ChartWatchers

REGISTRATION NOW OPEN FOR CHARTCON 2014 IN SEATTLE THIS AUGUST
by Chip Anderson | ChartWatchers

Hello Fellow ChartWatchers!

Happy New Year! 2013 was very, very good to technical investors. Let's hope 2014 continues that trend.

As we mentioned in the previous newsletters, we've put together an amazing line up of speakers for our upcoming ChartCon conference. Today, I'm please to announce that registration for this great event is now open. If you already know you want to attend, click here to get an early jump on the registration process. If you aren't sure, read on.

Announcing ChartCon 2014 in Seattle on August 8th and 9th

ChartCon is our annual conference for StockCharts.com enthusiasts. Each year in Seattle we invite all of our members to join us for several days to talk about chart analysis. The feedback we get from attendees is universally positive with many of them saying something similar to "This is unlike any other investment conference I've ever been to. I've learned more here than I have at all other conferences combined!"

This year we are making a couple of exciting changes:

• We have invited several "titans" of the technical analysis universe to join us including Alexander Elder, Martin Pring and Richard Arms. That's in addition to our regular speakers which include John Murphy, Arthur Hill, Greg Schell, Gatis Rose, Erin Heim and myself. The complete speaker list is included below.
  
• OK - I have to devote a second bullet point to that list of speakers. It is truely amazing to have John, Alex, Richard and Martin at the same event, much less at an informal, fun event like ChartCon. In addition to hearing their presentations, you'll be able to meet and spend time with each of them throughout the conference.
  
• We've moved ChartCon to the Grand Hyatt hotel in downtown Seattle. This is a larger venue in a better hotel with more dining and entertainment options. In addition, the Hyatt has a auditorium that we'll be using for our breakout sessions.
  
• Speaking of which, we will be having breakout sessions this year. For part of each day, we'll split the conference up into 4 different groups in different rooms for presentations that are more focused and more targetted to specific topics. We'll be holding the same breakout sessions twice (once on each day) so that you can go to several of them.
  
• In addition, we'll be having several optional "After Dark" sessions on Friday night. These will be informal presentations that you can come to after dinner if you have some spare time. See the schedule below for details.
  
• We're also going to have a Mobile App this year for those of you with smartphones. This optional app will help you keep up with all of the ChartCon presentation details, room maps, nearby resturants, shopping opportunities, and feedback surveys - all right on your phone.
  
• We've also put together a wonderful Puget Sound cruise to a gala banquet on a private island to wrap up the conference on Saturday evening. Spouses/significant others are welcome to attend this event for free as well!
  
• Speaking of spouses, we've also included a special "After Dark" session just for them. Erin Heim from DecisionPoint will be talking about technical investing in a language that most spouses will understand/appreciate on Friday night.

Now keep in mind, that's just the new stuff. That's on top of the "normal" ChartCon offerings which include:

• Presentations from StockChart's "regulars" John Murphy, Arthur Hill, Greg Schnell, Tom Bowley, Gord Greer and Gatis Rose. You'll be able to listen to and hobnob with all of the people that write articles here in ChartWatchers and on our website.
  
• Access to the folks that created StockCharts so that you can get any question you have answered in a person-to-person manner.
  
• Great food. Seriously. We alway get lots of compliments on the food at ChartCon.
  
• The Great Pacific Northwest in August, the best time of the year to visit. We schedule ChartCon deliberately in August so that - when the rest of the country is broiling in 100+ degrees - our attendees can enjoy gorgeous sunshine and sunsets with temperatures that are typically in the mid-80s. Many attendees combine their ChartCon experience with a cruise - either whale watching up by the San Juan Islands or on a big cruise ship up to Alaska!

OK, are you sold yet? If so, click here to get started. If not, check out the schedule for this year's event:

(Schedule is subject to change. Click here to see a larger version of the schedule.)

