Editor's Note: This article was originally published in John Murphy's Market Message on Friday, May 17th at 4:49pm ET.

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The table in Chart 1 plots the relative performance of the eleven market sectors for the week. And they show a generally defensive market. That can be seen by the fact that REITs, utilities, and consumer staples are the three top sectors for the week. At the same time, the weakest sectors are financials, industrials, cyclicals, technology, and materials. Industrials were pulled lower by Deere and Caterpillar. Technology was held back by semiconductors with exposure to China. Materials were led lower by trade-sensitive copper and steel stocks. On a brighter side, communication stocks were led higher by fixed line telecommunication stocks like AT&T and Verizon (see below). A rebound in crude oil supported energy stocks. Drug stocks gave a boost to healthcare. Consumer discretionary stocks were pulled lower by automotive stocks; homebuilders, however, were the strongest cyclical group (as they've been all year). Asset managers and banks helped make financials the week's worst sector. And therein may lie another theme for the week. And that's the impact of falling bond yields.

Chart 1

The bearish failure swing is a bearish RSI signal from Welles Wilder, creator of RSI. Note that this signal is NOT the same as a bearish divergence, even though a bearish divergence is also possible at the same time.

A bearish failure swing has four parts: RSI moves above 70 (1), RSI falls back below 70 (2), RSI rises and fails to exceed 70 (3), RSI falls below the intermittent low (4). The failure occurs when RSI fails to exceed 70 on the bounce. Signal confirmation occurs when RSI breaks its prior low. The failure below 70 shows waning upside momentum, while the break below the prior low shows an increase in downside momentum.

The chart above shows the Russell 2000 trading well below its September high and seriously lagging the S&P 500. The small-cap index is also back below its falling 200-day SMA. The indicator window shows RSI with two bearish failure swings in the last nine months. The first occurred in early October and foreshadowed a sizable decline. The second signal triggered this week when RSI broke below its March low.

Astute chartists will also notice that the Russell 2000 formed higher highs during each failure swing. Higher highs in the index and lower highs in RSI amount to bearish divergences Personally, I do not use bullish or bearish divergences for trading signals. As far as I am concerned, the break below the 200-day, the falling 200-day SMA, underperformance and RSI break down point to weakness in the Russell 2000 and this is enough reason to avoid small-caps.

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Arthur Hill, CMT
Senior Technical Analyst, StockCharts.com
Author, Define the Trend and Trade the Trend

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From what I can see, global bank charts are continuing to weaken. The banks as a whole have rolled over in the last two weeks, but we have some major banks around the world making new multi-year lows. This is problematic. First of all, we have the chart for KBE below. If this is an average of the banks, that average is now below both the 10-week and 40-week moving averages. The price action is also continuing the downtrend. Notice that momentum, shown by the PPO, is rolling over at zero. This is not good.

But the world has some banks in serious trouble from a chartist's perspective. Australia, in particular, has a couple of trouble spots.

Australia and New Zealand Banking Group (ANZBY) is fading away here. The stock is down 5% on the week and now looks like it will test multi-year lows as the PPO rolls over at zero. Meanwhile, Australia National Bank lost 10% this week and is barely above 6 year lows.

Barclays is testing 2019 lows and is only a $1 or 15% away from its three-year lows.

Goldman Sachs is rolling over below its 40-week and 10-week moving averages. The PPO is rolling over at zero.

Wells Fargo is 30% off its highs and 15% above its 5-year lows. The problem is that the chart looks aimed toward the lows as it is $0.25 above the 2019 lows. Compare that to the $SPX. Ouch!

Sumitomo Mitsui is only 10% away from 3-year lows. Another Japanese bank, Mizuho Financial, is down 5% this week. It has made new 2019 lows this week and is $0.02 above 3-year lows. Mitsubishi UFJ Financial Group broke to new 3-year lows.

Societe Generale is marginally above 6-year lows made earlier in 2019.

Deutsche Bank made new all-time lows and new closing lows this week.

These are just some names that are looking extremely weak. Many of the US and global bank charts are rolling over with momentum near zero or at zero on the PPO. This is extremely important. The breadth of the problem in the big financials appears to be global. While the US names don't look as desperate, many are failing at the 40-week moving average again.

