It’s Been Two Years Already….

I’m happy to say that two years ago this weekend, Allstarcharts was first born. What started as a daily email blast to friends and family throughout the 2008 financial collapse turned into this Technical Analysis blog read around the world and published throughout major media outlets. Most importantly, in my opinion, the blog has become a part of an even better, more spectacular universe of unbiased financial bloggers with something to say. That’s probably what I’m most proud of.

So I’d just like to take a moment to say Thank You. Sometimes this market likes to mess around with our minds, and this blog has been a nice outlet for me to share what’s going on inside this technician’s brain. Whether it’s right or wrong, I think you guys can tell that I’m writing from the heart, expressing what I really feel. Over the years I have received countless emails and comments thanking me for my work. And let me tell you that it really means a lot. I don’t know that I could have kept this blog going for so long without such incredible feedback from readers around the globe. So I’ll say it again, Thank You.

I’m going to try my best over the next year, two years, and hopefully beyond, to continue to write honest opinions about market behavior. I think I’ve done a good job of staying true to my discipline and being consistent in my approach. Nothing worse than hearing a technician preaching PEG ratios (whatever those are). If you guys ever see me getting away from my area of expertise, I know you’ll let me have it. Which is what I love about the blogosphere. No BS. We tell it like it is. As readers (myself included), we have to appreciate that.

So I decided not to go into a rant about how many visitors come here daily or where I’ve been published over the last few years, or how many new investors I’ve acquired. That’s not what this blog is about. Allstarcharts is about sharing thoughts about current price behavior. Period. I try to express my thoughts using a variety of different tools and time frames. I like to share other people’s work as much as I can when I feel that someone somewhere else is making a valid point that perhaps I either missed or failed to comment on. So I’ll do my best to keep that up.

Another goal that I’ve had for the blog is to clear up a lot of the misconceptions that people have about Technical Analysis. Like I’ve said before, we’re not just looking for head & shoulders patterns and drawing lines on paper. This is about bringing together price behavior across asset classes in a way that can help us manage risk as best we can. That’s it. I’ve written about this before and gone into much more detail, but I’ll do my best to keep that message going throughout the lifespan of the blog. I promise.

And finally I just want to say that one of the best parts about being a blogger has to be the friendships that I’ve made over the years. Whether I’m in Chicago, or Los Angeles, San Francisco, Texas, Miami, it doesn’t matter. I meet readers and other bloggers everywhere I go. This week in New York there’s going to be a huge technical analysis extravaganza as guys like Greg Harmon, Ryan Detrick, Derek Hernquist, and a bunch of others come into town at the same time. This is what I’m talking about. Friendships that have only been made possible because of the blog and the tremendous universe of market participants sharing that I’m proud to say I am a part of.

So here’s to another year charts and friendships!

Thank you so much for reading.

JC

 

MTA Educational Webcast Full Video

As some of you know, I had the pleasure of hosting a live webcast this week for the Market Technicians Association. Like I’ve mentioned here before, I have been watching these live webcasts and going to MTA events for most of my career, even before I had my CMT designation. I’ve learned so much over the years by watching some of the best technicians that ever did it present and explain how they analyze markets. So to be asked to present is a huge honor for me.

We went over momentum divergences using the Relative Strength Index and how we incorporate it with our intermarket work and sentiment analysis, among other tools that we have as technicians. Towards the end we went over how social media is now playing a huge roll within the Technical Analysis community and some things that we should all be aware of.

Here is the webcast in full. Enjoy:

 

 

 
Source:

Market Technicians Association Educational Web Series (March 27, 2013)

And Just Like That, We’re in Q2

Q1 in the books. That was quick.

Here’s a short video I did after the close Friday with Dr. Phil.

We went over US Stocks, specifically the defensive leadership, weakness in Vietnam and Lululemon:

 

 

Tags: $XLV $XLU $XLP $LULU $SPY $MDY $VNM $IWM $DJI

Leadership Stays Defensive in 2013

Here we are at the end of the first quarter. So now is probably as good a time as any to take a look at sector performance for the year. And it’s the defensive names that have been the clear leaders so far. We first brought this up a month ago, and the rotation into more defensive sectors continues. Coming into March, the leaders for the year had been Consumer Staples and Healthcare. Now with the Healthcare space leading the way once again this month, the year-to-date sector performance story remains pretty much the same: Defensive: Healthcare and Consumer Staples are the clear winners, while Tech and Materials lag big time. Here are the YTD numbers relative to S&Ps:

3-28-13 sector roation ytd

For the most part, this action is nothing new. Industrials struggled a bit more than usual this month, while Consumer Discretionaries caught a little bit of a bid. But other than that, the leaders for the last month really stand out: Staples, Healthcare, Utilities:

3-28-13 sector roation

This rotation into defense and out of the more aggressive leaders that took us to historic highs last year is one of the reasons I’ve been extra cautious with US Equities lately. We’ve seen some bearish divergences in momentum, major selling and even bear markets in Europe and Emerging markets. But the daily charts for US Stocks remain intact. And sure, defensive sectors can keep leading this market higher. But if I’ve learned anything throughout my career, it’s that towards the end of the run, these defensive guys tend to lead. So this isn’t surprising.

