ChartWatchers

The Energy Components Have A Great Month

In the forest of information, sometimes the trends don't jump out easily.
Rolling through my dashboard charts, I noticed the energy group was on a real roll for the last month.

First of all, the big picture in crude oil is at technicians dream time and price. While dreamy may seem strong, look at the chart.
The 5 year pennant for crude oil broke to the upside in July. The decision point at the apex of a pennant is pretty important.
Should the centre line of the apex fail to hold, this would be considered a continuation pattern lower.
The cycle arcs at the bottom have a pretty good track record for lows this time of year and the acceleration out of the time frame.

$WTIC 20131206 weekly

Below is a zoomed in view (A three year weekly view) of the same chart above. You can see how much the price action was behaving based on technical levels.
The RSI found support at the 40 which is a bull trend place to find support. The CMF money flow went positive this week.
You'll notice the price briefly broke below both trend lines and found support. That is probably more important that it tested below and got aggressively bought.
Here is a link to the weekly chart. $WTIC. Change the time period below to see the 7 year view.

$WTIC 20131206 3 year

It is common to find price break out of a pattern and then go back and backtest the trend line. When it does, that is usually an excellent entry.
So here we sit below the 10 WMA and 40 WMA. On the daily its quite bearish. With the big picture in mind, I think this positive breakout is valid until proven otherwise.Because of the pennant pattern and the breakout with a big week, it gives technicians lots of good choices for stops.
It was only the last Chartwatchers that I though oil would go back up and test the 40 WMA from the bottom. I also wrote that I thought it would would be a major decision point to get back above the 40 WMA. This week's power thrust is pretty bullish. That article is linked here, Is Crude Oil Ready to Rally.

Oil is testing the 50 DMA and the 200 DMA from the bottom right now. But look at all the other energy components since early November. All moving nicely higher.
The live link is here. $WTIC $BRENT $GASO $HOIL $NATGAS

$WTIC  $NATGAS 20131205

I personally like $NATGAS here as the stocks seem to be rising in tandem with the commodity.
Natural Gas is really one of those quirky products that does not necessarily correlate to the overall business cycle. It really seems able to carve its own price path regardless of currencies, the large equity indexes like the $SPX, as well as other usually related sectors. In times of turbulence it can be an interesting trend to ride.
The refiners have had a good run recently mostly on the back of lower crude. This push up in $WTIC this week was very big which would normally squeeze refiners. But the gas prices have risen to dampen the margin squeeze for the refiners.

This correlated action might be the first indication that these commodities and the related industry groups could finally break out. I am very interested when I see a big move across the board on all these components.
Last week there were no major Canadian energy stocks in the top 25.  This week created some interesting turns. Some are really starting to make nice moves higher, contrary to the previous weeks in oil.  In isolation, I felt crude might stall below $100. When I see the last months correlated moves of everything going higher, I am ready to get a lot more bullish in this sector.

I have been expecting the $USD to break out to the upside. If the $USD breaks down instead, this group could really benefit. It is still interesting timing for the $USD but it does look like it wants to test lower levels from here. So I am watching how crude behaves at the 50 DMA and the 200 DMA. If we do get a breakout to the upside in $WTIC, this will be a very attractive entry on a substantial portion of oil and gas stocks.
Energy stocks with high SCTR rankings can be an excellent filter to find some big ones moving well.

To get to the main SCTR rankings page, click on the link on the right hand side on the FreeCharts tab.

Screen Shot 2013-12-06 at 3.12.14 PM

To get a complete list of various SCTR's just use the drop down menu above the list where is says "S&P 500 Large Cap Stocks". You can choose ETF's, the $TSX, mid cap and small cap stocks.The closer they are to the top of the list, the stronger they are. You can sort by column name to help group stocks by sector together as an example. Scroll down past the ETF's to see the list of energy stocks and their SCTR rankings all on one page!  I like to scrolling down to find stocks moving up into an SCTR ranking of between 76 and 81. They still have room for institutions to buy their stock. A visual check of the charts helps with the timely entries.

Screen Shot 2013-12-06 at 3.19.30 PM

So I'll be keeping an eye on Oil and the $USD. A break either way will be very important for the Santa Claus rally. If you are trading the Natural gas stocks, they may be less inclined to track the $USD as closely. Remember to book the SCU 101 and SCU 102 Classes in Vancouver and Altanta.

Good trading,
Greg Schnell, CMT

Is Crude Oil Ready To Rally?

Crude oil has had a huge setback. It has fallen below all of the common moving averages.
Is it ready for a bounce? Here is why I think it will retest the $100 level soon.
For the live link to the chart. $WTIC

$WTIC 21031123

Notice the uptrend line on crude oil off the 2012 lows. This blue line sloping upwards has been a support for the last year and a half and we would look for crude to get a bounce. The 92.5 level is also significant as the May June and July 2013 lows continually tested there. $WTIC was supported there for three months in a row. If you look up to the 98.5 dollar level you will notice the firm resistance at that level all the way through 2012 and 2013 before finally breaking out in the summer of 2013. That resistance level will probably be retested as the 40 Week moving average and the 10 week moving average look ready to meet there as crude retests this from the bottom side. That decision point will be a major decision for technicians. If crude oil fails at the 40 WMA, I would expect a significant move down to the $85 level next. This would create a downtrending 40 WMA which is not good news. Should crude bounce off this 92.5 level and push back through the moving averages, that should be a bull train getting on board for.  So I would expect crude to get a bounce here and watch closely up above for resistance.