When the financials are not participating in the rallies, I want to stay focused on credit. The markets are in a very tense setup here. I'll have more information on my Weekend Market Roundup, which you'll find in the playlist here later on Saturday night.

Good trading,

Greg Schnell, CMT, MFTA
Senior Technical Analyst, StockCharts.com
Author, Stock Charts For Dummies

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Every trader dreams of owning a stock that doubles. If it can happen in just six months, even better. This has been the case for Twilio (TWLO), a stock featured during our Top 10 Stock Picks webinar in November of 2018 that has doubled in price since the November 20 bottom of $71.56.

You can see in the chart below that the stock came close to revisiting that November 20 bottom when the overall market melted down in late December. However, it instead put in a slightly higher low and then went off to the races.

Take note also of the massive volume accompanying the gap higher after it had reported its earnings on November 6. This was a sign of strength with traders recognizing the potential of the stock on any pullbacks.

Of course, finding stocks that double in six months is no easy task. (If it was, everyone would do it!) But finding stocks that have the potential to outshine the overall market becomes an easier task if you can zero in on stocks like TWLO, which easily beat earnings expectations while exhibiting leadership qualities. In fact, we're about to have our next Top 10 Stock Picks webinar (featuring StockCharts.com's Senior Technical Analyst Tom Bowley) this Sunday evening, May 19. It's a very popular event and with good reason, given the stellar performance of stocks that made the Top 10 lists the past two quarters. If you want to learn more on how to register, just click here.

Q1 earnings season has pretty much come and gone. We saw a boatload of companies beat earnings expectations, gap higher and pull back to high reward-to-risk levels. These are the types of stocks you should focus on.

At your service,

John Hopkins
EarningsBeats

I've begun writing my own obituary. No worries. I don’t have any incurable health issues to be concerned about. It's simply an exercise that I believe will have value and will be beneficial to my investment efforts. The catalyst for this rather unusual undertaking was James Hagerty's piece in the Wall Street Journal on April 22, 2019. Hagerty's professional job is to write obituaries about others for the newspaper, and on a lark he decided to write his own.

As I read his article, I began to ask myself the question, "what has motivated me to live the life I am living?" Hagerty writes that the obituaries he writes always attempt to answer three basic questions. What was that person trying to do? Why? And how did it work out?

I think asking these same questions while wearing your investor hat can produce a number of profound insights. We investors all have different motivations because we're all different unique souls. But I've always maintained that if money is your primary motivational driver, your investing efforts will underperform your potential.

In resolving to compose my own obituary I've pledged to set aside fifteen minutes a week to delve into myself and revisit my thinking. Yes, I'm exploring my own motivations, but I guess I'm writing my own story as well and not leaving it entirely to my family to figure out when I'm gone. I've made choices. I continue to make choices and I am trying to catalogue precisely those choices to better understand my motivations both in life and investing.

This is not too dissimilar to prize fighters. They are judged by the fights they select almost as much as by those they choose to avoid. We investors must choose wisely in making investments, but we should understand the reasons for doing so — why we chose what we did. An unwillingness to do so would be like living in a house without windows.

Not to sound morbid, but I invite you to join me in writing your own investing obituary as you consider the choices you've made and the choices still to make. Sure, you can include some personal tributes, but don't make it all about your victories, triumphs and conquests. Make it something that reveals your motivations. Be humble and include your bungles, botches and blunders as well. Be brave. Step forward and look in those tough places — your life will get bigger.

Living and investing with purpose yields the fruits of labor to be proud of. Think of your written obituary as a sort of life recipe. What you do here and now will determine what you leave behind and how you are remembered. It's not good when life ends, but here you get to write the ending!

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Seattle-area investors!

Come join me at next month's MoneyShow here in downtown Seattle, where I'll be speaking.

