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All Star Charts

Expert technical analysis of financial markets by JC Parets

[Chart Of The Week] Yesterday’s Losers Are Today’s Winners

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From the desk of Steve Strazza @Sstrazza

In recent weeks, we’ve witnessed a powerful rotation as many of the secular laggards have assumed short-term leadership positions.

In today’s post, we’re going to take a stab at using a new visualization tool in order to illustrate this recent changing of the guard.

This scatter plot is comparing the maximum drawdown from 52-week highs to the March lows (Y-Axis) with the short-term performance off of the May 13th low, among all of the 150+ Dow Jones Industry Indexes. The plot-sizes are based on how large the current drawdown is… In other words, the bigger the dot, the bigger the drop.

[Read more…]

Charting School: What Is Market Breadth?

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This is a market of stocks, and not just a “stock market”.

All of these Indexes, from the Dow Jones Industrial Average to the Russell2000 Small-caps, are made up of components. There are 30 stocks in the Dow and 2000 stocks in the Russell2K, for example.

Are more of them going up? Are more of them making new highs? Are more of them showing bullish momentum characteristics? Are fewer and fewer components doing these things as the indexes make new highs? What about in downtrends? Are more stocks confirming the new lows in the indexes or are fewer and fewer stocks making new lows and showing bearish momentum characteristics as the market makes new lows?

The answers to these types of questions is what we call, “Market Breadth Analysis”. There are a lot of ways to do this on all sorts of different time horizons. In this lesson we go over all the methods we use to decipher market breadth, which can be used by both individual traders and the largest financial institutions in the world.

This explanation is taken directly from Lesson 4 from the NEW Allstarcharts Charting School: [Read more…]

[Options Premium] Utilizing Premium Again

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This is starting to become a monthly trade.

I like to keep a few delta neutral trades active in the portfolio at all times (if I can). It’s a good diversifier and also benefits from sleepy or sideways markets that tend to not help any of my directional trades.

So I regularly scan my list of the most active optionable ETFs to pick out the ones with the highest implied volatility and charts that look like the potential for sideways action setting up (ideally). And once again, for the 3rd month in a row, The utilities sector is standing out for me.

The last two strangles worked out. This time, we’re gonna do a slightly different twist.

[Read more…]

Been Around The World & We’re Resolving Higher

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From the desk of Steve Strazza @Sstrazza

Thanks to everyone for participating in this week’s Mystery Chart. It was a bit of a layup, as most of you were bullish, recognizing the powerful failed breakdown and follow-through back above critical former support.

We would agree and like this chart for a counter-trend move right now as well. But the reason we chose it was really for informational purposes, as we are seeing continuation patterns resolve higher all over the globe right now.

The more of these patterns that resolve to the upside, the stronger the weight of the evidence builds in favor of other consolidations working themselves out higher as well. We are seeing this across all areas of Domestic and International Equity Markets, many of which we’ll highlight in this post.

[Read more…]

Markets Trend, That’s Why Technical Analysis Works

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What do we know is fact?

Market prices trend.

Stocks go up mostly together for a while. And Stocks go down together for a while. Sometimes, they go sideways.

It doesn’t matter if you’re a Technical Analyst, fundamental analyst, economist or whether you look at the moon and the stars to make your buy/sell decisions. You cannot argue with the fact that stocks prices trend.

This is why technical analysis is so powerful. All we’re trying to do is identify the direction of the trend. That’s it. If we’re on the right side of that trend, we’re going to be right more often than wrong. This is because there is a much higher probability of a trend continuing in the direction that it’s headed vs it completely reversing.

There are signs, of course, that allow us to get out of the way when risk is elevated. But to be perfectly clear, those are much more rare occasions. You guys who have been reading this for a long time already know that. How often am I all of a sudden Mr. Bear and the world is ending? Rarely. And that’s because stocks have mostly been in uptrends the past decade.

What’s happening today? Consolidations are resolving higher, not lower. Our longs are working incredibly well. Any shorts haven’t. That’s information.

Our Bull Market Checklist has also been really helpful. I encourage you to go back and go through the list yourself.

There are stocks we want to own. They’ve been working.

Defensive areas are rolling over: Bonds, Gold, Yen, Consumer Staples Relative, etc…

I think that’s a positive for stocks.

And how about the news? Fortunately, I don’t watch. But I can only imagine.

Stocks ripping in face of that I think says something.

What am I missing here? Let us know!

JC

 

Have you enrolled in our NEW Charting School yet? We’re really proud of what we put together. Check it out!

 

 

Mystery Chart (06-03-2020)

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From the desk of Steve Strazza @Sstrazza

New Mystery Chart!

For those new to the exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!

We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.

You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?

[Read more…]

Consolidations Are Resolving Higher, Not Lower

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Consolidations tend to resolve in the direction of the underlying trend. But when they don’t, that’s the signal!

An oldie but goodie from the past, that I always think about when this comes up, is the US Treasury Bond Fund back in the Fall of 2016. I remember chatting with Liz Claman at the time about it on FOX. The $TLT was consolidating in a classic, textbook continuation pattern above former resistance from the early 2015 highs:

The bet we were making (for many other factors as well at that time) was that this was not a continuation pattern, and instead a massive failed breakout.
[Read more…]

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