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Here is yesterdays blog with new data!

Yesterday, we blogged about how everything was below the 10 week. Well, every sector except Tech is above the 10 week today. The USD is moving down and the commodity currencies of Australia and Canada are moving up above their 10 week lines.

Today,

 Just a brief look at the different sectors. A quick scan says things are still weak. The Euro currency as well as the Yen were quiet today. The bond market has not confirmed the big move of yesterday.

Here are the Canadian Sector charts. I recommend looking at the recent price action, trending up, flat or down. Secondly, watch the 10 week MA on the right hand side. Lastly, check if the price is currently above the 10 week. That is where price has to be to turn the MA up!

Did you find any upsloping 10 week MA's? How about price above the 10 week MA?

Regarding all of the sectors, we would expect these recent November lows to be above the October low. If not, these sectors are weak and getting weaker.

So Financials, Consumer Discretionary, Materials and Technology have taken out the October lows or are already pushing down at the same level. Notice how the Canadian financials clearly broke through the area of previous support on the left side of the chart.

RIM.TO dominates our tech sector but it's falling in value and importance.

The Canadian financials are clearly weak.

The Consumer Discretionary sector has been more bouyant in the US, but we have a smaller pool.

I continue to think materials are being hit by the strong US Dollar. This hurts Agriculture and the commodities.

I've dropped in a currency chart to demonstrate the issue.

Notice how every currency is near a major support level. On the USD chart this is resistance overhead. Four of the five currencies have downsloping 10 week MA's.

For the Canadian Loonie, this 95 level is important. A generous support level would be 94. If we break through there, the strength of the USD is probably a global event affecting all currencies. The little dotted line is important on each chart.

You can click on the charts for a live update. You can revisit the blog page to get current updates on the chart. The blog photo won't update, but if you click through on the chart, it will take you to a current update chart. The currencies are going to be a major indicator as we go forward. The Yen and the Euro are the large currencies. If they can continue to find support here, that is great news. If they both start to break down below support, it will be a massive push to the USD which would hurt commodity prices. This in turn would hurt the $TSX.

The entire world is expecting Fed QE3. Will it be talk, that the Fed stands at the ready? Will it be reality that they QE somehow?

I am not as convinced. The food inflation is really high already. More QE will be inflationary and all commodities - especially energy - will surge higher. Surging energy costs are a tax on the consumer. That is tricky for the Fed. Currently the GDP is 2.0% in the 3rd quarter. While not aggressive, it makes it hard to justify additional QE when it is growing.

Please register for the CSTA meetings in December. Head to www.csta.org and see if there is one venue close to you. All the meetings are free for first time visitors. The CSTA is a volunteer based group to help educate investors on technical analysis in Canada. For US investors, check www.mta.org. For International investors, check www.ifta.org

To subscribe to the Canadian Technician blog, follow the link and click subscribe in the top right. Check out the Stockcharts facebook page or twitter feed.

The Canadian Technician

Good Trading,

Greg Schnell, CMT

Using volume to help with your analysis is widely considered as the best tool in Technical Analysis.

Today, let us compare three charts.

I have marked the distribution days within the last month on the chart. A distribution day is a down day compared to yesterdays closing price, that has higher volume than the previous day. In other words, a distribution day is aggressive selling. Passive selling would be a down day, but people aren't selling aggressively so the volume is lower. 1 distribution day a week or less is ok. But clusters are a major negative!

Here is the Energy dashboard.

I like to look at two things.

1) Position relative to the 10 week.

2) Slope of the 10 week line - Up, Down, Sideways

My arrow covers it a little bit, but it looks like a failed breakout on the $BRENT chart, and has now moved right through the 10 week to the downside. $WTIC looks better though. Heating oil and $WTIC both have slopes heading higher. $BRENT continues lower...

I use a variety of indicators grouped together to help me spot trend changes. The stockcharts website has some great indicators. How you use them is up to you. I'll try and show a few that I like. I have a list of 20 or so. Then I like to look the Bullish Percent indexes as well.

Fortunately, when all the charts point to the floor, it definitely shows the trend. But the interesting time is when all the indicators reach extremes and would normally turn around. How to know when to close the trade, and when to hold.