Good Trading,
Greg Schnell, CMT

The Currency Commodity Intermarket Relationship

This week had bearish overtures for my view of the markets.

Probably the one I worry about the most is the commodities Index, the $CRB. The break below the 5 year trend line is particularly disconcerting.
One week does not make a new trend, but one week can start a trend. After breaking out to the upside, the $CRB has made 8 weeks of lower highs. Not only has it fallen below the trend line, it has now fallen below the five year support line. So, we have had 8 weeks of lower highs, which is a trend. We have had one week closing below the 5 year support, which is not a trend.

$CRB 20131103 5 year

While everything else seems to be perking along, there were a lot of inter market relationships that got beat up.
The Canadian and Australian currencies are a good methodology for looking at the commodities.
Both of the charts failed at the 40 WMA which is down sloping. Live link here. When prices retest a down sloping 40 WMA, investors should respect the price action either direction.

$CDW 20131103 2 year chart

Here is the Australia Dollar Chart. The live link is here.

$XAD 20131103 2 year chart

All the indicators on this chart say we are in a larger bear trend. This was just a bear market rally in the commodities until proven otherwise.
For a detailed explanation of the commodity currencies and the relationship to the commodities, a long thorough posting is on The Canadian Technician Blog.
It can be found here. Currencies Ring A Pessimism Bell.

Good Trading,
Greg Schnell, CMT


The $TSX Soars Above Resistance With A Global Tide

Commodity countries have been trying to find a bid for a while.

This week, Toronto closed at 2 year highs, well above resistance.This is the first close above 13000 in 2 years.
The link is here. $TSX

$TSX 20131018

Here is a chart of other major indexes breaking out. Live link for the global breakout.

Global Breakout 20131018

India has pushed above 4 similar highs this year. Australia broke out in September with Germany and France. Korea moved above in October. Italy and Spain (not shown) have also broken out to the upside. The All World Vanguard fund shown at the bottom has broken out. Two interesting charts are the Hang Seng ($HSI) and Shanghai ($SSEC).
The Hong Kong Hang Seng is testing the May highs after making a higher low compared to last year. I would expect it to finally break out here. That chart looks more like an uptrend.
The Shanghai is still in a downtrend. The only encouraging thing on the chart is that the lows of 2012 were not taken out this year. Support held. $SSEC does not have far to move to break out and I would be thrilled to see it break the downtrend. Especially for the global commodity demand, that would be exciting.

Charts like England and Japan still have work to do and they are important globally. Brazil and Russia are both interesting. Brazil and Russia have pushed above downward sloping trend lines.
Russia has taken out the May highs, whereas Brazil has not. Having the four Commodity horsemen (Australia, Brazil, Canada and Russia) breaking out would confirm a major breakout.

There is an old saying. "When you are breaking out to new highs, you are not in a downtrend." When the globe is breaking out to new highs, we are probably breaking out into a big new global bull market.  One week doesn't make a conclusion, but it can be the beginning of a multi year breakout. That appears to have happened this week on many exchanges. I'll be focused on watching to make sure it holds up. The extremely light volume on the $TSX chart is not a ringing endorsement, but investors are willing to pay higher prices in a quiet market. Canada was closed for Thanksgiving on Monday, so that explains some of the reduction. The price action is still bullish.

Good Trading,
Greg Schnell, CMT

The Commodities Try To Find Support

The global expansion has been tepid at best. One of the indicators I like to look at is the commodities demand.
The easiest way to check that is to compare the commodities to the 10 Week MA.

Here is the Commodities Dashboard I like to scan. Click here for a live version.You can see we had a nice uptrend since the June lows.

Commodities Dashboard 20131005

One of the most difficult parts of this market has been the continuous start stop of the commodities cycle.
Here we see gold and $WTIC (West Texas Crude) falling below the 10 week. Lumber and Copper remain above as does the $TSX.
We need to see renewed strength in the commodities complex to push the $TSX higher. This would also signal an improvement in global demand.
The different benchmarks continue to oscillate, and the global test at resistance has stalled for now.

I am encouraged by a few of the indicators and discouraged by a few as well. As you can see on the top of this chart, the $USD has traded within a $0.05 range for 2 years.
Compare that to the massive swings in the Yen and the Pound. The Yen moved almost 30% to the dollar, and the Pound has moved $0.14 in 4 months.

$GOLD and oil appear to be expecting the $USD to strengthen here while Copper and Lumber are still above the 10 week. Copper has solid resistance at $3.36. A break above that would be bullish with a measurement into the $3.75 level.

The commodities markets usually do well in the 4th quarter, so we'll stay optimistic. If Copper and Lumber fail the 10 week test, I'll have to pause my optimism on the $TSX as well.

Good trading,
Greg Schnell, CMT

The $TSX Tries To Breakout Again

The $TSX has tried to move above the 12900 level a few times this year. We are approaching it again.
Here is the live link to the $TSX Chart. The unfortunate part about this $TSX chart is it looks extremely similar to this link of the  year 2000 chart of the $SPX relative to previous highs.
The June low is the only thing that makes this look worse than the $SPX 2000 chart. A series of tests at the highs with multiple tests of the 40 WMA below before failing. However there are some strong positives.

