March 16th 2014: Around the world and back in weekly charts. Some scary, some not.

Let's start with a throwback to 2007 - right before the crash...

Here's what the NYSE looked like in 2007:

OK, fast forward to present time (March 16th, 2014) and take a look at the INDU's.  Obviously, there's some major differences between the 2007 $NYA and 2014 $INDU's, but the structure is remarkably similar.  PPO lines show similar negative divergence w/price.  You have a left side "doublet", a swoosh down to the 30w (150d) EMA, recovery and failure.  Although the sequence isn't aligned exactly, it's close.  History doesn't repeat, but it often rhymes.  Significantly, what we don't have yet is the "panicky" volume that came in 2007.  Still worth watching.

So what, you say.  It's only 30 stocks.  It's a statistical sampling error that's revised every few years by a bunch of grumpy old men to make it even less consequential or reliable.  OK, let's look at some other charts from the US and around the world.

How about retail?  That's an important US sector, right?  We're supposedly a retail-based economy.  After a blistering run, I see a series of lower highs here.  Can't argue with price until we see a higher high.

And where's the leadership coming from now?  Utilities.  Ugh.  I'd rather staples and low-vol lead, than utes.  Anything but the 'utes.

It's not all bad.  US small caps are making higher highs with volume.  That's bullish.  Price is still above the 10w EMA.  Elder bars are green.  There's still that pesky, omnipresent PPO negative divergence with price, but there's really nothing terribly wrong with this chart.

Here's another example of the negative divergence with higher prices.  This time courtesy of the $NDX, but $SPX, $NYA, XLF, etc. all look similar with "-ve D".  The $NDX is looking a little less perky than small caps, but still no lower highs here.

The rest of the world doesn't look nearly as strong, though.  Emerging markets, Japan, & Europe (led down with H&S top in Germany) are all weaker.

Volatility is picking up and PPO didn't even get back below zero during this latest run up in equities.  We're not even at the magic 21 level yet, so plenty of room for more upside.  IF the 22 level should fail, this one could run significantly higher - a possibility that not many people will expect.

And what the f*ck heck is up with copper?  Dr. Copper did an excellent job of sniffing out the 2007 top and subsequent bottom in 2008-2009 right around when China and Brazil bottomed....but well before the March 2009 bottom in US equities.  So, why is it back to 2009 levels?  Why are we breaking important support levels with volume?  Imagine how low it would be with a stronger dollar!  Yikes.  What is copper's problem?  What is it sniffing out this time?  $2.81 is the next level to watch here with important support from 2009 and 2010.

Continuing with metals, gold is looking much better than it has in YEARS.  Remember the persistent verbal bashing gold took last year?  Everybody's favorite whipping boy.  "Why own gold when you can own a cow?"  How it is going below $1000 and doesn't belong in anyone's portfolio?  All that rot.  I haven't heard much from those people this year.  Here's the take-away: no trend lasts forever and sentiment is a powerful contra-indicator.  Coffee, anyone?  Anyway, the acceleration off the double bottom is continuing.  PPO is crossing the zero line (just barely, but still positive).  The 10w EMA closed above the 30w EMA for the 1st time in over a year.  The next important level is $1399.90 and that looks like it will be tough to break on the 1st push.  A pause at the level would be good as indicators look poised for higher prices.

Gold & silver miners are moving up with gold.  PPO lines & EMA's are looking bullish.  The next important level is $112.12.  Similar to gold, a pause around that level to digest gains would be good as long as indicators remain strong.

Forget the headlines of the bond bubble is over.  Look at this chart of the 20+ year treasury bond fund.  It's working on a PPO zero-line x-over.  EMA's are threatening to cross.  And price is banging away on $108.73.  This does not look bearish to me.  I'm not saying that it's a new bull in the bond market, but this thing could retrace 50% - that's a nice bounce from these levels.

So what does it all mean?  From these charts, I can tell where I want to be buying dips or positioned long: gold, miners, bonds, maybe utes (ugh) and maybe small caps.  And I see lots of areas that I want to avoid namely, anything ex-US.  For my own trading, I'm raising cash, nibbling on some index hedges, but still trading long (mostly half-size) and taking profits faster than usual.  Everbody's trading plan is different depending on time frame, flexibility and comfort level, so what works for me may not work for you.

Thanks for looking.

For more charts, please see my public chart list on stockcharts.com:

http://stockcharts.com/public/1109955

March 9th 2014: Some cool charting tools, tips & tricks (that might not have heard of).

I'm one of those guys who likes to tinker with stuff.  This holds true whether I'm out in a boat messing around with fishing gear or building something useful out of wood or playing around with stock charts.