Look at the daily chart of S&Ps. They still look fine for now. But if they start to break, that’s a different story.

3-28-13 spy

Like I mentioned last week, the 153s are still my level to watch in $SPY. As long as we’re above, I believe things are still fine in the US. But watch your back.

 

Tags: $XLB $XLP $XLU $XLB $XLY $XLK $SPY $SPX

MTA Educational Webcast Today at 4:30

*In case you missed the webcast, I’ll publish the video as soon as it’s made available

***

I’m pumped up for this afternoon. I hope most of you can join us.

The Market Technicians Association has asked me to host a webcast today as part of their ongoing Educational Web Series. Some of my favorite technicians on earth have been asked to do the same over the years, so it really is a huge honor for me to be invited. I promise to try to make it as awesome as possible.

3-25-13 mta

We’re going to break it down into two parts. I want to really focus on momentum and price divergences. Readers of the blog know how much I like using the relative strength index (RSI), so I’ll explain how I incorporate it with my intermarket work, sentiment and sector rotation. I’ll then touch on how technical analysis is being done and shared throughout the social media world and how it’s helped me over the years. We’ll also leave some time at the end for Q&A.

We’re going to get going at 4:30 eastern. Use this link to to enter the webcast and try to be there 10-15 prior to start time. Everyone is welcome to attend at NO COST.

http://go.mta.org/lobby032713

Looking forward to it!

 

Staples Relative Are Coiling Big Time

One of my most important charts has to be the relative performance chart for Consumer Staples. I don’t care if you’re a technician or not, this is a big one. The psychology behind the price action is very simple: Money has to be put to work, one way or another. Whether that money goes into Tech, Financials, Discretionaries, or chooses to be more defensive into Staples is another thing. If the economy is slowing and things are “bad”, we’re still going to drink soda, smoke cigarettes, brush our teeth and wash our dishes right? That’s not going to change. So when institutions need to allocate money and prefer to be “defensive”, for whatever reason, the flow into staples picks up relative to other areas of the market (Coca-Cola, Philip Morris, Colgate-Palmolive, etc).

Here is a daily line chart of S&P Consumer Staples vs S&P500 to show the relative performance I’m talking about. I think it’s pretty clear that since the 2008 market crash, when institutions were dumping money into staples on a relative basis, price has been coiling to the point where it’s decision time very soon:

3-26-13 staples vs spy

The XLP/SPY correction off the 2008 highs retraced approximately 61.8% of the entire crash move. This is pretty standard within an ongoing uptrend. Also, the combination of the downtrend line off the 08 highs and uptrend off the 07 lows has created this symmetrical triangle looking formation that needs to resolve soon.

A breakout from this pattern would be bearish for US Stock as a group, in my opinion. While a breakdown here, which I consider much less likely, would bode well for equities as an asset class.

I’d be watching this one closely if you have any exposure to the stock market whatsoever.

 

Related Posts:

Are Staples The Key To This Market? (March 6, 2013)

The First Two Months of 2013 (February 28, 2013)

Tags: $XLP $SPY $CL $PM $KO

MTA Educational Webcast Wed 3/27/13

The Market Technicians Association has asked me to host a Webcast as part of their ongoing Educational Web Series. In the past, the MTA has invited brilliant technicians such as Martin Pring, Charles Kirkpatrick, Ralph Acampora, and others that I’ve looked up to throughout my career. So to be the next one in this group truly is an honor for me.

3-25-13 mta

The topic will be Momentum Divergences & Social Media in Technical Analysis. As always, the webcast will be Free for all who attend and will run approximately 1 hour. This will include about 10-15 minutes for Q&A at the end.

The Presentation will begin at 4:30 PM Eastern Wednesday March 27, 2013

Please use this link on Wednesday to log in and shoot to be in the webinar 10 minutes prior to start time.

http://go.mta.org/lobby032713

See you there!

JC

 

Where Do We Panic?

Alright let’s keep it real. I’ve been cautious on US Equities since late February and they’ve relentlessly kept rocking to all-time highs without caring what I think. The monster breakdowns in Copper, Emerging Markets and Europe with the continued bid in Treasuries and US Dollars and a simultaneous rotation into defensive stock sectors have kept me from being leveraged long US Equities. It has not been fun.

