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the StockCharts.com Newsletter

January 3, 2016
  Chip Anderson | Site News | John Murphy | Arthur Hill | Greg Schnell | Carl Swenlin & Erin Heim | Tom Bowley | John Hopkins | Gatis Roze  
by Chip Anderson | ChartWatchers

Hello Fellow ChartWatchers!

Happy New Year to you and yours. Here are the results for last year in PerfChart form:

All-in-all, bleh. The Nasdaq outperformed everyone else - mainly because of a spurt back in February. In reality, everything has been negative since the start of March. When both the NYSE (blue chips) and Russell 2000 (small caps) are battling for last place, you know the overall market is weak.

Looking Back and Looking Forwards into 2016!

Long time ChartWatchers know that I also begin each year with a review of what we've added in the previous year. Hey, it's tradition! So here we go:

Last year at this time, I listed a bunch of features that I hoped we would complete in 2015. Here's the list and my thoughts about how we did:

  • International Stock Data - we did add delayed data for LSE and NSE-India stocks to our database. We are working hard on allowing real-time intraday data for those exchanges as well and expect that to roll out in the first quarter of 2016.
  • Webinars - Holy cow! 2015 was definitely the year of the webinar at StockCharts. We produced and archived over 300 free webinars for our users in 2015. Hopefully you had a chance to see some of them. We expect to continue providing lots of high-quality, technically-focused webinars in 2016 as well.
  • Improved Webinar Registration - Things are much better than they were but we still have several big improvements in store for 2016.
  • More Tom Bowley - Tom's 3 webinars per week have been a well-received addition to our commentary lineup and that should continue in 2016 as well. His blog is awesome as well.
  • Wyckoff-Oriented Blog - Bruce Fraser's blog now has over 30 terrific Wyckoff-oriented articles. You can expect many more in 2016.
  • More ChartPacks - Well, Greg Schnell still owes me however we did get new ChartPacks from Greg Morris, Arthur Hill and Gatis Rose. Maybe if we all say "I believe in Greg Schnell" out loud, he will grace us with a ChartPack in 2016.
  • Paper Trading Game - This one has proved elusive. We are still making progress on it, but challenges remain. I'd say it is 50-50 for 2016.
  • New ChartNotes - This one we did make tons of progress on, but there is still tons to do. Look for it around the middle of the year (he says...)
  • New P&F Workbench - Done. It is excellent.
  • Index and Market Indiciator Improvements - Done. Also excellent. Have you see our new index documentation database?
  • Online SCU Events - The webinars kind of overtook this idea. We expect to create several SCU videos and DVDs in 2016 however.
  • Fundamental Data - Frankly, this fell through. The deal we were offered would have cost us a fortune and frankly, the free data on other website would still have been better.
  • An App - No actual progress on this but we have hired someone how will start working on this very soon. Fingers strongly crossed on this one.

In addition to all of that stuff, we have lots of other stuff in store for 2016. Having learned my lesson from last year's list, I'm not going to give out a ton of details except to say two things:

  • Our focus will be on "Helping our users make money using simple approaches that make sense." We'll still have our huge industry-leading collection of technical tools, but if you feel overwhelmed by all of those choices, help is on the way!
  • Instead of holding a physical ChartCon 2016 conference in Seattle, we will be holding an on-line version this fall. That way more people can attend for less expense. We'll have several technical tricks up our sleeves to try and make the online version of ChartCon just as fun as the previous versions. Stay tuned for more details!

Thanks again for being great StockCharts users. Here's to a great, profitable 2016!

- Chip

  • CHARTWATCHERS WEBINAR SCHEDULE CHANGE - The ChartWatchers webinar with Chip Anderson will now be held on the second and fourth Saturday of each month. Basically on the weekends opposite of when we send out this newsletter.
  • LAST CHANCE FOR OUR HOLIDAY SPECIAL! - Seriously, it ends Sunday at midnight. This is your absolute last chance. If your account expires before October, 2016, you should renew right now.
The Market Message
John Murphy is on hiatus this time. Please visit The Market Message for more articles by John Murphy.
by Arthur Hill | Art's Charts

Depending on how you measure it, the stock market was up, down or flat in 2015. It also depends on what you call the stock market. Is it the S&P 500, S&P 500 Equal-Weight Index, the Dow, the Russell 2000, the Nasdaq? Truth be told, it is a market of stocks and not really one big stock market. Chartists using the broad stock market indices will see mostly negative numbers. The Nasdaq brothers, $NDX and $COMPQ, were the only two to gain.

