Don't Ignore This Chart

Utilities Take the Lead with a Triangle Breakout

The Utilities SPDR (XLU) is clearly one of the leading sectors in 2017 because it is trading at its highest level of the year. XLU, by the way, is the only sector SPDR that hit a year-to-date high on Monday. The chart shows XLU correcting into November 2016, breaking out in December and then consolidating from mid-March to mid-May. This consolidation just ended with an upside breakout and the breakout signals a continuation of the bigger uptrend. The indicator window shows the PPO(10,40,1) turning positive in December as well and remaining well above zero the entire year. This confirms the uptrend because it means the 10-week EMA is above the 40-week EMA. 

****************************************
Thanks for tuning in and have a great day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
*****************************************

Northrop Grumman Awaiting Bullish Triangle Breakout

Northrop Grumman (NOC) has risen ten fold since this bull market began in 2009 and its current bullish pattern suggests that this defense company is not ready to roll over just yet.  It's been a struggle to clear 250 price resistance the past 6-7 months, but the rising lows are an indication that we should expect another breakout - with this ascending triangle measuring to perhaps 280 or so in time upon a heavy volume breakout.  Here's the current technical view:

The entire defense industry group ($DJUSDN) has been steadily outperforming the S&P 500 the past few years and this interest should add sustainability to the NOC bullishness of late.

Happy trading!

Tom

The Swiss Franc Raises Its Flag

The Swiss Franc ($XSF) made a meaningful break of the downtrend this week. The correlation of the Swissie to other asset classes is worth noting. 

Reviewing some of the history on the chart, 2011 shows the Swiss Franc at the summit of a Matterhorn peak with  major momentum going in. But the sudden plummet soon after aligned closely with a meaningful top and plummet in Gold. Interesting enough, the Yen in the lower panel would need another couple of months to top out and roll over. 

Continue reading "The Swiss Franc Raises Its Flag" »

Caterpillar Tests Price Support, Nearly Fills Gap

Caterpillar (CAT) was one of many beneficiaries of the latest quarterly earnings season.  With its revenues and EPS topping Wall Street estimates, CAT surged higher on April 25 from its April 24 close of 96.81.  The recent market weakness enabled CAT to pull back to test key price support and nearly test that gap support as well, setting up the stock as a very solid reward to risk trade at the current price and down into that support zone.  Here's the chart:

Price support resides near 98.00 and the zone from that level down to the 96.81 gap is where I'd look for buyers to continue to step in during periods of weakness.  I would expect the high from April 26 to provide resistance in the near-term.  The blue arrow highlights the extremely heavy volume that accompanied the gap higher.  Because of this heavy volume, gap support should be quite strong.

Happy trading!

Tom

Gold, Euro and Bonds: The Three Inter-market Amigos

The Gold SPDR (GLD), Euro ETF (FXE) and the 20+ YR T-Bond ETF (TLT) are all up year-to-date and showing positive correlation. This is not a big surprise because gold is negatively correlated to the Dollar and negatively correlated to the 10-yr T-Yield ($TNX). The Euro accounts for around 57% of the US Dollar ETF (UUP) and a strong Euro translates into a weak Dollar ETF. Treasury bonds and yields move in opposite directions and this means higher bond prices translate into lower yields. Furthermore, chartists can clearly see that GLD, FXE and TLT were down from September to December. The correlation here is also positive because all three moved in the same direction. 

Continue reading "Gold, Euro and Bonds: The Three Inter-market Amigos" »

The Rare Earth Metals ETF (REMX) Might Be Worth Mining

The Rare Earth Metals ETF (REMX) had glory days from October to February. Then a slide ensued where a lot of the basic materials were falling down. Today the REMX ETF looks interesting as the chart has a new pattern of higher lows and higher highs with todays upside push. It is back above the 200 DMA and trying to break above the 50 DMA. The downtrend in Relative Strength has been broken and it is trying to make new 1-month relative strengh highs.

Continue reading "The Rare Earth Metals ETF (REMX) Might Be Worth Mining" »

PPO Upturn Points to a Correction-ending Breakout for Textron

Textron (TXT), which is part of the industrials sector and the defense-aerospace industry, surged to new highs after the election and then declined in 2017. I consider this a correction within a bigger uptrend because the decline retraced less than 50% of the prior advance and the stock remains above the rising 40-week EMA. A channel formed over the last few months to define the immediate downtrend. A break above channel resistance would signal an end to the correction and a resumption of the bigger uptrend. Signs of an upturn are already emerging as the PPO (5,30,5) turned up and crossed above its signal line for the first time this year. 

****************************************
Thanks for tuning in and have a great day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
****************************************

Breakout Watch: Can Intel Deliver The Goods?

Intel (INTC) has been trading in bullish sideways fashion since topping in October.  The Dow Jones U.S. Semiconductor Index ($DJUSSC) has continued to rise and lead the benchmark S&P 500 on a relative basis - even while INTC consolidates.  A breakout in Intel would measure to 42 based on its ascending triangle.  That's a tidy profit from the current price of 35.53.  Given the strength in its industry group, INTC could make a fairly quick push higher.  Here's the chart:

Continue reading "Breakout Watch: Can Intel Deliver The Goods?" »

IWM Shows The Battle Scene Pretty Well

A lot of people who analyze the market including portfolio managers will talk about supply and demand, or the battle between buyers and sellers. This could not be more evident in the Russell Tracking ETF (IWM). Since December 9th the IWM has been in a sideways trading range, whereas the NASDAQ has been up humongously since then. 

The $RUT is charting some indecision. The rising highs but slightly lower lows suggests the range of indecision is expanding. On April 25th we see the chart gapping up to new highs for the first time in 7 weeks. April 26th the market trades higher but closes mid range. The following day shows an inside day and then a big push down on Friday April 28th as a blue candle. Essentially what happened here is the market ran out of buyers at new highs and the price fell back. We need to wait for the end of today to complete today's price bar, but the 2-month uptrend in Relative Strength appears to be breaking today. If nothing else, its suggesting we pay attention. The horizontal dotted line on the price panel touches the top of the December 9th price bar, and we are struggling to get back above this level again after surging to new highs only two weeks ago. Five months later price reads as unchanged. This 138ish level is a real support/resistance line. 

Continue reading "IWM Shows The Battle Scene Pretty Well" »

Xerox Rises from the Ashes

I was running through some charts today and came across and interesting setup - in Xerox of all names. It has been a long time since Xerox crossed my path. The company provides document management solutions with both hardware and services. It is a $7.2 billion company and part of the S&P 500.  Based on the chart, things may be looking up. The stock broke out with a gap and surge in January and hit a 52-week high in February. After a 30+ percent gain, the stock was ripe for a correction and it fell back to the 6.90 area in April. Notice that a falling channel of sorts formed and the stock retraced around 38% of the prior surge (sans spike). There are signs that this correction may be ending because MACD turned up the last few weeks. A resistance breakout would complete the reversal and argue for a continuation of the bigger uptrend. Note that Xerox is a low-priced stock and this means it carries above average risk. 

****************************************
Thanks for tuning in and have a great day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan 
*****************************************