So sure anything we short in Europe or emerging markets has worked great. Some non-correlated stuff has worked and some hasn’t. Fine. But we haven’t been seriously short US Stocks because price hasn’t given us a reason to. Occasionally we’ve taken a stab on some things but nothing that could have a big impact on the bottom line. The conviction on the long side just hasn’t been there, and price hasn’t said short the hell out of everything. When you’re not sure, get smaller right? But now the question becomes, where does price say to short everything?

To me there are 2 important charts that I am following very closely. The Yen and S&Ps. And they both look exactly the same. We broke out to new highs at the beginning of March, bearish divergences in momentum continue to develop and now those new highs need to hold. Or else.

Here is $USDJPY with the 94s as my big level:

3-21-13 usdjpy

Here is $SPY with the 153s as my big level:

3-21-13 spy

In my eyes, those are the lines in the sand. As I pointed to here, the Yen has the highest negative correlation to US Stocks out there right now. They should both do the same thing. I think future shorts can be initiated as long as we’re below the above mentioned levels. If we hold (which I’m not counting on), then the market is still fine.

These are serious lines in the sand that we cannot and will not ignore. I’ll do my best to write a follow up post if and when they break. At that point we’ll see if anything has changed and we can also discuss some potential support levels. But that’s a conversation for another day. Watch these levels guys…

 

Related Posts:

Thoughts On Risk (March 8, 2013)

European Underperformance Continues (March 5, 2013)

Tags: $SPY $SPX $ES_F $FXY $USDJPY

The Safest of Havens

Here is something that I’ve found myself getting into friendly arguments about lately. When money is scared and wants to come out of risk assets, what is the safest place? Where do they go? The easy answers are obviously the US Dollar and US Government bonds right? Some people might say gold. But the math says otherwise. If you look at just the numbers, the winner is by far, the Japanese Yen.

And I don’t know why that is the case. I get asked, “why”, all the time. Not really to worried about the answer. We’ll let the math do the work and answer the more important question of, “what?”.

So when you look at negative correlations with US Equities, the US Dollar Index is actually a plus 0.58 for the month and plus 0.68 for the quarter. Sure it’s at -0.52 for the year, but no where near as high as what you might expect the safest haven to be. Treasury bonds show a nice negative correlation, but again, surprisingly low coming in at just -0.74 for the month. While -0.91 for the quarter is nice and high, the -0.55 correlation with S&Ps for the year doesn’t convince me. Gold has a zero correlation for the month, -0.68 for the quarter, and actually a positive 0.24 for the year. So gold isn’t the answer either.

Which brings me to the Japanese Yen. The clear winner here having a correlation with the S&P500 of -0.93 for the past month. The -0.96 for the quarter and -0.77 for the year makes the Japanese Yen, the highest negatively correlated asset on earth. So does that make it the safest haven?

Think back to 2008 when all hell was breaking loose. Did money flow into gold? Nope, they sold them too. Sold them hard. The “quality” that was being flown towards was the US Dollar, Treasuries, and Yen.

Here’s something else. Sunday night when fear was building and top callers were organizing bear parades, where did money flow right away? What was the initial gut reaction? US Dollar Index was up 0.69% at the futures open. Gold shot up 0.94%. US Treasury Bonds were up 0.73%. But the Yen? EUR/JPY was down 2.3% Sunday night at the open. Euro was obviously where money was feeling from. So where was it fleeing towards? EURUSD was only down 1.17%. So it wasn’t the US Dollar right? It was Yen. In fact, Sunday night at the open, USD/JPY was down a percent.

So this is my math. Am I missing something? The most negatively correlated asset class with US Stocks in the world is the Japanese Yen. When money gets scared, where does it flow to the fastest? Seems like Yen. So as Yen goes, the opposite should be in store for US Equities no?

Just my thoughts. I’d love to hear your comments. And no I don’t want to have a philosophical conversation about fiat currencies, or central banks in Japan. Lets try to keep this about price and intermarket relationships.

Oh yea, one more thing. Keeping in mind the very high negative correlations with US Equities and Yen, here is the recent commitment of traders report from Sentiment Trader showing the Commercials loading up, while speculators are historically short Yen.

3-20-13 cot yen

Thoughts?

 

Source:

Committment of Traders Report – Yen (SentimentTrader)

Tags: $EURUSD $USDJPY FXY $EUR/JPY $GC_F $GLD $TLT $ZB_F $UUP $DX_F

The Silver Chart is Interesting Here

Last year Silver came out of a summer base in August to rip over 23% in a month. We talked about it just before the breakout because momentum had been diverging positively at the time. As prices were making fresh lows into June, RSI was putting in higher lows. But after that explosive move, Silver has just been deteriorating lower for six months. And here we are, right back to where we started.