Arthur Hill posted his trend monitor in the blog this week. Mine is a little more complex unfortunately. But all of us are a little bit analytical...ROFLMAO...ok remove a little bit.

I keep searching for Nirvana. It doesn't show up that easily.

Let me post a few odd indicator charts here, and see what you think. Posting the common ones won't help you much!

Here is the TRIN. The signals show up at the extremes. I put grey arrows where the signal was of no value. You can see it happens a lot. I have also tried a Moving average to help.

Here is one that I like to use the MACD rather than the actual data feature. But notice in July the MACD  stayed near the bottom for 2 weeks. An early exit would be good if you use the crossovers on the MACD signal lines and a bullish crossover to buy. Again, lots of false signals. Using it near the extreme waves on the MACD helps more than closer to the centre line.

Here is one that I use the slope feature on top of the Advancing stocks indicator.

When all three go positive, you want to be long. When all three are below zero, you want to be short or protected.  Again, lots of whipsaws. But this one marked May 2 exactly, and October 27th exactly. It also caught the October 4th low. Not bad.

I  deal with some of the whipsaws by finding a common consensus on the trend change.  I find it helps if I just record bullish or bearish on each chart of 20 for the day. I prefer to record it in an excel spreadsheet. I have created a list of charts I look at and analyze the results as a group rather than an individual chart.  Essentially, the Majority of the charts have to swing to the other signal to give me a trend change I will rely on. Say 60% have to swing. It still may whipsaw you, but I find a lot of them are minimized. The experts will have been whipsawed too!  It will help hold you in your trend trade longer. It prevents one day or 2 day moves that shake you out. When you start to trade, it may help you be on the right side of the trend more often. When you are an investor, rather than a trader, this may not be of value. But it can also help you find a place where you might buy put insurance or protection on your portfolio. It can also help as to when you want to sell that insurance.

I have listed 3 different ones above, but obvious ones are the NYMO, NASI, NYSI, NYADV, NAADV, SPX, COMPQ, $NDXA50R etc. I like to use the MACD on lots of these rather than the indicator or chart itself. Slope is also interesting. My previous published blog on the $NDXA50R combined with the $NDXA200R is another example of finding extremes.

You can find a massive list of ideas in the public chartlists. I would encourage you to build your own. As the market changes and you get extreme signals, I have become more in tune with staying in the trade or exiting. The discipline comes in doing it often enough to help with the results. That is harder.

Tom Demark has a book called Demark Indicators. This man has studied more candles and the relationship between them than almost any other chartist.

While everyone wants a list published for them, my experience is that when I give it to fellow traders, they don't trust it or change it to work for them. The problem with that is they did not understand it as they did not create it. So to publish my list won't help you but I encourage you to create your own checklist. You'll find things that move faster and slower. As an example, the $TRIN, $VIX, $TICK, NYSI, NASI all move at different speeds. I sort them in order of fickleness!

Tom Bowley from Invested Central does some great work with the CPCE. That can be another chart.

Stockcharts has a breadth summary link on the home page right under the chart on the left.

Here is a sample of the link.

Breadth.

I encourage you to set up your own charts in a chartlist. Number each chart in the title to control the sort order. This process will help you see when the markets are stretched to extremes. More importantly, you'll be able to exit the trade with more confidence when a group of indicators you build creates a signal you have tested. Especially at extremes.  It's never perfect. But the more time you spend trying to figure it out, the better understanding you will have of NYMO, NASI, TICK, TRIN, CPCE, CPCI, CPC, $NDXA50R, $NDXA200R, etc. Read through the chartschool. Expand out to 15 year timelines so you can see what extremes are. Then come back and look at the current market. We also have the benefit of the 2007 market crash, the May 2010 Flash crash, the 2001 top, the 2003 bottom. The 2008 Commodity peak. What signs were in $GOLD when it Dropped from $1000 into the $600's. History is a great guide to help you see extremes.

Today I have extremes on a lot of the charts from their move down recently.

The MACD on the $TICK as an example.

Or check out the NYMO oscillator. It is at an extreme right now.

