Alright guys. No labels, no time frames. Bars and Momentum via 14-period RSI
Talk to me….
Recent Mystery Charts:
Expert technical analysis of financial markets by JC Parets
by JC
Alright guys. No labels, no time frames. Bars and Momentum via 14-period RSI
Talk to me….
Recent Mystery Charts:
by JC
Now that Syria is taking over the news, interest rates and bonds have taken a back seat in the financial media. But for us market participants, this is still front and center. If you watched this weekend’s market video that I did with Phil, or follow me on Stocktwits or Twitter, you know that I’ve been really vocal lately about the potential bottom in bond prices. But today I want to focus on rates.
This is a chart of the 10yr Treasury Note Yield Index. We’re looking at candlesticks that show yields are retesting what was formerly key resistance throughout the summer:
The problems I see are 1) the quick reversal lower after the new highs last week and 2) the momentum divergence that developed on those new highs. As yields took out resistance, the relative strength index made lower highs. That worries me.
In addition, we see crazy bearish sentiment in Treasury Bond prices. These are the kinds of numbers that we’ve seen consistently at peaks in yields; most recently in early 2011 and mid 2009.
For confirmation, we want to see a weekly close in 10yr yields below 2.7%. With rising 20, 50 & 200 day moving averages, there is no doubt that yields are and have been in a bull market. But so were stocks just a few weeks ago right?
Stay tuned…
Tags: $TNX $TLT $ZB_F $ZN_F $TBT
by JC
A funny thing happened on Monday afternoon. As stocks rolled over into the close, US Treasury Bonds didn’t follow. This is now something different, a change in character for these markets. Last Friday we ran the numbers: Stocks and Bonds ($SPY & $TLT) had a 1-week positive correlation of +0.95, a 2-week correlation of +0.94 and a 1-month +0.79. The results showed a very high positive correlation between the two asset classes. Interest rates rising was bad for stocks and bonds. But no more.
I was pretty vocal on Stocktwits Monday about this shift in market behavior. But since this has now continued into Tuesday, I think it’s worth a quick blog post. Lower rates are now negative for stocks.
Here is a 10-minute chart showing the close relationship between the two asset classes. They came apart around 2 o’clock Monday:
With stocks selling off, it seems as though the market is looking for the safety of US Treasury Bonds. Safety appears to be the priority, not the fear of higher rates. This is an interesting development.
I’ll follow up as this behavior continues. I think this is just the beginning of the return of negative correlations.
Tags: $TLT $SPY $ZB_F $ZN_F $TNX $SPX $ES_F
by JC
We had a lot to cover this week. And although this may be a boring few days coming up, there are some interesting setups that could start to get going. First of all, everyone hates bonds so I think that’s something to pay attention to. But we also discussed Herbalife, Vietnam, S&Ps and the importance of keeping an open mind as a market participant.
Enjoy:
Tags: $SPY $DJIA $DIA $SPX $HLF $VNM $TLT $ZB_F $TNX
by JC
Summer is almost over boys and girls. There’s only one more week before September gets going. So as we enter the last few days of the season, I believe it’s prudent to think about what’s coming up next. How can we be best prepared for September? Well, I think now is probably as good a time as any to check the seasonality stats as we head into Labor Day.
This chart below shows the average monthly performance going back to the beginning of the Dow Jones Industrial Average in 1886. There’s one month in particular that really stands out:
There isn’t much for me to say here. The numbers speak for themselves.
This chart represents every single year. Check out the Presidential Cycle that was posted last week to see what the end of post-election years typically look like.
Source:
Seasonal Patterns For Dow (TheChartStore)
Tags: $DJIA $DIA $SPX $SPY
by JC
Vietnam has now officially lost all of its year-to-date gains. The Market Vectors Vietnam ETF was up a quick 30% to start 2013. And since then, it has slowly been giving it all away. Yesterday, the ETF closed at new lows for the year and took out all of the previous support.
Today’s chart shows the daily bars for $VNM –
I think the support levels here are pretty clear. The July lows were right around 18.10, but the 18 and change level was successfully tested 4 times, before ultimately breaking down this week. I think that as long as prices remain below those levels, Vietnam should stay under pressure.
Volume expanded on the recent break, helping to add fuel to the fire. And when it comes to momentum, as you can see in the chart above, there is still plenty of downside left before reaching any extreme oversold readings. The fact that RSI has failed for several months to stay above 50 is another negative for this security.
With a lot of the Asia Pacific stocks taking a beating lately, I wouldn’t be surprised if this was the next one to get hit hard. Keep an eye on this Ho Chi Minh Stock Index…
Tags: $VNM
by JC
When we go through all of the charts in the US Stock market, there are sometimes certain reference points that we can look back to in order to find strength and weakness within the stock universe. I think the May high in the S&P500 is one of those price and time reference points that we can compare stocks and sectors to. Here’s the $SPY daily bar chart showing the highs in May that I’m referring to:
Now, when looking for strength within the market, we would much rather be buying the stocks that were strong enough to exceed those previous highs. If a stock or sector was unable to surpass that May peak then, to us, it is a clear sign of weakness. We would prefer to stay away from those names, or even short them if the opportunity is right. And we would rather not be short the stronger names, of course.
Here are a few examples of sectors within the S&P500 that showed enough strength to get through the May highs: Financials, Discretionaries, Industrials and Healthcare:
Technology and Materials were barely able to make it over:
And the weakness was definitely out of the Staples, Utilities, and Energy that all failed to make it back above the May highs:
This is how I see things right now. Those May highs are a reference point that we are comparing stocks and sectors to. And as I mentioned above, I would much rather own the strength and be short the weakness. And this may sound like common sense, but sometimes “strength” is more difficult to define. In this case, I think it’s much simpler.
Trade ’em well….
Tags: $SPY $SPX $ES_F $XLF $XLY $XLK $XLI $XLE $XLB $XLV $XLP $XLU
by JC
There is a common misconception out there that, “gaps are always filled”. We’ve all heard that one right? But the thing is, that there are all different kinds of gaps that all have different implications. Exhaustion Gaps for example are always filled, by definition. They show up at the end of a move, uptrend or downtrend, and then quickly reverse. It was given that name because the market’s move by that point is, “exhausted”. But Breakaway Gaps aren’t filled for a long time, if ever. They show up to begin a big move. One day the market gaps higher (or lower in a new downtrend) and doesn’t look back. Some might call it a “gap and go”.
Take a look at all of these gap and go’s in the stock market during this uptrend. Nice moves followed those gaps. But this is now the second consecutive time that we’ve seen one to the downside. So if this is indeed a breakaway gap, the implications could be devastating for this market.
We at least know this isn’t an exhaustion gap….
Look at the uptrend line from the November lows. These recent gaps lower came at or around that trendline. So we know the market is recognizing the significance of this well-defined uptrend. Now we’re back below it, after gapping lower. This critical break also comes right at the horizontal support we’ve been talking about, that represents the May closing highs.
Breakaway gap or not, this is an important series of events that has occurred over the last week. To invalidate the consequences of this potential breakaway gap, S&Ps quickly need to be fill it and the May highs need to be retaken by the bulls.
The Japanese call gaps, “windows”. And when they’re filled, they say the market is “closing the window”. So with that in mind, I think the bulls’ window of opportunity could be closing as we speak.
Tags: $SPY $SPX $ES_F