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This one year view has a couple of major positives going on. For the first time in a long time the $TSX has outperformed the $SPX for 4 weeks as shown on the SPURS in purple behind the RSI chart.
The RSI has not broken out into a new bull trend (above the red line) yet, but this could happen soon. The 10 WMA is above the 40 WMA, and the 20 WMA is just below. If the 10 WMA and the 20 WMA can both move above and hold above the 40 WMA over the next 2 weeks, we'll confirm a bullish upside breakout. I would like to see the $FTSE, the $DAX and the $AORD move above May highs to confirm the breakout. The $TSX price chart has made a series of lower highs currently and a lower low in June which is the definition of a downtrend, so I am apprehensive here. This weeks test of 12889 was taken out intraday but so far, failed to hold. Currently, the $AORD (Australia Index) has also made a lower low, and not a higher high (yet!) as you can see below. Click here for the live link to the Aussie chart.

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The LL indicates the lower low. I plan to keep watching for the confirmation from the two major commodity countries. I would be thrilled if we could break out of this 2 year $TSX base that you can see below. Here is the 5 year view of Canada.

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You can see how frustrating it has been to hold Canadian equities. This would be a considerable breakout that would be very very bullish, especially with global confirmation. The Full sto's have stayed above 50 all year, so maybe this is finally the big breakout. Last fall we moved above the 12500 level as the full sto's moved above 50 and that looked to be the big breakout. Unfortunately we stalled at 12900 with a lower high in May and a lower low in June. Recently we pushed the full sto's above 80 where it can stay for a long time. This does not mean overbought but a good strong uptrend with these long period settings on a weekly chart.

Conversely, if the breakout does not hold, I would be very bearish in short order if Canada and the global markets mentioned fail at former resistance levels. Stay tuned!

Looking forward to seeing investors in NYC. We'll have a great market presentation including intermarket analysis by John Murphy. Couldn't come at a better time. The major downturns on the $SPX started September 1, 2000 and October 9 2007. The next month marks another 6 year cycle from the 2007 high to current highs. We'll have more cycle work on that in NYC as well. Not just courses but some current market analysis thrown in for good measure! Hope to see you there!

Good trading,
Greg Schnell, CMT

The Friendly Giant Wakes Up

Canada had a popular TV show called The Friendly Giant.
 When Suncor merged with Petro Canada in March 2009 it become Canada's energy giant.
It is the largest oil company on the $TSX by market cap and one of the top 5 companies in Canada as well.
Here is the live link. Suncor.  It has been trading in a sideways range for 2 years.

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However, on a down week for the US index and an up week for Canada, something was going on.
With the gold miners breaking to the upside, Canada's energy sector and Canadian banks going sideways,
the undercurrents are swift here.

It emerged this week that Warren Buffett had put Suncor on his Breakfast Buffet. T Boone Pickens was also adding more Suncor.
When the big guys start to pile in, this stock should be well supported for retail investors. Canada's largest oil and gas company has broken out to 52 week highs.
With another $1 per share we will be at 2 year highs.

The $TSX still remains trapped below the 2 year top at 12904. Having this major company push up the overall index is bullish.
If we can get Canada to break out here, that would be a major trend change going into the fall. Currently we have lower highs and lower lows in 2013.
Here is the link to the live chart. $TSX.

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Lets see if we can make moves into new highs. Rejection at this level will be just as important so stay tuned.

Good trading,
Greg Schnell, CMT

$COPPER Moves Above, One More Time

$COPPER is one of our best indicators of economic activity. It is usually early in bull markets and very weak when markets top.
We all know that $COPPER has been under pressure for a long time. I like to use a dashboard of world mining leaders to confirm moves in $COPPER.
Here is the chart live link. $COPPER

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So almost all of these stocks that seem to be correlated to $COPPER have moved above the 10 WMA. We need to see this hold and actually make a solid push above.
We can also see $COPPER will face resistance at the $3.30 level.
But currently, it looks like things are starting to run. If we can continue to ride above the 10 WMA, this will be an attractive sector.

Good trading,
Greg Schnell, CMT

Is This The ValleyView Lookout Or Mount Everest Base Camp?

Notice the price action on the $VIX. The peaks and valleys are 100% apart!
The monthly options expiration date has marked a significant turning point for the $VIX every month for at least 8 months.
I have marked the OE day with a black dashed line. The circles represent 2 major turns that were not associated with OE.

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So being aware of the price action coming into and leaving the OE date can be very important for short term traders.
Currently we appear to be near recent lows. We also have made 3 higher lows in a row. We'll see if that trend changes in the next few weeks.

Globally, I think watching the foreign market charts will tell us where the markets are going next.

This is Asia below.

NIKK20130720

The Nikkei has been one of the most volatile markets in the world. It soared 100%, pulled back over 20% and
is now trying to push higher. The real problem is the momentum. The strong momentum has been lost here. Notice how all these markets have faired
since the May 22 high on the $SPX. The $NIKK can't seem to get back up and closed the week at a 61.8% retracement of the move. It also
had an engulfing candle on Friday which covered the entire range of the week. It closed in the bottom third which is bearish.
You can see the RSI has given off a bear market warning signal (RSI below 40) and is now testing the high side of the range.
The MACD is showing the slowing momentum.
Notice how the $SSEC (Shanghai) is a full 4% behind the $HSI (Hong Kong)on the retracement move. The $HSI finds itself at resistance.

For Europe, the charts couldn't get more interesting. The elder statesmen technicians will tell you to watch the $FTSE
to see if it starts making lower highs. That usually precedes the $SPX.

