subject recently. Also, a few commentators on the site have mentioned the yield curve and its recent movements in their blogs recently. Read articles by Chief John, Greg Schnell, and Arthur Hill. In my DITC contribution of 18 October, I showed how Relative Rotation Graphs can be used to monitor the (shape) of the yield curve. You can find a more detailed explanation of combining RRGs with the Dynamic Yield Curve tool in this RRG blog. In this DITC I want to point, again, to the Dynamic Read More 

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An Emerging Market Trading above its 200-day

by Arthur Hill

The S&P 500 is below its 200-day moving average and most country indexes are also below their 200-day moving averages. Two emerging countries, however, stand out in this crowd: Indonesia and the Philippines. The first chart shows the Indonesia iShares (EIDO) and the DJ Indonesia Index ($IDDOW) with their 200-day SMAs. The index (lower window) found support in the 1225-1250 area from July to October and broke above its summer highs with a surge in November-December. This is one of the few country indexes trading above its summer highs and above its 200-day SMA. The upper window shows Read More 

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Yields Invert - Dow Drops 800 - Whoa!!!!

by Greg Schnell

The yield curve has been the talk of the town as the Fed has raised interest rates. With lots of discussion, a part of the yield curve finally inverted this week. The issue at this point in time is the bond market has seen the 2, 3 and 5-year yields invert. How can we show that on a chart? The real problem for chartists is getting the settings right to make it easy to see. On the chart below, I have used the Price (same scale) overlay tool rather than the Price selection as an indicator. By using the Price (same scale) it separates each of the lines nicely. However, Monday Read More 

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Cisco Holds Up Well and Maintains Uptrend

by Arthur Hill

Relative strength, an uptrend and a bullish continuation pattern point to higher prices for Cisco (CSCO). First and foremost, Cisco is in a long-term uptrend. The stock recorded a 52-week high in early October, the 50-day SMA is above the 200-day SMA and price is above the 200-day. Second, Cisco held up better than the S&P 500 and the Technology SPDR during the recent pullback. Both $SPX and XLK broke below their 200-day SMAs, but CSCO held this moving average in late October and again in late November. In addition, CSCO formed a higher low from late October to late November as $SPX Read More