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June 2019

ChartWatchers

Building Portfolio Power: Start With Stocks Like These!

by John Hopkins

Let me start by saying that we track a "Best of the Best" list at EarningsBeats.com. Technically, it's actually 3 "Best of the Best" lists - a Model Portfolio, an Aggressive Portfolio and an Income Portfolio. They each include 10 stocks that are weighted equally in the portfolio and held for three months. After the next earnings season is over, we cash in the 10 stocks in each portfolio and replace them with our next "Best of the Best" list. Here is the actual return of our Model Portfolio since its inception and the corresponding return of the benchmark Read More 

ChartWatchers

These Stocks Can Pick You Up

by Greg Schnell

The IPO frenzy has been well-documented this year, with CrowdStrike, Beyond Meat, Slack, Pinterest, Uber and Lyft all garnering media attention. One thing that can happen with IPOs is a sudden surge in either direction. However, for chartists, with no chart history, these IPO's are hard to buy. What works better for me is when the stock pauses and builds a base. Two stocks line up nicely this week for that concept. First of all, UBER does not make any money, so until the stock forms a price range to trade around, we have no relative value of what investors are willing to pay. By Read More 

ChartWatchers

S&P 600 Under the Indicator Microscope - Bouncing Off Relative Lows

by Erin Swenlin

Be prepared! I have a plethora of charts this week to share that focus only on the S&P 600. If you look closely, you can see that, even before the last two days of an impressive rally, the indicators were already suggesting a renewed interest in small-cap stocks. Below is the relative chart of the major indexes to the SPX. Note that we are seeing an increase in relative strength for the S&P 400 and S&P 600 after logging relative lows that we hadn't seen all year.  I'm going to introduce you to all of the charts that are in our Read More 

ChartWatchers

How to Spot Reversal Alert Zones and Get the Jump on Breakouts

by Arthur Hill

Breakouts are bullish and often look great, but they do not always offer the best reward-to-risk ratio when taking a trade. As with so many aspects of technical analysis and trading, we must often walk the fine line between anticipation and confirmation. The first step to anticipating a breakout is spotting a reversal alert zone before the breakout occurs. Going on alert before the breakout can improve the entry price and the reward-to-risk ratio. There are three parts to a reversal alert zone. First, the decline leading to the reversal zone should be considered a Read More 

ChartWatchers

Defensive Sectors Fall Behind While Technology, Cyclicals, and Industrials Take the Lead

by John Murphy

Editor's Note: This article was originally published in John Murphy's Market Message on Thursday, June 27th at 3:49pm ET. Previous messages have pointed out that defensive stock sectors were top performers since the market hit a peak at the end of April when trade tensions started to resurface. Stocks, however, have recovered most of their May losses during the month of June. And sector leadership during June reflects that more opimistic alignment. Chart 1 shows sector performance for the past month. And it shows defensive groups like utilities, real estate, and consumer staples lagging Read More 

ChartWatchers

Small Caps and Biotechs Have Both Turned Positive - Here Are 3 Candidates for Your Consideration

by Mary Ellen McGonagle

June is shaping up to be quite a month, with the S&P 500 on track to outpace January as the best-performing period. Of special note is this week’s move into Biotechnology and Small Cap stocks, which both have struggled since stalling out in February. With money flows into these laggards, a downtrend reversal is shaping up. This is very good news, not only for these stocks but for the markets in general. Given the lowered liquidity in Small Caps and the lack of earnings in Biotechs, both of these areas are viewed as risky. A move back into these riskier stocks historically points Read More 

ChartWatchers

The Bullish Case For Gold Isn't All That Strong

by Tom Bowley

The price of gold ($GOLD) closed on Friday at $1400.10 per ounce. The weekly gain of 4.14% was the best such weekly advance since April 2016 and the close above $1400 was the first such close since September 3, 2013.  Since testing 2019 lows on May 21st, GOLD has rallied more than 10% in just one month. What's not to like? Well, for starters, there's the following 8-year relative downtrend vs. the benchmark S&P 500: What drives that type of relative underperformance in GOLD? A rising U.S. Dollar Index ($USD). The USD has had some short-term issues of late, closing on Read More 

ChartWatchers

Dialing Down the Dollar

by David Keller

Has the slow and grinding uptrend in the US Dollar finally reached its exhaustion point? A quick review of the charts suggests this may be the case. The $USD chart has certainly been a frustrating one for Dollar bulls, as the trend, while steadily positive, has not provided the upside follow-through you’d expect. Every time the Dollar index has approached the key 97.50 level, the greenback quickly reversed to find support around 94.50-95.00. That all changed in late April, when the $USD finally reached 98 as it trended above two upward-sloping moving averages. All is well Read More 

ChartWatchers

More Short-Term US Market Indicators Turn Bullish

by Martin Pring

Editor's Note: This article was originally published in Martin Pring's Market Roundup on Tuesday, June 18th at 2:30pm ET. Several reliable short-term oscillators have just turned bullish. Chart 5, for instance, features my Dow Diffusion Indicator. This one is similar to the Global Oscillator, but uses DJIA components instead. The green arrows show when it reverses to the upside from a position below the oversold line. The indicator recently turned up again, but not from such a subdued level. As long as it can continue to power its way higher, it represents a positive backdrop.Chart 5 Read More 

ChartWatchers

Will China Be Able To Complete Its Current Rotation Inside Positive Territory And Start A New Period Of Outperformance??

by Julius de Kempenaer

On the above Relative Rotation Graph, which shows the rotation for international stock indexes against the Dow Jones World index, we really ought to pay attention to the long tail inside the weakening quadrant for the Chinese market. This rotation follows a strong performance of the Chinese market during the first four months of the year, which was followed by a 50% correction. At the moment, $SSEC is putting a first higher low into place, which could offer good entry opportunities. China Regarding China, the big question will Read More 