FTSE20130720

The $FTSE has made a lower low (LL), the $DAX has made a higher low (HL) and the $CAC has tested the 2
previous lows exactly! All of them have retraced the same amount of the move down in percentage terms unlike the
Asian markets above. The $FTSE RSI has given a bear market signal by going below 30. It is weak. Now can it get back above 70?

It should be an interesting month. July marked the top of the big $SPX pullback in 2011 amidst the commodity weakness.
We currently have the commodity weakness. The global markets are softer than the USA. I think it will be very important for the $FTSE
and $DAX to make new highs here. The long term  $FTSE chart would look like a failed double top compared to the 2007 highs.
The $CAC is still below 2011 highs. The $DAX is the strongest market in Europe with the chart well above the 2007 high.

Good trading,
Greg Schnell, CMT

The Snap Of The $USD

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I noticed the British Pound took an absolute thumping this week. It moved almost 5 cents to the $USD.
But more importantly, the USD has moved above the long term trend line.
As the largest currency in the world, that would suggest money continues to move to the $USD.
 For safety, for the best opportunity for return or for trend following, the money is going to the USD.
Click here to see the live $USD Chart.

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We will move the dotted line over if it closes the month here.
Lastly, the big picture currency chart with of of the $USD index currencies. Here is the live link $USD Currencies
They are all breaking down slowly. The British pound and the Canadian dollar are the most recent.

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Bullish Percent Indexes Stretched to Both Extremes

Some of the most powerful,informative gauges of sentiment towards the market are the Bullish Percent Indexes.
If you are not familiar with them, you can read about them here by clicking on this link. Bullish Percent Indexes

Recently, some of the Bullish Percent Indexes reached extremes that have not been reached before.
The chart below shows the Major Indexes BP readings. Click here for a link. $BPSPX 
These charts are daily to see if there are any pinnacle readings, rather than weekly closes. The $SPX set a new record being above 90%.
The $SPX has never been higher. More than 450 stocks out of the 500 were on Point and Figure buy signals recently.
The NYSE composite is extremely bullish but it has been at or above this level every year for the last 5 years.
The Nasdaq Composite is surging back up to relative extreme levels above 70.
While we are all aware that commodities are out of favor, the Canadian Stock Exchange is hovering around 60%. The $TSX never enjoyed the big pushes in 2012 or 2013.

BPSPX

Looking at some of the individual sectors, The Consumer staples hit a record 100%. This has never been achieved before.
Consumer discretionary appears to be surging to levels not seen since 2010.
Health Care is at rare heights, but it has been up here 3 of the last 4 years.
Utilities are at levels not seen since before the financial crisis. They have recently rolled over off the highs as Staples have.
However, Financials are at 10 year highs and Industrials have only been at these levels once before.
To see the live chart, click here. $BP Sectors

BPSTAP

So that is the definition of bullish. As long as the market holds above the 50 level, we are in a big bull market.
Each one of these daggers down or spikes up give technicians trading opportunities.

I have one more sector to show you. The gold miners index. $BPGDM.
StockCharts created a Bullish Percent Index for the miners in 2008. Notice the difference on this chart.
We are stuck in the bottom right corner of the chart.

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So one of the ways to help spot a reversal in a sector is the Bullish Percent charts.
If this chart can get some upward momentum it might be time to trade some gold stocks.
Currently it is still depressed. On Friday, $GOLD was down $24 but the miners did not give up much of the gains from Thursday's push up.
A change in sentiment towards the gold mining stocks will show up on this chart. Patient technicians will be rewarded by staying tuned in.

To conclude, this bull market momentum has never been higher. If you are a contrarian, that will make you worry.
 If you are a trend follower, you'll notice both the $NYA and $COMPQ bullish percent indexes got substantially weaker before the final 2000 and 2007 tops.
Good Trading,
Greg Schnell, CMT

A Meaningful 3 Week Pattern in $COPPER

On a huge macro scale, we are trying to break out of a consolidation range. 13 year. Breaking out on Dow, SP500, Nasdaq, $RUT.  Unfortunately, the rest of the globe has not been confirming.
But the 2 days since the Fed announcement since they removed the upside limit on intervention has really changed the shape of the market.

This was a major week for the markets.
Here was a view from April 24. Notice by right clicking on the Perf Chart you can bring up the cycle tool and slide the yellow line, left to right!!!!!! (That 's a new feature!)

Screen Shot 2013-05-04 at 11.14.00 AM

Compare that to now.

Screen Shot 2013-05-04 at 11.11.28 AM

The $UTIL relative strength line plummeted. That is actually a good thing. The transition to tech leadership this week was particularly acute.
The transports were doing well, now the techs are starting to move.  Next should be the industrials and raw materials. So I visited the $COPPER chart.
The 7% move in Copper yesterday was working real hard and I believe a trend change.
Unlike the $INDU market Copper kept climbing from open to close. The $INDU market opened high, climbed slightly and gave back into the close.
There are 7 big green volume candles on the daily JJC. Live Chart

JJC

We need to look at the bigger picture in Copper. $COPPER

Copper

So one week does not make an all clear and the problems are wider spread than America, so its still cautionary. But in 7 trading days things have clearly reversed.
It's pretty important timing in the market as normally a summer swoon sets in. This week and the change of behaviour to the growth side of the cycle is very encouraging for me.
We also made a confirming move above the $SPX 1597,$TRAN, $RUT, $INDU, $TYX.  We are still in a dicey spot on the charts. But when you are looking for technical signals, we got a bag of confirmations this week. Short term we might have run a bit too far, too fast. Big picture, we got some great signs this week. $COPPER's change was huge in my mind.
Good Trading,
Greg Schnell, CMT

Trading Using A Black Belt

One of the hardest trades to make is the one you don't put on. Just sit. The martial arts practice Defence and Offence.