Now that's my definition of fun! One last think to consider - this year we have a hard limit on the number of people that our main conference room can hold. That limit is 400 people. With the superstar line up of speakers we have, I'm pretty sure that this event will sell out fast. I really don't want you to be left out so, if you are at all interested, be sure to sign up soon!

ChartCon 2014 FAQs

Q: How much?
A: $599 per person. Includes breakfasts, lunches and the gala banquet dinner.

Q: Do you have a special deal for hotel rooms at the Hyatt?
A: Yes! We've negotiated rates of $199 per night for a one-bed room or $214 per night for a double-bed room.

Q: What can my spouse do while I'm at the conference?
A: Spouses can attend the evening events - the After Dark sessions and the banquet dinner - for free. Unfortunately, we do not have room for them to attend the regular conference sessions unless they register seperately. Seattle offers lots of daylight alternatives however including museums, site seeing and shopping.

Q: What's the cancellation policy?
A: You can cancel anytime up until August 1st.

Q: What's the difference between ChartCon and your SCU Seminars?
A: ChartCon is our big conference in Seattle with presentations from a larger number of different experts. SCU Seminars are one-day events for 50-70 people where we take you step-by-step through all the features of the website.

Q: What's the optional SCU Seminar on Thursday about?
A: We are holding a special SCU 101 seminar for ChartCon attendees on the Thursday before the conference. This event is optional. Chip, Greg, John Murphy and Tom Bowley will be teaching it. Once you register for ChartCon 2014, we'll send you additional details on how to register for this optional seminar.

Q: I live in the Seattle area. Can I attend ChartCon?
A: Absolutely! We'd love to see you there. There's ample parking right next to the hotel at the convention center.

Q: I have another question that you haven't addressed. Where can I send it?
A: The good folks at chartcon@stockcharts.com will answer all other questions.

I hope you have the time and ability to join us at ChartCon this year. I know that all of the speakers would love to meet you and hear how you are using StockCharts to analyze stocks and the market. Is it a date? If so, click here to register. Thanks!

- Chip

BOND YIELD PLUNGES ON WEAK JOBS REPORT
by John Murphy | The Market Message

Friday's news that American employers added only 74,000 jobs in December didn't have much of an effect on the broader stock market, but did shock bond investors. Chart 1 shows the 10-Year Treasury Note Yield ($TNX) suffering the worst drop since September. In so doing, the yield fell back below its early September peak just below 3%. Friday's plunge kept bond yields within its second half trading range between 3% on the upside and 2.5% on the downside. Bond prices jumped sharply as yields fell. Stocks tied to bonds also had a strong day. They include bond proxies like utilities and REITS. Homebuilders also had a strong day, as did dividend-paying stocks. So did gold and other precious metals. All had been hurt during 2013 by rising bond yields. Friday's action may have been an over-reaction to one month's report (most likely influenced by bad December weather). Portfolio rebalancing may have also played a role. One of the time-honored practices is to "rebalance" one's portfolio at the start of a new year. That involves moving some funds out of the previous year's winners (like stocks) and into the biggest losers (which are bonds). Some money managers are suggesting, however, that some money earmarked for bonds might be better placed in stock categories tied to bonds. The reasoning is that "bond proxies" offer the possibility of capital appreciation if stocks continue to rally. Since those groups were underperformers during 2013, they may offer better value at current levels, and some protection against an over-extended stock market that is entering a dangerous year.

RECAP OF 2014 FORECAST ... My December 14 message described a likely scenario for the presidential cycle to play out during 2014 which I'll summarize here. According to the Stock Traders Almanac, the second year of a presidential cycle (2014) is usually the most dangerous. The historical tendency is for the midterm election year to experience a correction (in the 15-20% range) between April and October. That usually leads to a major buying opportunity which most often leads to a stronger market the following year. I also pointed, however, that January and April were two of the best months to consider taking some profits (or rotate into more defensive sectors). January ends the best "three-month span" of the year that started in November. April ends the "best six-month span" that also starts in November. Of those two months, April is the more significant. Given that scenario, and following this week's market action, it may not be too early to start doing some "re-balancing" away from aggressive stock holdings that had a strong 2013 into more defensive stocks categories that pay dividends and that have lagged behind the market. Those groups include utilities, REITS (and especially homebuilders). That more defensive strategy may become more urgent if the market holds up through April. This may be one year where the "sell in May" strategy carries a lot more meaning.