"If a stock is near its high, 90% of TV commentators like it. If it is near its lows, 90% of them hate it." - Michael Burke

Does that sound true? Well, now you can become optimistic when all the indicators are in the tank and selling when all your indicators top out. Waiting for the top to form and roll down 10% is a painful exit strategy. Lifting your stops near the top is a much more valid strategy.

Check out the public chartlist for more great ideas. Send me feedback so I can understand if any of this information helps. Thanks for reading the blog today!

Happy Thanksgiving everyone!

Good Trading,

Greg Schnell, CMT

First of all, Happy Thanksgiving to all our american readers and friends. May this celebration find you happy and healthy. This also includes all the staff at Stockcharts.com who do a great job!

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The US Bond market has befuddled the masses by continually pushing prices higher and the yields lower.

Without reiterating all the reasons this is amazing, let us start with one.

1) France  credit spreads are blowing out and they still have a AAA Credit rating.

The US debt has been downgraded by S&P but the French have not.

But the cost to insure a French Sovereign debt is almost 400% more...

One of these things is not like the other....

Here is a link to the CNBC CDS rates page. Lets check out the market perception of these debt instruments from a default insurance perspective.

Credit default Swaps

This is a little paragraph at the bottom of the rates giving the laymans definition of a CDS.

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Note:
Credit-default swaps are derivative financial instruments that "swap" the credit exposure from one entity to another.  In simple terms it is an insurance policy for an entity's debt obligations.  The buyer of the swap holds the insurance, while the seller takes the risk. The listed number is the price, in thousands, to insure $10 million in debt.

Although the markets for such instruments are somewhat illiquid, the prices and their movements are used by some to gauge the perceived creditworthiness of a particular entity, in this case, the sovereign nations listed above.

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In this inter-related world, the FXE - (Euro/US Dollar currency pair) seems to push each lever across all asset classes from bonds, commodities, stocks, and other currency pairs. We see this stalemate in the credit ratings of France and Germany, but the US has already being downgraded.

However, almost as polar opposites, we see the relative safety of the US repayment to be considerably less risky than the French or German bond equivalents.

In simple terms,

the French insurance cost is above         $200,000 for $10M

the German insurance cost is above       $100,000 for $10M

the USA insurance cost is above             $50,000 for $10 M

The super committee was unable to come up with a package to contain the explosion of US goverment spending.Would that put more pressure on the US bond market?  I think it is timely to watch the bond market response after the super committee was unable to progress on the US Debt. If the US 'ability to pay' has been downgraded by S&P, it should start showing up in the CDS rates listed above, as the market perceives the problem getting bigger.

So I want to watch what happens to the

30 year Treasuries $TYX,

10 year Treasuries $TNX.

5 Year Treasuries $ FVX,

2 Year Notes $UST2Y

1 Year Notes $UST1Y

3 Month Notes $IRX

All of the above are expressed as yield. So as the price rises the yields fall. If the markets perceive less value in these investments, the price will fall causing the yields to rise.

I have found the 3 month $IRX to be super sensitive and a good indicator for a long time. As it continues to bang upon the zero line, it's value as an indicator has dropped. We had to move to longer time lines like the 6 month or 1 year. But should it start to surge to the upside, our rabbit ears should pop up!

Here is the 3 month  IRX.

Recently, the 3 month surged to the upside and the RSI went into overbought on the daily. It has only happened once a year in the last 3 years. So, maybe a trend change to see the "yield" chart going into overbought in the middle of all this Eurozone debt problems would be an indicator for us to use. That means prices paid surged to lows and yields pop higher.

What I interpreted was that the fortress of the US debt market may start to see some upside pressure. Nothing dramatic, but a trade I'd like to participate in if it was to start rising quickly.

Let's look at the 1 year. $UST1Y

So the trend in the 1 year has definitely been a sideways pattern near zero. It is still contained in this pattern. It may hold here for days, months, weeks, years. But the longer the base, the higher the space when it moves out of the base. We'll keep watching the 3 month and the 1 year for hints.A dashboard could help as well.

Here is the bond dashboard.

I notice a slight upward skew on the 1 year, 2 year, and the 5 year. Today, they are all back below the 10 week.