ChartWatchers

Speeding Up the Price Momentum Oscillator (PMO)

by Erin Swenlin

Viewers of MarketWatchers LIVE know how much I rely on my scans to find all those interesting symbols I review. In a ChartWatchers article last month, I shared my new favorite scan (Bullish EMA | Midrange SCTR), where I adjusted my time-tested "scan to rule them all" and found I could get better results by tweaking the SCTR and EMA configuration. In that mindset, I decided to try something new and use a "faster" PMO by changing the (35,20,10) parameters to (12,26,9). I run the scan using the fast PMO but analyze the results using the slower default PMO parameters Read More 

ChartWatchers

I've Never Seen An Earnings Signal This Bullish

by John Hopkins

At EarningsBeats.com, we track the best U.S. companies in a "Strong Earnings ChartList." In order for a company to be included in our ChartList, they must do 3 things: (1) Beat quarterly revenue estimates (2) Beat quarterly EPS estimates (3) Look solid technically If a company doesn't meet those 3 requirements, we ignore them. Plenty of energy and materials stocks have met requirements 1 and 2 over the past 90 days, but the sectors have been shunned by Wall Street due to a strengthening U.S. Dollar Index and many of these companies are in downtrends, or at Read More 

ChartWatchers

Monthly Sector Rankings Show Defensive Leadership

by John Murphy

Editor's Note: This article was originally published in John Murphy's Market Message on Friday, June 14th at 1:20pm ET. Chart 1 is taken from the Sector Summary page for the past month. And it shows that investors are still gravitating toward defensive issues. Four of the top sectors are utilities, health care, real estate, and consumer staples. All four are defensive in nature. Even the month's strongest sector has a defensive tilt.  Materials were the month's strongest sector. But it was led higher by gold miners which rallied on the back of a stronger Read More 

ChartWatchers

Are Small-caps Really the Canaries in the Coal Mine?

by Arthur Hill

Many a pundit considers small-caps as the canaries in the coal mine and this implies that relative weakness in small-caps is negative for the broader market. As Missanei of Game of Thrones might say: It is known. Known, yes, but is it actually true?   In the interest of full disclosure, I bought into the argument that small-caps were the canaries in the coal mine and relative weakness was negative for the broader market. It certainly makes sense, but the markets often march to the beat of a nonsensical drummer. We can certainly eye-ball charts and find instances Read More 

ChartWatchers

Lumber Stocks Try To Bounce

by Greg Schnell

Commodities have been smothered for years. I think the best way to play them is to enter near the bottom - with tight stops - and subsequently ride out the runs. When they top out, step aside as they pull back. We can use indicators to help us find setups. There is no guarantee that we'll have found the final low, but, remember, our stops can also be tight.  This week, the lumber-related stocks are trying to rally. Here is the chart of Lumber. The Full Stochastic has given a buy signal this week and the PPO is close to giving a signal as well. I do like the Read More 

ChartWatchers

Banking on Bitcoin

by David Keller

Yesterday, I had a great roundtable with Tom Bowley and Erin Swenlin on MarketWatchers Live, where Erin and I discussed comparisons between gold and Bitcoin. Now, at first glance, that might seem like a bit of a spurious comparison. Gold has been around forever, while Bitcoin and other cryptocurrencies are just a couple years old. They couldn't be more different! Not so fast. You see, both have fanatical supporters. Both are polarizing topics; investors seem to either love them or hate them. Both have a Read More 

ChartWatchers

Relative Strength Or Diversification? You Better Choose Carefully

by Tom Bowley

I'm going to say that you need elements of both, although you're going to want a much bigger helping of relative strength.  Too much diversification can be extremely unhealthy, there needs to be a balance.  Let me give you a quote about diversification from one of the best investors of all-time: "Diversification is a protection against ignorance.  It makes very little sense for those who know what they're doing." - Warren Buffett Mr. Buffett, I completely agree with you.  Conventional wisdom says to diversify Read More 

ChartWatchers

3 Tasty Restaurant Stocks to Sink Your Teeth Into

by Mary Ellen McGonagle

By all accounts, people enjoy eating out, with the National Restaurant Association projecting a record high in U.S. restaurant sales at $863 billion this year, up 3.6% from last year. From global expansion plans to technological advances, many restaurants are catering to consumer’s changing tastes while easing the delivery process. All of this has boosted same-store restaurant sales to levels not seen since 2015, with 4 successive quarters of improvement. Below is a chart of the Dow Jones US Restaurants & Bars Index, which is comprised of larger, better-known companies. As Read More 

ChartWatchers

Long-Term Picture Shows Gold Close to a Breakout

by Martin Pring

Editor's Note: This article was originally published in Martin Pring's Market Roundup on Tuesday, June 4th at 2:57pm ET. From a long-term aspect, Gold looks as though it is in the process of duplicating its action at the turn of the century by forming a huge base. Of course, it will only a base once it has completed with a decisive move above the $1350 area, an event that looks close to happening but has not done so yet. Chart 1 What has occurred is that the price oscillator (bottom window of Chart 2) has re-enforced its recent bullish signal by Read More 

ChartWatchers

Can I Have A Coke (KO) With My Big Mac (MCD) Please?

by Julius de Kempenaer

While browsing through the stocks in the DJ Industrials index, my attention was grabbed by the tails on KO and MCD, both in a positive way. KO is making a wide rotation through lagging into improving and is now very close to crossing over into the leading quadrant. MCD, meanwhile, is already inside that leading quadrant, having completed a rotation through weakening without hitting the lagging quadrant. When you toggle* through the tails on the RRG of the Dow 30 stocks against $INDU, you can easily notice these two tails as being of potential Read More