FLAGS ARE FLYING AROUND AND WITHIN THE DOW
by Arthur Hill | Art's Charts

The Dow Diamonds (DIA) and several key stocks within the Dow formed bullish continuation patterns over the last two weeks and traders should watch these patterns for breakouts. DIA formed a falling flag and this pattern represents a rest after a sharp advance. Such a rest or pullback is actually healthy because it alleviates short-term overbought conditions. We could use a momentum oscillator, such as the Stochastic Oscillator or the Commodity Channel Index (CCI) to quantify overbought conditions, but a simple look at the price chart shows us that prices moved quite far quite fast. DIA was clearly overbought after a 5+ percent surge in just eleven days during mid December. Also note that DIA is up around 12 percent since early October, a mere three months ago. Even though I am concerned with medium-term overbought conditions and the possibility of a deeper correction, note that a move above last week's high would break flag resistance and argue for a continuation of the December surge. Yes, DIA is overbought and could become even more overbought. Based on a flag flying at half-mast, the upside projection would be to the 171 area (163 + 8 = 171).


Click this image for a live chart

The Dow is a price-weighted average of thirty stocks, which means the stocks with the highest prices carry the most weight. With prices above 175 dollars per share, Visa (221.13), IBM (187.26) and Goldman Sachs (178.39) are the big hitters in the Dow. With prices well below 30 dollars per share, the influence of Cisco (22.22), Intel (25.53) and General Electric (26.96) is way overshadowed by the three highest price stocks. Chartists looking for an edge on the Dow should focus on the highest priced stocks. Even though the four stocks below are not the highest priced, they are priced high enough to exert some serious influence. I picked these from the Dow CandleGlance charts because all four have bullish continuation patterns taking shape. CAT is already making a breakout bid. Chartists should also watch AXP, MMM and XOM for potential breakouts in the near future.



Best wishes for 2014!
--Arthur Hill CMT

INTEREST SENSITIVE ISSUES GET INTERESTING
by Greg Schnell | The Canadian Technician

Recently the Municipal Bond ETF started to turn higher. It has been a leading indicator for some of the actual government bond issues.

You can see it has broken above the 40 WMA and has started to turn the MA's from down to flat. We'll see if it can extend.

Looking at the TLT ETF on the chart below, we can now look for trend changes here.

So far, we have a textbook double bottom with positive divergence showing up. We are above the 10 WMA. The first target would be the 40 WMA at 107.25 with the follow on targets at the three fibonacci levels of 109, 112, 115.

I would not expect this to rattle the bull market in equities unless this stays above the 40 WMA. At this point, this would be a bear market rally in TLT.

Just one more note. Vancouver SCU 101 and SCU 102 classes still have room if you can make a decision quickly. We talk a lot about the current market conditions for both Canada and the USA using live charts. The actual dates are January 17 and 18th. This will aid professional money managers as well. I hope to see you there! Vancouver link 1/2 way down this information page.

Good trading,

Greg Schnell, CMT

DecisionPoint.com
Carl Swenlin is on hiatus this time. Please visit DecisionPoint.com for more articles by Carl Swenlin.

SIZING UP EARNINGS SEASON
by Tom Bowley | InvestEd Central

It's my favorite time of the quarter - as a trader. I approach it like an offensive or defensive coordinator on one of the NFL playoff teams this weekend. I study recent history to find strengths and weaknesses of the market and then I anticipate "plays" (price action) before they happen. Let's talk about the planning phase first.