Just another chart to keep watching! The bond market can start to move in a different direction than the equity markets at totally different times.

The interesting part about this trade is you could see it working in 2 scenarios.

Everybody gets concerned about US debt which pushes prices lower and yields higher. This would probably pair with a stock market becoming concerned as well, pushing prices lower.

or

The Stock market takes off to the upside and the bond market has a massive withdrawal of funds from the bond market into equity markets. This would also drive prices lower, yields higher as you can see on the 30 year treasury in the last few months. The change in price and yield were tremendous for a 30 year bond!

Conversely if it stays in here, it probably indicates a desire to remain in treasuries as the global scenario unfolds in a downward trajectory. Safety in the largest bond market sounds safer than parking elsewhere.

To me, it still says safety is here in the US bond market.

We have Ed Carson speaking to the Calgary chapter of the CSTA in December. Should be some great stuff and more clues from a senior market watcher! Guests are welcome!

If you would like to subscribe to this blog, follow the link and click subscribe in the top right hand corner.

The Canadian Technician

Good Trading,

Greg Schnell, CMT

We know they are weak.. what we are watching for is any signs of a bottoming process.

Here is the Canadian Dashboard.

Here are the US Banks

Here are the Investment Banks

Spanish,Dutch, German and Swiss Banks.

The French and British Banks

As of writing this morning, every bank is below its 10 week. Lots of the banks have taken out the September lows. Credit spreads continue to widen.

We are still making lower highs and lower lows. That holds true for USB as well, which has the strongest 'uptrend' in a down market.

Caution is advised. Potholes still exist.

Good Trading,

Greg Schnell, CMT

OK. I like to buy stocks with high growth rates...these lumber stocks have had cement shoes on the profits for years.

But this is why we need to pay attention.

Here is the $LUMBER chart Weekly

Inthe past 2 weeks It has gone from below the 10 week and 40 week to above them both. What makes that so remarkable is the downtrend the overall markets have been in.

Is it a buy here...no..not when the markets are in a downdraft like a Canadian Thermometer in November. But, we need to put together a buy list if we were to buy a lumber stock.

Here is the same data with Support drawn in. Look at how important the 280 level is above. On the first rise, it formed a red elder candle when it fell through. On the second rise, it was a support level for 15 or 16 weeks. Recently it was resistance on both the tops lumber made in the second and third quarters. Now we are in a sideways channel.

Before we look, what should we expect the stocks to look like?

Well, I would expect most of them ot follow the overall market lower. I hear CHinese demand is still strong, but I hear their housing industry is feeling a bit overbought currently and has pulled back. America has recovered from the ICU for housing, but still on life support.

So what is pushing lumber up? New home sales have picked up moderately. Aha, that's the issue. We are looking at single family starts and we need to look at multi-family and seniors residences. They have some substantial growth currently. So do we play it through HD or Lowes? How about RONA? Or other building supply companies? I won't bother to list them all here, but lets build a couple of canadian dashboards for the stocks so we can glance at the sector quickly.

Well none look like compelling buys at this point, but there are a few oscillating above and below the 10 week lines. I would start setting  some alarms on my trading platform if they start to move up. Or globeinvestor allows members to set alarms. I would probably do something like a buy point at an 11 day high. I'd need stops of course if the trades go the other way, but that simple type of buy order will keep me out of most downdrafts.

Sounds difficult? Not really, look for the highs from the previous 2 weeks on a weekly chart. If it can climb above there, I might have a trade to start managing, especially during a downdraft in the rest of the market.

This is not a recommendation of course, it is a strategy. The lumber stocks are behaving different than the overall market, which in itself is interesting. My real problem with the sector is I have not found anything with high growth of earnings or sales.

Follow the link under the Blogs heading, click on the Canadian Technician blog and hunt for the subscribe button top right, if you would like to receive this in your mailbox. Its on Stockcharts twitter and facebook.

Good Trading,

Greg Schnell, CMT

Here are 6 Pacific rim Markets.

The blue vertical lines are the approximate options expiration weeks. Options expiration dates during earnings season (January, April, July, and October) are pretty pivotal.