This is a daily bar chart of the iShares Silver ETF. You can see that for the past month, silver has been consolidating in this pennant looking pattern of lower highs, but also higher lows, right at the breakout level from last summer. There is memory here:

3-19-13 slv

I think that the resolution of this pattern could set the stage for a nice move in the metal. RSI isn’t shown here because we’re not seeing any divergences. Just lower lows in momentum with lower lows in price. That’s definitely one for the bears. The bulls, however, have on their side the fact that Silver prices rallied hard from these levels in August. Markets remember those things.

The base of this small pattern is about 4.2%. So after a move out of this thing, that would be the initial target. But the true tests should come around former support and resistance levels. A resolution to the upside could take $SLV up towards the January highs above $31. But a downside breakdown out of this pattern should take it down to last summer’s lows, and could be devastating for this commodity’s chart.

Typically these types of patterns resolve themselves in the direction of the underlying trend, which is down in this case. But the fact that we’ve been sitting here for an entire month right at last summer’s breakout level makes me think that the bulls still have a chance.

I don’t really care either way, we’ll just trade in the direction that this thing resolves itself in. But I think it’s worth pointing out that this is happening at an important level and the outcome could be critical to the chart of Silver going forward.

 

Also See:

Yes The Action in Silver is Constructive (Aug 14, 2012)

Tags: $SI_F $SLV

Seriously, What’s Europe’s Problem?

I mean, we’re just trying to have a nice little bull market over here in the U.S., minding our own business, and they gotta go underperform and diverge to ruin all the fun. Seriously though, what’s Europe’s problem?

OK just kidding. But not really.

I think I’ve been pretty vocal over the last month or so about the underperformance in Europe. I’m not going to link to posts or tweets or anything, you can go back and find them if you want. That’s not the point of this. Today I want to pull up a very simple chart of the Euro Stoxx 50 Fund to look at, not only how broken it has become, but also how vulnerable its condition was coming into this weekend.

Here is a daily bar chart of “The FEZ” as we like to call it at our shop. I remember the original¬† breakdown like it was yesterday. It was February 4th and I had just woken up in a New Orleans hotel room after a memorable night at the Super Dome. I was extra dehydrated that morning (can’t imagine why). And European averages were getting destroyed. Germany was down 3.6%, France down 4%, Spain down 5.3%, Italy down 5.8%, the entire Euro Stoxx 50 down 4.5%. The list goes on and on. And I said to myself, “this is not bull market behavior”. And it certainly wasn’t. Healthy stocks and assets don’t get smacked in the face like that overnight (yes this all happened overnight). And by the way, Emerging markets were getting smoked that day also, but that’s another discussion for another day. Let’s stick with Europe for now:

3-17-13 FEZ

You can see that there was an island reversal of sorts created on that Monday morning breakdown after the Super Bowl. Along with that came a bearish divergence in the Relative Strength Index. As prices made fresh highs into that “island”, if you will, momentum was already rolling over. This is shown clearly in the chart above. Go run through a some of the individual countries and you’ll find similar looking charts.

Then a few weeks ago we had that Monday Italian Election fiasco. That day, confirmed a hard breakdown below the uptrend line from last summer’s lows. Again, stocks and assets in bull markets don’t behave like that. They just don’t get crushed in one day the way these have. Italy down 10% in 6 hours? You don’t need to be a technician to know that isn’t bull market behavior.

Now since then, US Markets have continued to rally into historic territory. Investors waving their hands in the air like they just don’t care. And maybe they still don’t. We’ll see. But European markets are vulnerable. They’ve rallied back up towards that broken uptrend line and retested it this past week.

Even the Euro itself peaked on that Super Bowl weekend. Look at $EURUSD Daily bars. You think it’s a coincidence that the currency topped out at the same time that their equities did?

3-17-13 eurusd

Europe is vulnerable. Not really an opinion, but more of a fact I think. So will the US continue to shrug it off? We haven’t seen the two of them disconnect for this long since 2009. This is a chart comparing the peaks in Europe with those of the US. Typically, Europe tops out first, and then the US gets the memo and rolls over. Well, we’re going on 6 weeks now without the US joining the correction. Will this continue? Or will the US play catch-up?

European stocks better start rallying very soon for none of this to matter technically. And by soon, I mean like right now.

3-17-13 fez vs spy

You see what I did there? Didn’t have to mention Cyprus in the entire post.

 

Tags: $SPY $FEZ $EWP $EWI $EWG $EWQ $EURUSD $FXE