Here's some of the cool charting tools on Stockcharts that you might not be familiar with....

#1.  PPO.  PPO stands for "Percentage Price Oscillator" and has the same basic construction of MACD.  The key distinction is that PPO is percentage-weighted and MACD is price-weighted.  This small difference becomes really important when looking at charts that experience a large price gain/loss.  In the example below, you can see a chart of a hot stock right now, PLUG.  MACD is making new highs with price, but PPO is not (a potentially bearish divergence).  You can also see the squeeze that MACD takes at very small prices (<$1) which makes signals harder to see.  In effect, MACD is squeezed and stretched simply by the price-weighting nature of the MACD formula.  PPO seeks to normalize MACD by simply dividing MACD by the slow EMA (middle number).  For more info on PPO, see this link...
http://stockcharts.com/school/doku.php?st=ppo&id=chart_school:technical_indicators:price_oscillators_pp

Also, in the PLUG chart below, I removed the signal line (and corresponding histogram) from MACD/PPO by setting the signal line parameter (last number) to "0" or "1".  It's really just an easier, more quantifiable way to look at EMA crossover's and the spread between them but I find it very useful.

#2.  VWAP.  VWAP stands for Volume Weighted Average Price.  The way this indicator is designed makes it best suited for intraday charts, but it has other applications.   VWAP starts collecting data price & volume data when a vehicle opens and stops when it closes for the day.  Looking at VWAP over multiple days shows pops and drops associated with the day-to-day reset (especially gap ups/downs).  However, it serves two very useful purposes: it's a real-time, volume-weighted smoothing function of price bars and it highlights oversold conditions when price trades below VWAP.  These features make it useful to me for confirming crossover (MA's, EMA's, BB's, etc.) and replaces an overbought/oversold oscillator for intraday adds.  It's the dark green line in the PLUG chart below which tracks closely with price (but not exactly).

For more info on VWAP:

http://stockcharts.com/school/doku.php?st=vwap&id=chart_school:technical_indicators:vwap_intraday

#3. Bullish Percent Index and Invisible bars.  The Bullish% of an index is simply the # of stocks on a P&F buy signal divided by the total # of stocks in that index.  Sometime in late 2013, I noticed that the bullish percentage indexes on Stockcharts stopped being only available as of end-of-day data and started being populated in real-time intraday.  For example, now you can look at $BPSPX on a 15-minute cloud chart to confirm a breakout on the daily without waiting until after the market closes to get $BPSPX (EOD) data.

Here's a chart that I made using "invisible" bars and EMA(1) signal line (which serves to smooth out the intraday bullish percent data).  The "invisible" setting for price bars removes the noise from the choppy bullish percent ratio as "chunks" of stocks pop to new buy signals.

For more info on Bullish Percent:

http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:bullish_percent_inde

For more of my charts, check out my public chart list on Stockcharts.com...
http://stockcharts.com/public/1109955

March 2nd 2014: Is this a top? Probably not. Here's why in 3 charts.

Everyone wants to know if this is THE top in the markets.  In my view, probably not.

Here's why in 3 charts:

Perhaps the most important chart of the week goes to Ryan Detrick who showed S&P short interest surging to new highs.  This surge to near July 2012 highs implies that bears are still shorting this rip, hedgers are hedging, and bulls are buying insurance.  Historically, this level of short interest has matched with market lows which means that we could have a blow-off type move into late March/April, i.e., this latest rip could look like a low in late March/April.  Do not underestimate the power of this market to squeeze shorts and grind higher on low-volume.
Here's a link to the original article:
http://finance.yahoo.com/blogs/the-exchange/short-interest-on-the-s-p-500-surges-to-a-new-high-182007031.html

There are other a few other important charts that are worth nothing here.  Let's look at an equal-weighted weekly chart of the S&P500.  The S&P500 is a heavily market-cap weighted index which tends to mask the performance of the smaller  to mid-size components of that index.  If you apply an equal-weighting structure to the same components, you can see how the average stock is performing versus the high market-cap skewed version and the average stock is doing extremely well which is bullish.  The strength in the equal-weight index combined with the total short interest chart above makes a powerful bullish case.

Lastly, another force behind this bull market that can't be ignored is the power of rotation.  So, yes, some sectors and some stocks are frothy (ex., health-care/biotech), but what if some laggers suddenly caught fire?  What if 2 big lagging sectors of the S&P suddenly started ripping, namely financials and energy?  Their charts are starting to perk up here.  Here's a 150-day performance chart from stockcharts showing the lag.  You can check out this chart and adjust the settings for free here:

http://stockcharts.com/freecharts/perf.php?[SECT]