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At the recent Chartcon event in Seattle, John Murphy spoke on how he follows the markets. One of his favorite charts is the sector perf chart.

It can tell you a lot about how the sector rotation is moving in the market. In July, the market had swung from defensive to a little bit more optimism.

I just generated this chart at noon Friday. So it does not include Friday's rally.

Some great wisdom in John's setup. Let's work through some of it.

If the cyclicals and industrials are strong, that is a very important clue to be more bullish. When the defensive sectors are stronger, it is not a time to press the gas pedal.

All the sectors except consumer discretionary are aligning in a defensive posture. This does not include Bernanke's Jackson Hole speech influence yet. We'll have that tomorrow.

Usually, when the Nasdaq is outperforming, it is a very important clue.

The two weakest performers by % are the Russell and the Nasdaq. When the Dow is the strongest, I usually find that is money moving to safety. When the dow is the weakest of the groups, money is usually moving towards risk on.

So on this big bullish day, new risk positions are not being added to. One day does not make a trend. But is is interesting that both the perf chart sector map for the week before Bernanke's influence and a scan of the index performance after his speech shows caution invading the tape.

Arthur wrote a great 'Don't ignore this Chart' article taking about the Summation index and the Momentum oscillator today.  

Have a safe holiday weekend.

Good trading,

Greg Schnell, CMT

Some folks like to use the 40 Week MA as the dividing line between bull and bear markets. Long term planners will look on monthly charts. 

Today becomes meaningful. A Federal reserve push up has been pretty common recently at month ends. Mario Draghi spoke late in July. Ben Bernanke spoke today.

Well, today the $TSX is flirting with the 40 week line again. The 40 week is right at 12000, and the market will be trying to better that for the monthly close.

Can it finally push through with conviction?

That Head/Shoulders neckline at 11,000 to 11,200 needs watching. It is very loose (200 point range) where some are much more defined. That really has to be considered important support.

Good Trading,

Greg Schnell, CMT

$USB - Sometimes the Bond market is a better clue to the future than the equities.

The bond market is just so big, it is very important to understand the sentiment towards holding bonds. Recently Warren Buffett's holding had a dramatic drop in Municipal bonds. Well, is that showing up in the 30 year yet?

Nothing  would be better than $COPPER jolting higher. Unfortunately, lightning has not struck and sent this to higher ground. It's tepid at best, and the miners below are not staying above the 10 week, even though $COPPER is.

This could be back underwater soon. There continues to be no current coming through this  $COPPER chart.

$COPPER is the best evaluator of Economic recoveries worldwide. Caution is warranted.

One of those triangle signs for a downed power line...

Good Trading,

Greg Schnell, CMT

Last week we covered the $USD and $WTIC. Today, I want to continue on that subject and talk about what the long-term implications of US dollar breaking higher would be.  Based on some of the other information  with significant trendline failures, can we use this to help guide our bias?

Let's talk about the $CRB Index compared to the S&P 500. This is a ratio of  the $CRB:$SPX. Starting at the top, we have the RSI in a weak position. It's near 30 on the monthly ratio chart.

The main chart shows commodities massively outperforming the $SPX from 2000 to 2012. The actual peak was the blowoff top in 2009.  The Trendline was broken a while back and blog readers might remember this from before. The MACD has made a lower high and lower low with no divergence. The Full  stochastics are deep in the red and we got below the  20 level. In the 90's it stayed there for a long period of time. What does that mean to us now ? We know that commodities are out of favor after breaking this trendline above and usually that would surmise a rising US Dollar. That has not happened yet based on the 10 year trendline on the $USD. 

However, with this ratio breaking down, it could be used in parallel to watch for a new push on the $USD to higher ground. That would mean that oil / commodities have probably seen the highs for a few years if this all plays out with the $USD breaking above the 10 year trendline.

 Should the $USD fall, we would expect the $CRB to outperform the $SPX.

I'll be keeping this macro view in mind as we see this market close out 2012. This is monthly data so day trading blips are obviously ignored.

Good Trading,

Greg Schnell, CMT

OK.

 First of all, did anyone take the time after reading yesterday's blog about weekly timeframes to go and check how the move in 2005 played out with the negative divergence on the MACD? The real reason that the 2005 move interested me was that it had the same slope during it's advance as the current move. Anyway, it had an extremely similar pattern to the current pattern on the MACD. Technical Analysis is all about pattern recognition.

One thing that I absolutely love about Stockcharts.com is the ability to save multiple charts of the same stock, currency, commodity or index. It allows you to have different ideas on different charts so you can explore different ideas at the days progress.

Below you'll find a few different looks at the $USD weekly.

As 'The Canadian Technician", I seem to write about the US Dollar a lot. That is because 80% of Canada's exports, all commodities, and seemingly most equities are tied to the tide of the $USD.

Let's start Macro on this blog, and then we'll fill in the shorter time frames through the weekend.

Here is the 10 year time frame chart of the $USD. 

This chart has a little too much data on it so let me walk you through slowly. 

1) the Blue vertical lines are placed based on the $USD hitting it's head on the line. When I showed this chart previously, it was just as the $USD reached it. 

2) The $USD has had two different slopes on the rallies off the lows. The current slope of the green line duplicates the dotted line from 2005. For those that don't remember, 2005 was a sideways year that soared throughout 2006 and into 2007. You will also notice the two black lines hold identical slopes. Those produced beautiful rallies that were exceptional in size and scale.

3) Obviously, I could plot downward trendlines on this chart as well. It seems the breakout dates on those were also significant but we are currently looking at topping action in the $USD and trying to figure out if it will hold at this level and stay on the upward trendline, or breakdown. 

4) the red dotted arrow is what we are watching for. If that happens, we would expect the corresponding green arrows to show their complicit action. So we want to be ready to place those MACRO ...MACRO >>> MACRO trades. This is a long term monthly chart which does not help us much in the 60 minute world. But understanding the key timing of the inflection point that we are currently  at is pretty important. 

Tomorrow we'll analyze the weekly view with this in mind.

Good Trading,

Greg Schnell, CMT

"Up from the ground come's a bubblin' crude." 

Maybe we should change Jed's theme song to "Up from the down come's a bubblin' crude oil price".

OK...no songwriting skills present. Let's do some chart analysis on crude. I have a few different ideas here.

First, let's look at a chart of crude with a few indicators on it that I don't usually use.

Suncor broke above it's July highs 5 weeks ago. Let's check the chart.

Well, considering Suncor broke out mid to Late July, it sure hasn't done much. The stock appears stuck between $31- $32.50. The rate of Change at the bottom is still above zero, but struggling. The MACD has flattened and the RSI has not made it back above the 70 RSI to start a new bull run. This weakness or delay is especially odd, with crude rising almost every day.

The fact that the rise in crude isn't helping to drive the stock higher off a low base like Suncor's is troubling. While we continue to make higher highs and higher lows,  it does feel weak.  Maybe Suncor can bounce off the 200 DMA at start a stronger ascent.

The declining volume may just be the summer swoon, but we are looking for a celebration of higher prices in this stock. Suncor is not supposed to be a stock having a nap in a August hammock!

Crude is at a critical level here. I'll blog on that tomorrow.

Greg Schnell, CMT