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Trade well; trade with discipline!
- Gatis Roze, MBA, CMT

StockMarketMastery.com

• Author, Tensile Trading: The 10 Essential Stages of Stock Market Mastery (Wiley, 2016)
• Presenter of the best-selling Tensile Trading DVD seminar
• Presenter of the How to Master Your Asset Allocation Profile DVD seminar
• Developer of the StockCharts.com Tensile Trading ChartPack

If you watch MarketWatchers LIVE regularly, you've probably heard about my new scan. I've found, especially when the market has a bearish bias, that my original Price Momentum Oscillator (PMO) scan wasn't producing any results. I consider this a caution flag before I get too involved with the results of my new scan.

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The original scan is below. Its requirements are quite high, so I won't get results in a bearish market; not only do I need a PMO on a rising trend, but the EMAs need to be configured bullishly. After the market takes a serious hit, there aren't that many stocks that will work with the scan. It is great for intermediate-term trades, though, as resulting stocks are on already on the right track.

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// Narrows down the universe to stocks with decent volume and from the US
[type = stock] AND [Daily SMA(20,Daily Volume) > 100000]
AND [country is US]

// Keeps the penny stocks and high volatility stocks out of your results
AND [Close > 10]

// This identifies a PMO that hasn't yet had a positive crossover its signal line
AND[today's PMO Line(35,20,10) < today's PMO Signal(35,20,10)]

// This identifies a PMO rising for three days
AND [today's PMO Line(35,20,10) > yesterday's PMO Line(35,20,10)]
AND [yesterday's PMO Line(35,20,10) > 2 days ago PMO Line(35,20,10)]
AND [2 days ago PMO Line(35,20,10) > 3 days ago PMO Line(35,20,10)]

//This ensures we get a positive IT and LT Trend Model configuration
AND [today's ema(20,close) > today's ema(50,close)]
AND [today's ema(50,close) > today's ema(200,close)]

//This identifies stocks with SCTRs greater than 75 or in the "hot zone"
AND [SCTR > 75]

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MarketWatchers LIVE is centered mainly on the short term. I need a scan that would give me good results for short-term investments; I think this scan serves that purpose pretty well.

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[type = stock] AND [Daily SMA(20,Daily Volume) > 100000]
AND [country is US]

// Keeps the penny stocks and high volatility stocks out of your results
AND [Close > 10]

AND [today's PMO Line(35,20,10) > yesterday's PMO Line(35,20,10)]
AND [yesterday's PMO Line(35,20,10) > 2 days ago PMO Line(35,20,10)]
AND [2 days ago PMO Line(35,20,10) > 3 days ago PMO Line(35,20,10)]

AND [today's ema(20,close) > today's ema(50,close)]
AND [today's ema(50,close) > today's ema(200,close)]

AND [SCTR < 80]
AND [SCTR > 70]

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The scan above doesn't require the PMO to be beneath its signal line. Additionally, it allows the SCTR to be potentially as low as 70, rather than 75. I really have been surprised by the results that return with just that little amount of tweaking. If this still isn't opening you up to enough results, I recommend that you go ahead and "comment out" some of the criteria. For example, I will sometimes let the PMO rise for 2 days (or even just for the day). Unfortunately, the hard work comes afterwards when it's time to analyze the results.

Here is part of a CandleGlance containing some of today's results.

To start with, I look for breakouts from resistance or declining trends accompanied by a good-looking PMO (one that is moving upward, not sideways or twitching). I then follow that with looking at any chart patterns that reveal themselves.

Looking at the results above, my interest lies with AEE and CMS (a breakout from a possible flag and challenging highs). It's just a small thumbnail, though, so I have to look at the charts. I've annotated both below. Of the two, CMS is more promising, despite a very similar price chart. My reasoning is that CMS has already broken above its March top while AEE hasn't.

Hopefully you found this exercise helpful. I hope you find my new scan to your liking. Enjoy!

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Watch the latest episode of DecisionPoint with Carl & Erin Swenlin LIVE on Fridays 4:30p EST or on the StockCharts TV YouTube channel here!

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Technical Analysis is a windsock, not a crystal ball.

Happy Charting!
- Erin

erinh@stockcharts.com

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Helpful DecisionPoint Links:

Erin's PMO Scan

DecisionPoint Chart Gallery

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking

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