What happens when we add dividends to the equation? There is a total return index symbol available for the S&P 500 ($SPXTR), but chartists need to use ETFs to simulate total return for the other indices. Note that StockCharts provides total return data for ETFs and stocks. This means the dividends are added back into the price so chartists can see the total return one would get on their investment. Taking this into account, the second PerfChart shows S&P 500 Total Return Index with a 1.38% gain last year and the S&P 500 SPDR (SPY) with a 1.23% gain. The Dow Diamonds (DIA) also moved from a small loss to a fractional gain with the dividend. Thus, it would appear that dividends did indeed matter in 2015.

The performance of the major stock indices and major index ETFs tells us it was a mixed market in 2015. This is also confirmed when we break down the performance of the Nasdaq 100, S&P 500, S&P MidCap 400 and S&P Small-Cap 600. Using total return data, note that the Nasdaq 100 had the most winners with 63% of its components advancing in 2015. Netflix, Amazon and Ctrip.com were up over 100%, while another 38 components were up more than 10%. These numbers show broad strength throughout the tech-heavy index. The S&P 500 was literally split down the middle with half up and half down. Performance then deteriorated as we move down in market cap. The S&P Small-Cap 600 had the most losing stocks with around 56% of its components closing lower on the year.

Best wishes for 2016!

Thanks for tuning in and Happy New Year!
--Arthur Hill CMT
Plan your Trade and Trade your Plan
by Greg Schnell | The Canadian Technician

A few industry groups that look to have upside in 2016 have been moving sideways recently. These may pull back with the averages, but they will probably perform pretty well on the recovery bounces. Due to the volatility in each of them, you may find they are trades, not long-term buys. Living with 30% pullbacks makes it hard to outperform the averages.

Currently, in this risk off environment, they have not rallied. The weakness heading into the New Year was not a compelling reason to get long these groups, but keeping them on watchlists for moves could be very fruitful. Knowing what you want to buy, when the time comes is one of the better strategies.

The first one is Cyber Security. The ETF is HACK. If it can start to outperform on relative strength, and break the down trend in SCTR, that would be a start. A move above the $27.75 level would be 4-month highs and suggest there may be a change in trend coming from sideways to up.

Secondly is the Biotech ETF area. There are many ETF's and all of them are suppressed currently under the 200 DMA. I would wait for a clean breakout. In the case of XBI, as shown below, a push above $73.75 is new 3-month highs and the 200 DMA is $75. A push above those levels with some volume is probably an indication the Biotechs are ready to run. As long as those levels hold, this can be a part of the portfolio.

Lastly, the internet area has been very strong and will probably continue to be with high margins and low-cost structures. Right now this chart looks like a decisive move is coming, one way or the other. A breakdown of the relative strength shown in purple would be a major caution for me. The relative strength is trying to hold above 2-month lows. If the price can't hold above $73, I would stay away and look for a better entry at lower levels. Right now, a break above $78.25 would suggest the trend is rising again.

Sticking with strong, high growth areas is helpful, but only when the overall market is in a risk-on mood. Currently, with Staples and Utilities holding up better than the others, this is not a risk-on environment. If the market pulls back, you might get some nice entries into these high growth areas that could help your portfolio outperform the indexes. Having them on a watchlist with Technical Alerts is a great method to stay on top of the action. Look for the Technical Alerts Workbench on your members tab in the Control Centre.

Best wishes for a very prosperous 2016!

Good trading,
Greg Schnell, CMT

Carl Swenlin & Erin Heim are on hiatus this time. Please visit DecisionPoint.com for more articles by Carl Swenlin & Erin Heim.
by Tom Bowley | Trading Places

2015 was a very difficult year. We witnessed our first serious selling since 2011. It's unusual to trade in a bull market for four years with little interruption, yet that's exactly what we did. Despite not breaking down, the trading environment was quite challenging in 2015. Sure, consumer stocks and technology performed better than average, but energy and material shares were tossed aside much of the year. And if we dig a little deeper, we'll find that not even consumer stocks were broad winners. For example, there are 23 industry groups within consumer discretionary. 12 finished the year higher while 11 were down. Consumer staples actually performed much more consistently with only one of its industry groups - nondurable household products ($DJUSHN) - lower for the year. In technology, the XLK rose nearly 5.5% but strength was felt in mostly three industries - internet ($DJUSNS), software ($DJUSSW) and mobile telecommunications ($DJUSWC). Those three industries gained 28.79%, 9.12% and 7.88%, respectively. The other 8 industry groups dropped in 2015, led by consumer electronics ($DJUSCE) which fell 24.92%.