The 40 WMA (Weekly Moving Average) is roughly equivalent to the 200 DMA (Daily).  Lets call it the Black belt for today.  Many technicians employ a simple strategy of the price action being above or below the 40 WMA. If it is above they are bullish and below they are bearish.Depending on your investment strategy depends on how short or how long the timeline is for your long term MA.

John Murphy reviewed 2008 and remarked that the $SPX never spent 1 day above the 200 DMA all of 2008. Just sitting on your hands while it was below would have saved many accounts from the beating that ensued. So many investors could have been out of the market just using that strategy for the down turn. Here is what makes that difficult for Canadian investors. Every time the $TSX broke below the 40 WMA in the last 3 years, it surged back above, tested a higher level and then continued lower. So it's not as easy as it sounds. Here is the link to the $TSX chart. $TSX. If we use the slope of the red line it can be a guide. It is either pointed up or down while the market tests the 40 WMA.  This is not infallible either but it helps. Sometimes using Elliott wave theory can try to place us on the right part of the wave structure. It looks to me like we have had a 5 wave move down off the 2011 highs, to an ABC correction which we just completed if my marks are right. An equivalent move from the 5 wave down would have us finish this corrective wave at about 9500. That would be optimistic. The bearish views of EWI (Elliott Wave International) would suggest much lower than that.Let's just say I am not an elliottician. The bottom line is the pattern looks lower right now.

$TSX 20130419

Today we sit at that junction. We moved the major Canadian Index below the black belt or the 40 WMA. Now what? There are many moving parts to this chart. It feels like a thriller, and it should. The moves are straight out of 'Skyfall'. The $TSX is already 7.8% off it's highs from peak to trough. We've already had 200 and 300 point moves down in the last 3 weeks.  While investing in a firestorm is very tricky, the $TSX is a market riddled with cross currents. Our major trading partner is the USA. 80% of our trade is with America. But our index is filled with commodities and has traded closer to the growth markets rather than America. So assuming the USA is doing well, tells you  to stay long.  Most of the growth markets are testing the 200 DMA or just the opposite of America's charts.

An example would be growth markets like Shanghai daily. ($SSEC).

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and India  daily.($BSE)

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Both had 2% up days this week which may be indicative of at least a slowing of the downward trend if not a reversal. India moved below and is retesting the 50 DMA from the bottom. The multiple big candles suggest this move is not done. Notice that all three charts flirted with the 200 DMA this week. The $TSX made its high 6 weeks ago, roughly timing with the first test of the 50 DMA from the underside on the other two charts in March.

What we need to see now is a surge above the 50 DMA. For Canada, that is a long way above. I think watching these global indices will tell us if the frightful move to the downside in commodities is finished and we are going to reverse right here, or if we are entering into the strongest part of the major wave down. If we are entering the strongest part of the major wave down, sitting on my hands might just be the best trade I can put on. Or trade with a black belt. Defence is as important as offence. Many are enamoured with going short. It is not a game for the buy and hold either. The overnight bounces off major lows have been 150 points higher. That is hard to hold short positions through. The charts make it look easy but short time intervals are way more profitable than trying to catch the top and the bottom of the big move down. That is what I have found anyway. We are at a tricky part of the charts. Smaller positions can also help mitigate the risk.

Good Trading,

Greg Schnell, CMT

Same Planet, Two Different Markets

We have a few wonderful indicators we can use to judge the overall health of the market. The problem for the technician is when to say, "I'm Out!"
Lets compare the $TSX to the $SPX using these two charts to analyze the broader picture. Here are the links. $TSX, $SPX

TSX

The blue vertical lines are placed when the index fell below the 10 week or approximately the 50 DMA line.  The $TSX looks like it is ready to breakdown here, with the exception of the stocks above the 200 DMA.   That still looks strong as does the Bullish percent. But both are at levels where markets have broken down before.

Spx

The $SPX appears stronger. Period. The only signs of weakness are the stocks above the 50 DMA appear to be making lower highs.  The Ratio of Stocks above the 50 and the 200 DMA seems to be weakening to a level where things normally break down from.

Looking back up at the stocks above the 200 DMA (black) area, you probably don't want to wait until that number starts falling.  But a drop below 80% would be ending a trend I think.  The % of stocks still above their 50 DMA is strong.  The level was almost 10 % lower midweek so there is some weakness.

Good Trading,
Greg Schnell, CMT

Municipal Bonds Hit A Pothole...

Strolling through the the mid month charts, I came across this ETF.

This ETF represents Municipal Bonds.  MYI

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It has only moved below its 40 WMA twice in the last 5 years. Till this week. It marks the third time.
In 2007 it marked a drop early in the year and could not stay above the black line.
It tried twice in 2008 to get back above but failed in June and July. It was important.
In late 2010, it plummeted below the line, while the stock market went on a final run into April before correcting 20% in 2011.

This fund has shown more red in the last 3 months than at any time in the last 2 years.
At this point, its a heads up that something is going on in the Municipal Bond Market. We'll stay tuned to see if it has broader implications.

Good Trading,
Greg Schnell, CMT

Reasons to be Concerned with the Tech Sector

This weekend, I want to talk about the technology sector. Some of the major tops of the market have been spotted on the $NDX before the market breaks down.
Here's the chart. It has a lot of data on it. I would encourage you to click on this link $NDX to see a larger version.