Analysts are constantly visiting companies throughout the quarter, discussing prospects, goals, outlooks, etc. with management teams. They generally have a sense of how a company is going to report before they report. They use this information to build positions throughout the quarter, usually leading to a rise in stock price (accumulation) into earnings. Think of that old Wall Street adage "buy on the rumor and sell on the news". Need a real life example? Check out Alcoa (AA). AA is the company widely recognized as the one that "kicks off" (another football term - sorry it's the Divisional Playoffs and I'm a HUGE NFL fan) earnings season. Of all the Dow Jones industry groups, do you know which one has been THE best performer over the past month prior to AA's earnings report? (drum roll please)

Aluminum.

The Dow Jones U.S. Aluminum Index ($DJUSAL) had risen approximately 11% in one month before AA's report on Thursday evening. That topped even the airlines industry ($DJUSAR), which is the group that seems to command the headlines. But AA represents that "buy on the rumor and sell on the news" mentality so often exhibited on Wall Street. Look at the AA chart:



Alcoa disappointed traders after coming up a tad short on its quarterly EPS. Technically, however, AA remains a very strong stock technically after holding both price and trendline support on massive volume Friday. I expect to see AA back testing recent highs in the not-too-distant future.

Expect strong results in industry groups where prices have been soaring higher. There's a reason for this outperformance into earnings season, although a "sell on the news" reaction cannot be dismissed. That will likely set up the opportunities we'll be looking for. Through Friday's close, and excluding aluminum, here are the best performing industry groups over the past month:

Tires - Consumer Staples - $DJUSTR +14.55%
Airlines - Industrials - $DJUSAR +12.75%
Platinum - Materials - $DJUSPL +10.71%
Home Construction - Consumer Discretionary - $DJUSHB +9.57%

That last name is intriguing. The 10 year treasury yield ($TNX) has been rising since early May. Home construction ($DJUSHB) is an interest-sensitive group that generally performs poorly during a rising interest rate environment. Check out this chart:



There was a clear inverse relationship in play between home construction stocks and 10 year treasury yields for much of 2013. But the recent two month climb in yields has been met with buyers of homebuilders as we enter earnings season. Home construction stocks were one of my least favorite industry groups moving into 2013, but with signs of economic improvement abounding, this is one of my favorites of 2014. Recently, Lennar (LEN) posted excellent results, beating both top and bottom line estimates. EPS came in at $.73 vs. $.62 estimates and revenues were $1.92 billion vs. $1.88 billion expected. Technically, LEN made a significant breakout as well and appears poised for further gains. Take a look:



EarningsBeats.com identifies stocks that reflect BOTH strong fundamentals and strong technicals and then allows these stocks to hit critical support areas just like LEN did for an opportunity to trade and profit - with less risk. On Tuesday, January 14th I'll be hosting a FREE webinar to discuss the 60-70 EarningsBeat stocks from Q4 2013, going over the performance of each in detail to prepare for the next round of earnings season trading candidates. You can register for this event by CLICKING HERE

Happy trading!

Tom Bowley
Chief Market Strategist/Chief Equity Strategist

MAJOR BREAKOUT ON HOLD
by Richard Rhodes | The Rhodes Report

Friday's US Employment Situation Report was much less-than-expected at +87k. Many believe this to be an aberration given recent strong employment data, but the aberration may be a longer-than-expected aberration given 10-year note yield may be telling us that a "soft patch" is directly ahead.

Quite simply, let us preference this with the fact that 10-year note yields have indeed broken out above long-term 200-week moving average, which tells us yields are going higher over the longer-term. However, major trendline resistance is once again starting to prove its merit, with distance above the 200-week moving average having traded into overbought levels at the +20% level. In the past, this distance has been "as good as it gets" for yields, and a decline develops thereafter.

Our downside target is obviously the bottoming 200-week moving average currently trading at the 2.47% level. But make no mistake, we are only looking for yields to correct and then begin to trade at much higher levels.

--
Good luck and good trading,
Richard