The point of all this? While our major indices may have remained close to breakeven in 2015, it was not a great year for traders as rotation left both bulls and bears frustrated throughout the year. Unfortunately, we're going to begin trading in 2016 with many challenges and few answers. Money rotated towards safety BIG TIME in the month of December and the Russell 2000 had its worst December showing last month since the index began in 1988, falling more than 5% in just the past 30 days.

Here are three ratios that fell apart in December that NEED to recover in order for the bulls to regain the upper hand in 2016:

The blue vertical line simply shows how these ratios have fallen since the beginning of December. Should we see the stock market rally in January (historically it does), we want to see money rotating towards aggressive areas, suggesting that traders have a "risk on" mentality. The risk on approach helps to sustain a market advance.

If the seven year bull market resumes in 2016 and we see a breakout in the S&P 500 to all-time highs, what areas of the market might be set up for relative strength? I limited my research to the industry groups within the four primary aggressive sectors, namely technology, industrials, consumer discretionary and financials. Here are a couple industry groups to watch:

1. Diversified Industrials ($DJUSID)

On a relative basis, the DJUSID has simply gone along for the ride. This industrial area significantly underperformed the S&P 500 throughout much of the first decade of this century, but is starting to rally. General Electric (GE) posted excellent results and GE last week traded at its highest level in nearly 15 years. Honeywell (HON), another key stock in this space, last week traded just 50 cents from its all-time high. Clearly, there's some strength building in this area and a relative breakout vs. the S&P 500 would provide an additional boost to an industry group that just displayed its best relative strength for a quarter in several years. A relative breakout is nearing, as reflected below:

2. Software ($DJUSSW)

Software had a strong 2015, but has just broken key relative resistance and is likely poised for further gains. Microsoft (MSFT) was a big reason for the 2015 outperformance as strong earnings accompanied a surge in the stock price in October. Other strong stocks in the space include Adobe Systems (ADBE), Autodesk (ADSK) and Salesforce.com (CRM). These four have been leaders within their space so look for continued strength to lead the overall group.

Happy New Year and Happy Trading!


by John Hopkins | InvestEd Central

The S&P ended 2015 down slightly from the close in 2014. But to many traders, it sure felt like a downer of a year.

At EarningsBeats.com we combine strong fundamentals with strong technicals to try to find the best reward to risk trading candidates for our members, the theory being the combination of the two is tough to beat. However, this past four months was extremely challenging, even for many stocks that posted strong earnings the prior quarter.

Our focus since our inception has been on the long side. But we are going to need to be prepared to shift our focus to the short side if the market so dictates. And we might get a better idea of what is in store once companies start to report their fourth quarter earnings, starting with Alcoa when they post their numbers on January 11, the "official" beginning of earnings season.

In spite of the recent doom and gloom and lousy finish to the year, we do need to keep a few things in perspective. First, over the past four years, the S&P has climbed 62% which averages over 15% per year. Maybe it needed a year off. Next, the S&P is 4.5% from its all time high of 2134. So a few strong days in a row could put that all time high within reach. Finally, the market has been hostage to falling oil prices and a change in the Fed rate policy and has actually held up quite well. Should oil begin to stabilize, and possibly even climb, that could help bolster the beleaguered energy sector and help to light a fire under stocks.

Bottom line? A decent showing when earnings numbers start coming out could be just what the bulls need to mount a challenge to the all time high. It's not far fetched, considering the market is preparing for a weak showing. And the good news for traders is they might not have to wait long to find out, maybe just a few weeks from now which will go by quick.

Here's to a prosperous trading year for one and all!

At your Service,

John Hopkins

by Gatis Roze | The Traders Journal
For myself, one of the most momentous insights into life and investing happened over 25 years ago when Sir John Templeton, who was exceptional as both an investor and a human being, talked about the profound importance of pairings in determining the quality of one's life. There are infinite examples all around us from which to choose – perhaps the most obvious being the pairing decision Read More

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