Trend Check with Tushar Chande

Tushar Chande
About the author: , PhD, MBA, is the inventor behind an impressive collection of technical indicators, including the Aroon and Stochastic RSI. He has written several books, holds both a PhD in Engineering and an MBA in Finance, and has over two decades of experience trading the financial markets. Follow Tushar in this blog as he highlights his new "Trend Meter" indicator and shares his analysis of current market conditions.

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Trend Check with Tushar Chande

May 2017 Review: New Highs, New Sighs

by Tushar Chande

The market made new highs this month, with utilities, technology and consumer staples being the three top sectors. Traditionally, utilities and consumer staples are considered risk-off sectors, and technology is thought of as risk-on sector.  The broad market, at the Russell 1000 universe, now has a downward tilt to its multi-period breadth. Thus, we have a mixed message from the market this month.  The S&P 500 hourly chart tells the story well.  The market drifted to new highs in a cup-with-handle formation.  Then we had a sharp break, suggesting the handle was Read More 

Trend Check with Tushar Chande

Back to Basics: Why do RSI divergences occur?

by Tushar Chande

I have an original, autographed copy of "New Concepts in Technical Trading System" by J. Welles Wilder, Jr.  The original signature is dated July 8, 1985, and made out to Stanley Kroll, who in turn gifted me his copy. I quite enjoy looking through the path-breaking book, as untold thousands have used the RSI and its other indicators over time. The original hand-written spreadsheets are just priceless.  Today I will try to explore why divergences occur between the RSI and underlying prices.   Chart 1: A pair of true originals, J Welles Wilder, Jr and Read More 

Trend Check with Tushar Chande

Can't Keep a Good Market Down

by Tushar Chande

The rapid rebound from the sell-off last week was impressive.  On the other hand, utilities made new highs and high-yield bonds resumed their rally.  The internals of the Russell 1000 index are pointing to weakness, even as trend-following models remain mostly bullish.  I look at some of the mixed signals from this sideways market. Chart 1: The breakout in utilities has pushed XLU to the top of the trend strength rankings.   Utilities Strongest Trending Sector The breakout in the XLU has pushed it to the forefront Read More 

Trend Check with Tushar Chande

SPX Breaks Cup-With-Handle Formation

by Tushar Chande

The bull entered the china shop yesterday.   The momentum divergence I have worried about for the past week resolved to the down side, breaking the cup-with-handle formation on the hourly chart.  As a result, the short-term trends have turned flat on the trend check carpet, though longer periods remain unaffected, as they should.  I have also pointed to the broader market being weaker than the indexes.  The overall path of least resistance from the Russell 1000 universe remains lower in the 25-to-50 day interval, as it has for the past several days. The big picture Read More 

Trend Check with Tushar Chande

High Yield Corporate Bonds Greenlight Breakout

by Tushar Chande

High-yield corporate bonds are pointing to higher equity prices.  The iShares IBOXX High Yield Corporate Bond ETF (HYG) formed a nice cup-with-handle formation, broke out above the prior high, came back to re-test the breakout point, and then rallied to new highs.  This is a very powerful chart pattern, and is indicating a risk-off market environment (see Chart 1).  The VanEck Vectors International High Yield Bond ETF (IHY) paints a similar picture (see Chart2), as it responds to the strong up-moves in European equity markets.  IHY shows a high correlation to the Read More 

Trend Check with Tushar Chande

Detour Ahead for the SPX? (Or, Is it 2015 All Over Again?)

by Tushar Chande

The S&P 500 chart this year is starting to resemble the market's evolution in 2015. Then, as now, the market had lost all its up-side momentum, and it was listlessly moving sideways into the summer.  Then, in 2015, we had a mini-crash in response to a currency move in China, and it led eventually to the lows in January, 2016.  We look at the similarities in the market’s price action in 2014-15 and 2016-17 for clues to what might happen next. Chart 1: Is there a detour ahead for the market? Perhaps there are clues to be found in 2015.   Read More 

Trend Check with Tushar Chande

Divergence in SPX, But No Pick-up in Selling Pressure

by Tushar Chande

A glaring divergence is developing on the S&P 500 chart as it makes new highs, but with a lower 14-day RSI.   Such a divergence implies a loss of up-side momentum. However, there is no discernible pick-up in selling pressure, even after the turbulence from Washington.  I converted RSI values from 7-70 days into the corresponding buy/sell pressure.  I show that buying pressure exceeds selling pressure, and buying pressure is relatively constant versus selling pressure as we extend the look back period.  So, the market is happy staying up here for now. Read More 

Trend Check with Tushar Chande

Weekly Trend Check May 05 -- Trend-following Models All Green

by Tushar Chande

My trend-following models trend check carpet is a lovely color of green across all time frames and market breadth, but event risk rises this weekend with round two of the French elections due Sunday. Chart 1: Trend-following models are all green, pointing to higher prices.  The degree of smoothing increases from to top to bottom, and market breadth increases from left to right, from 3o to over 2000 stocks.   SPX Holds Breakout and Rises to Top of Cup-With-Handle pattern The S&P 500 has held its breakout from last week Read More 

Trend Check with Tushar Chande

Sunscreen for your Portfolio: What to do if you can't sell in May and go away?

by Tushar Chande

As summer vacations breach the horizon, and beaches beckon, equity traders leave market worries behind, and equity prices have their summer fade.  But, what to do if you cannot sell in May and go away?  I found some stocks and sectors that gain from summer fun.  Naturally, momentum trumps seasonality, and well, this year is different, so a bit of caution/ sunscreen is always desirable.   Context for Summer Seasonality: "Sell in May and Go Away" The vacation season typically coincides with a lull in the equity markets. We plot the average monthly Read More 

Trend Check with Tushar Chande

Insights from Vanguard ETFs on Style and Cap Weight Performance -- The Magic Behind Vanguard MGK ETF

by Tushar Chande

Vanguard ETFs provide interesting insights into recent performance of funds by style (growth vs. value) and market capitalization (large vs. small).  Even a casual glance at industry net assets will show you that most of the US assets are in large or mid cap stocks.  Hence, whether you are an individual trying to gain an edge, or a portfolio manager trying to stand out, understanding their recent performance is well worth your while.   Chart 1: The Vanguard Mega Cap Growth ETF (MGK) is trending strongly.  It has leaped to the top of our CTM Read More 

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