$NDX 20130215

Let's start at the top.

  • Lower Valleys on the RSI seem to be one of the consistent themes among the recent tops.

Well, we clearly are seeing that here. 3 months  after the RSI has put major lows in, we are trending up, but I think everyone could agree begrudgingly. The tech market has not exactly exploded higher.  If you look at the shaded area behind the RSI, that is the $NDX compared to the $SPX. It has been under performing for a while now.

  • Looking at the CMF, the surface area of the recent pullbacks below zero are large, like the 2007/2008 top.
  • The major fund managers aren't as supportive.  
  • After 3 months off the November low it hasn't been an overwhelming bull surge in.  The price action is barely above the moving averages where usually the $NDX surges away from the moving averages. Maybe its just early and I am too optimistic in this charts power to outperform.
  • The Head/Shoulders pattern is remarkably clear and the MACD is mimicking a perfect trend for a head/shoulders top. Highest peak on the first one, progressively lower after that.  You will also notice the red arrows I placed on the 2 previous market peaks. They both happened at the 3rd peak of the MACD pattern. Again, the lower lows on the MACD is a better indicator than the lower highs but even the slightly lower highs were present in 2010.   Specifically on the MACD, we would be very concerned if the market rolled over at this level. The MACD at such a low level, rolling over near zero would confirm a bigger decline coming in my view.
  • To confirm all of this, The Full Sto's are above 80 so you are in overbought territory or a strong bull market depending on your view. I don't find the full Sto's that valuable an indicator currently, but if it breaks through the bottom of the current trendline (not immediately), we could find ourselves in a big bear market. Currently, the Full Sto's are half way between. Still bullish based on any interpretation.
  • Lastly, I want to point out that MSFT was the market leader and it fell fast and hard in 2000. Then AAPL was a big market leader and it fell fast and hard from Dec 2007. And then recently, AAPL was the market leader but it has recently fallen fast and hard with slight slowing of growth. After a 40% pullback, we are all expecting it to rise here. In both previous cases, the pullback was 70%. 
Too bearish a prediction? I don't know. I just know that all the traits and patterns are lining up. As the experienced technician likes to say....I know, it's different this time.

I will blog about the tech stocks this week. You can follow my blog at this address - The Canadian Technician.

Good Trading,
Greg Schnell, CMT

THE MOVE SEEN AROUND THE WORLD

Starting in the summer, some of the global stock markets started to move higher. Once Mario Draghi suggested he would do whatever it takes to save the euro, the European markets have been on a tear higher.
This is the first monthly close that all 18 global markets I track are above the 20 Month MA. Why is that level significant? Because when the entire world got above the 20 Month MA in 2003 it confirmed the global push higher and lasted 4 years. In 2009 it did it again but it only lasted into 2010 when the Shanghai started weakening. Here we sit in 2013 with all the global markets pushing higher. Here is what it looks like simplified.

Screen Shot 2013-02-01 at 8.56.40 PM

When the entire world is trying to rally together, it can be very supportive. Both exports and internal confidence grows which can be very complimentary.
So we have to maintain a bullish approach to the markets. Why fight this trend?

As regular readers of The Canadian Technician blog are aware, the commodities have not broken out yet, but are very close.
While I want to see that happen for obvious reasons, I have one interesting hurdle the markets have to overcome.
This is the chart of the 4 major commodity supply countries charts for the last 15 years. (Commodity Countries)

Commodity Countries 2013

Now we could debate exactly where to draw each line. These lines reflect a range that has significant support and resistance in each market.
Brazil actually rose above the line in January and has since pulled back under.

A renewed interest in commodities would probably confirm the new bull market. If it was to all unwind after a giant final rally that stalled at resistance on both the commodity and equity markets, this would be the time. I see very little negative divergence on the major indices so that is positive. The $USD is testing the lower boundary of its trading range. The Euro is pretty stretched here with gapping 1 cent moves a couple of times a week. Feels like an exhaustion move to me and based on the blue boxes below it looks like this run has been at least as long as the previous bull run into the September high.

$XEU 2013

So just when everybody shouts the all clear, I see some major similarities in these charts that might take time to work through.
Maybe the bulldozer provided by central banks worldwide will break down the barriers and this will all breakout to the upside shortly.

I'm Bullish and have been for months but the charts usually stair step up at a rate slower than 50% a year gains.
After a 10% move off the November lows, it might be time to expect a step. $TSX

$TSX 20130201

Good Trading,

Greg Schnell, CMT

Currency Wars!

Back in November I blogged about the currencies and the events around them. Recently in Early January, 4 of the currencies in the Dollar Index were testing the trend line for the dollar cross.  Today, 3 of 4 of those currencies broke down this week, and the Euro is losing strength.  Keep watching as currency changes can help time market breakdowns. The Euro makes up 56% of the dollar basket, so until it breaks, this bull train continues.

First of all here is the British pound. It fell dramatically this week. $XBP  It lost the 50 DMA, the trend line, and the 200 DMA all in a week.  Notice the purple relative strength line plunging to new lows.  The negative divergence on the RSI and the MACD played out perfectly. Remember this chart style as the $XEU is setting up a similar trade.