Notice how the markets ran up for one more week after OE. If you look at a daily chart, you'll notice the following Monday was a large downward candle. We have been making lower weekly highs and lower weekly lows since then.The little red lines on each price chart mark where the markets closed 6 weeks ago. Why 6 weeks ago? Just marking the week before OE. So since the earnings season has wound down, we haven't had anything pushing the markets higher.

Once again, we rallied into the OE, we had one more week pushing higher and have pulled back since. It hasn't been an aggressive pullback, but we definitely have not made any headway yet. The $COMPQ has been trading with lower highs and lower lows for three weeks. I think of this market as the 'RISK on" market. We are trading below where the market closed just 2 weeks after the October low.

Lastly, notice how important the 20 Week moving average is on every chart. This morning the $SPX was within ticks of this line. I'll be keeping my eye on it.

THe $HSI (Hang Seng), $SSEC (Shanghai Composite) and the Nikkei will update later today, But they closed below the red lines as well. On this chart, at this time, every market except the $SPX is back below the 20 Week.The lower BB is at 1085. That would be 'support' on this chart for me.

Here is the SPX daily. Bear market signal is still in play on the daily. The main concern I have is the test of the 200 DMA was pretty much rejected. We still have support of the 50 DMA and the lower BB.

More importantly, The Neckline of the H/S Pattern was tested and failed.

The overhead resistance shows up like a villian. The H/S neckline, the Downsloping 200 DMA, The rest of the world markets are capped by the 20 MA on the weekly. Backtesting (Testing from the bottom) and not getting through sets us up for a tough November. The real questions shart to show up for December. Are we going to continue to make lower highs and lower lows for another month? Then we'll start a rally into January Earnings?

I draw that out as a scenario. It really is amazing how things track. Look at where the lower Weekly BB level shows up on the daily chart. Between the Sept low and the October low. My daughter ran a campaign at school calling it "Awktober".. Well so far, our Awktober is the up month in the down trend.

Between the Asian markets slowing, the Europeans appointing country leaders, and the American markets awaiting the nth Super committee to get the debt on track, there does not feel like a large level of upside momentum.

But every day marks the opportunity for a change in sentiment. So we wait.

Here is the chart showing the H/S Top.

Here is my $TSX Chart.

TSX Weekly

$TSX Long Term

Have a great weekend.

You can click on every chart to go get a larger view.

To subscribe to this blog, follow the link and click top right.

The Canadian Technician.

Good Trading,

Greg Schnell, CMT

Here were some of my comments in the blog two days ago.

6) We have hit the fib levels on the index and on crude. Gold made moves above the fib levels, but the gold stocks have not.

7) Gold and oil opened higher today but the TSX opened weak. That is a simple piece of news that has been going on for a few weeks now.

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Below are my introductory remarks about crude at $100. My biggest concern was that oil stocks were not following oil higher.

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11/13/2011

There's something strange going on around here.. Crude Oil

Well, that was a very interesting week in the oil and oil stocks market.

First of all, let's review crude oil and where it is priced.

In the blog a few weeks ago, we suggested a good upside target for oil would be arond $99. How did we come up with that? At the time oil was in the $93-$94 level.

1) The 61.8% fib level is shown in gray on the chart. It was $99

2) The top of the BB has moved up slightly this week to $101. A few weeks ago, it was close to the same level as the BB. Remember, you can read the actual values in the top left of the chart.

So here we sit with a substantial move higher in crude. From October 4th to November 14 Crude has moved over 30% in under 6 weeks. Who would have called that? Great Question...

Let's stare at the chart.

A few things I notice.

1) We have previous weekly highs here at $103 and $100. We have the BB at $101 and we have the fib level at $99.

2) The enthusiasm for crude to run up from here will be muted in that a crude price above $100 really cuts into consumer spending as they allocate more towards gasoline and home heating oil.

3) In order for $WTIC crude to go lower, it first has to have some of it's momentum slow. For the last 6 weeks, we have closed near the highs of each week.

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Now, blogs always prove that we are seldom right. The reality is in the market, we don't know when the psychology of the masses will finally change from bullish to bearish or visa versa. But we keeping reading the charts, looking for volume and price clues to explain what is going on. EACH and EVERY DAY!