Schnell2

Here is the Swiss Franc. $XSF  Notice the large negative divergence between September and December. Lower peaks on the RSI between the mid-September 2012 high and the December 2012 High. The price was making a higher high, but the RSI was making a lower high.  The MACD was making the identical pattern. You will also notice two short term divergences  between September/ October and the current move down. The price on January 14 was near the previous high, but both the RSI and the MACD were significantly lower.
This is called double divergence. We have it on the short term (2 weeks) and intermediate term (3 months).

Notice in October, the purple SPURS line was gaining strength compared to the price.  So people were enjoying the outperformance of the Swiss Franc. It was breaking down through both the 200 DMA and the 50 DMA. So this is a hard signal in real time. Notice how the Swiss France bottomed a few days before the overall stock market ($SPX) bottom of November 16.

Schnell1

Here is the Swedish Krona. FXS  You can see this chart shares many of the similarities in divergence  that the Swiss Franc above shows.  This market is showing even more divergence over the intermediate 3 month period.  You can also see the purple relative strength breaking down. This would need to get support here immediately.

Schnell3

Here is the Euro. $XEU.  So I won't belabour the point here. Short term and medium term divergence is apparent.  The price is still clearly in an uptrend. I would suggest if the Euro starts to break lower, we'll mark a top of some sort in the equity markets.

Schnell4

Here is the Canadian Dollar which is also usually a good indicator of the tops and bottoms in the equity market. $CDW  It had a bad day Friday losing .65 cents to the $USD.  On this one we see the same short term and intermediate term divergence setting up. The Loonie has dipped below the trendline once again.  Will it reverse higher again?  I don't expect it to with the divergence on this chart and the divergence that has created price reversals on the British Pound and the Swiss Franc.
It doesn't really matter what I expect, it is more important to follow the price action. If both the Canadian Dollar and the Swedish Krona break their trendlines, I would not be surprised to see the Euro come down as well.

The tables on the chart label the $SPX market tops and bottoms.

Schnell5

So, I expect the currencies to continue to help us with market direction. 2 of the smaller currencies have broken. Two more are testing the trendline and look to be breaking in terms of momentum and relative strength.  The Euro appears toppy as well. The $DAX market and the $CAC have not been moving much this month. We'll see if this all concludes together.

I will be doing a webinar to the MTA on Wednesday January 23rd at Noon EST if you would like to hear my current macro view of the market and some unique perspectives on market analysis.
You can follow this link to login. MTA Webinar   It is free to attend.

Good Trading,
Greg Schnell, CMT

GOLD - BOTTOM FISHING OR LOST WRECKAGE

Gold has become pretty unloved. That in itself is usually bullish. This week we look at why it might be time to renew your interest in Gold and the miners.

First of all, Lets look at the Gold Miners. Here is a link to the live chart. Gold Miners Index.

$BPGDM 20130105

Lets start at the $BPGDM. First of all, the Bullish percent index is very close to the level it normally reverses at which is denoted by the green line. The index has 29 stocks in it, so each stock is more than 3% influence. It would only require 2 stocks to change the index below the line. So, getting into bullish territory.

In examining the chart information for more detail, I found a couple of interesting points. Lets start with the RSI.
There have been 4 times in the past 5 years where the index has dropped below the current level of 40. All of them produced nice trading rallies. It is clear that down at 40 is a pretty good area to look for a buying opportunity.

Next, the MACD histogram shows a deep push on momentum. This is the momentum of the Gold Miners index, not Gold. We have only had the selling momentum reach this level 7 times. This is one of the worst if you look at the area of the histogram over the last few months. It looks really bad. So that could be bad or good. However, the histogram recently seems to have bottomed out and made a higher low this week. That is important. I have drawn vertical lines where the histogram starts to improve. You can compare it to Gold's price at the bottom panel. Pretty nice location to start buying. The April to July 2012 period was harder to call as the histogram didn't go very deep.

Next is seasonality. I marked the vertical lines green if the rally started near the first of the year. Look at how strong those rally points were. I dotted the one in 2008 because of the trauma that was ensuing that particular year. While it did not happen in January, it did start near the beginning of the year. The seasonality factor looks to be huge. 4 for 4 in rallies for the beginning of the year. 3 rallies started around July.

Continuing down is the final panel where I have $GOLD plotted in Gold color. I have annotated the chart with some blue trend lines. The solid lines are equidistant from the middle as shown by the black lines. The dotted lines are best fit based on the trends in the price. This could be due to a log scale chart which would normally be used for a multi year chart with so much price movement. What I see from here is that GOLD is at an area that is near the lower extreme of distance from the trend. The blow off top of 2011 was a clear exaggerated move outside the trend. Could we see that to the downside still? Anything is possible. But this chart shows a lot of good reasons for a trade right here.

Lets look at a chart of $GOLD on the daily. Here is a link. $GOLD

$GOLD 20130105

Recently, the RSI has been improving. The GDX:GLD ratio is rising which is very good to see. The downward sloping bullish wedge is also a positive signal to help spot a reversal. Friday's reversal candle was textbook on higher volume as a lot of stops were tested on the weekly chart below. The MACD appears to be trying to make a higher low while price is making a lower low. The force down was not as significant on this push so that too is bullish. I have shortened the time to 6 months so the price action is clear, but the shelf back in August is at a very important level. This level has marked support and resistance for 15 months. You can see that on the weekly below.

Here is a Weekly of $GOLD. $GOLD Weekly

$GOLD 20130105 Weekly

On this weekly chart, the RSI is holding 40 which is excellent. The purple shaded area represents relative strength compared to the $SPX and is declining so that is not a good sign.

 $Gold looked to find support at the horizontal line of $1625. This line has been a support resistance zone for the last 15 months.  The $GOLD price also tested stops below the 2 year uptrend line this week. This is a very nice place for the chart to reverse, especially with seasonality.

The MACD is making higher highs in October compared to March 2012 even though the price was the same. That is a bullish divergence.

One thing that looks weak on this chart is the full sto's falling below 50. They really need to find a floor right here or that would mark a significant negative trend reversal.

This looks like a very interesting place to enter a gold related trade to the upside. Like all great entry points, they have significant potential to fail if no new major investors join the falling trade. For the gold followers, it has been a very difficult trade and they would sure like to see some upside reprieve.

In conclusion, I like the seasonality and the bullish candle. We'll see how 2013 treats the gold trade.

Good Trading,
Greg Schnell, CMT

CHANGE CAN BE GOOD

Overall, the world couldn't be more of a sovereign wild card. But at its weakest point, sometimes the strongest investment time is at the point of most change. While I don't forecast a quick turn, what can each investor watch for to see a global improvement? I'd like to propose the following chart could really help us.

The USA just elected a president. China just elected a new leader. Europe appointed a new ECB chairman.   Japan has an election coming soon with a new leader trying to push for a plunge in the Yen.  That is usually bullish for the stocks there. Germany and London have traded well. Australia has as well.
Here is why I don't want to sing a bearish tune for the long term. This chart looks excellent from a basing point. Notice the rising MACD lows while the price continues to decline. What would make a more obvious choice to start climbing than the change of leadership? It doesn't appear to be done falling yet but it is at a very interesting time.

$SSEC 20121120 2 year

If China can make a bullish turn here that would be important. Today, the Shanghai continues to test support at 2000. The blue line at the bottom of the chart is flat at 2000. From the 2 year chart above, lets look at the 12 year chart below.

$SSEC 12 year 20121120

I would suggest a couple of interesting levels here. 2135 did not hold, but notice the scale levels as we go lower. Each about 5% below 2135. We currently sit near 2000. Just below this are levels at 1895, 1775 and 1665. Notice the coiling of the MACD. It is building energy here for a surge on the breakout. I didn't want to put too many lines on this chart, but an argument for a bullish wedge can be made from the 2009 high. It is called a bullish wedge because the distance between high and lows get narrower and narrower as the price falls. This creates a downward trend line on the top that has a more aggressive slope down than a trend line under the lows that has a less aggressive slope. Usually the break above the upper trend line would be fuel for a significant rise as the short positions have to cover quickly which also propels the price higher.

Have a great Thanksgiving with family and friends.

Good Trading,
Greg Schnell, CMT

The Loonie Heads South for the Snowbird Season

Given the current chart for the Canadian Dollar, migrating snowbirds might want to exchange some loonies for some sawbucks very soon.  The Canadian Dollar continues to hit resistance above the $1.02 level.  It had a rough week chart-wise, forming a big red bar on the Elder Impulse System chart.

On the other hand, the US Dollar is strengthening, breaking to the upside compared to the Yen ($XJY), the British Pound ($XBP), the Euro ($XEU), and the Loonie ($CDW).

$CDW 20121019

Commodities have a rough time whenever $USD is strong which is one reason that Gold behaved poorly on Friday.  Even so, mining stocks held up well.  We'll see if that remains true next week.

Good Trading,
Greg Schnell, CMT

CANADIAN MINING STOCKS READY TO ROLL OVER

The Canadian mining stocks appear ready to roll over.

It is quite surprising that they've not been able to rally given the recent weakness in the US Dollar. With the move down in the US dollar, we would've expected the value of the metals and the associated miners to move up but that just isn't happening.  Check out this chart to see what I mean:

$SPTMN 20120827

This hardly looks like a bull run off the June lows.  While the weekly bars have moved a little higher, they have not moved up enough to turn the Elder Impulse System from blue to green, nor has the Full Stochastic line moved up.  The MACD and Ultimate Oscillatior are slowly improving, but the RSI and relative strength lines at the top of the chart have gone sideways.  If Canadian miners were really rallying, the weekly technical signals would be much more positive.

For all those reasons, caution appears warranted.  A case can even be made that the 750 level makes a nice head/shoulders neckline on a long term chart!

Greg Schnell, CMT

WHAT IS THE PRICE OF CRUDE TELLING US?

On Thursday August 2, $WTIC crude made an interesting turn.

SharpChartv05.ServletDriver
Currently crude is in a downtrend denoted by the red line.
We have started August creating a downward column of O's. The Red 8 shows the first box in August with a move of at least $3.

You can see that since June (The red 6), we were stuck in a range into July. In July (Red 7) Crude was able to push above $87. It then pulled back, roared to $93 and has since settled back to sit just around the previous support / resistance level built in June.

Upside: If Oil can rally from this level, it would be very bullish. A push through to $93 would break the downtrend line. Looking left, $93 and $94 have been resistance. A push through there would probably allow oil to surge to $102.

Downside: If Oil goes through $86, it is bearish. A break through $84 would be a bigger warning as the price has spent a lot of time there (9 X's and O's) and should have more support. Obviously the 3 O's at $82 are a significant level. We are currently in a downtrend as indicated by the red line. The $76, $77,$78 level is the major floor for this market. The last 3 years, August has been a weak month where oil pulls back and then surges into the September, October months.

Watch crude closely for hints on a major economic trend. The big picture on the chart above is higher highs and higher lows. We are just in the trading range now.

Good Trading,
Greg Schnell, CMT

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