Being right today, doesn't mean it will hold. The charting data plots the psychology of the masses towards owning a certain stock. The charts only increase the probability we are right. I have found (usually when the brick hits me over the head), I can be wrong!

Events change every day which changes the popular view. So, lets focus on the oil stocks dashboards today.

Here is a simple dashboard with just a few charts to identify what we are doing with these dashboards.

THe dashboards allow us to not only see how the individual chart looks, it allows us to quickly compare it to the other charts that affect the stock or other similar charts.

So here we have $NATGAS...Wow, this thing is so unloved, it could be a European leader public opinion poll chart.

Then we have $WTIC. this thing is so loved currently, it looks like a Leafs fan planning the Lord Stanley parade since the season started. OK, it is still pointed higher.

Then we have $SPTEN, This is on a major downtilt....what's going on? I wonder what is affecting it?

Then we have CNQ.TO which is CNRL. Historically a great stock market darling, but not since March.It has received some recent investing but it is clearly rolling over. What I do know is that CNQ has a lot of Oil and Gas.

Then we have Talisman. Is this just the spouse of the unloved European leader? I do not know the % of Oil or Gas for Talisman.

Now, let's compare them to each other.

$NATGAS has been in a down trend along with everything else since May.

$WTIC has been in a downtrend since April 30. The recent push up to $100 continues like a golf ball off a nine iron! $weet!

$SPTEN has been rolling over for about 4 weeks already. That's odd relative to oil.

CNQ has had a nice push, but it has clearly stopped following oil higher. Behaving like $SPTEN but slower to turn down It seems to be only about 2 weeks. (just eyeballing it)

TLM has barely got above the 10 MA. Either it is a company loaded with Natural gas, or it is really underperforming, but it has barely been able to climb above the 10 week MA. I won't be buying that one. It was one of the last to climb above the 10 MA, and it rolled over as soon as the $SPTEN did. very average at best. It is already below it's 10 week. Wow, compared to CNQ, it is weak. I would rather buy CNQ on a pullback as it seems stronger than average.

More importantly,  CNQ a relatively good stock, and TLM a stock 'out of favour', as well as the $SPTEN are all heading south but Crude is still going north...this should start sending alarm bells. Go back and review 2008 oil peak.

Notice at the blue vertical line, oil stocks continued higher as oil paused. This time, the stocks have rolled over before the oil....hummm.

Here is the 2008 Version of the Oil Top. Notice how the sector and the stocks had let go before the commodity did.

OK. That was an indepth view of why and how we can use the dashboard for a little bit of cross market analysis. John Murphy is the absolute doctor on intermarket analysis. Some of the best clues come by looking at things that normally correlate and keep track when that changes. Think the $BRENT and $WTIC spread. Collapsing by 70% in a few weeks....HUMMM something strange going on ..It just makes us put our rabbit ears up.

Below are just some example dashboards. you can do the same exercise as above.

Here are some oil producers. CPG and PBN are in the Bakken and the others are oilsands.

Here are some I think are Natural Gas. Does POU.TO belong here. At least we have a reason to go look.

Drillers

Fracing and service companies (This is Fracturing companies)

Lastly for this group, here are some high growth EP companies. (Fast little ones, can you tell by the charts which might be having trouble). Send me other ones to be included. Always happy to share some strong stocks.

Hopefully they can make us some money in the next upturn.

Lastly,

Here is a sell signal on my $BPENER chart. This is the number of stocks above the 50 DMA. When it crosses the 3 week MA its another signal. I never use it alone, but I sure like it when it confirms either way!

Without reference to oil....but popular to Canadians.

As an aside, GLD is testing it's 50 DMA today... ROC never got above zero...interesting times for this one.

One Final Piece. I got a great email from a fellow Canadian. He pointed me to his public chartlist on stockcharts.com that lists all the stocks in each industry sector. So rather than screen paste them in, I encourage you to go visit his blog. ALWAYS try to find time to go through the gems in the Public chartlist. More education there than any one text book.

Here is the link.

Canadian Public Chartlist All star!

Good Trading,

Greg Schnell, CMT