Trend Check with Tushar Chande

Vive la Volatilite (Or, Let Them Eat Risk-Off Cookies!)

The market chose to fret about French elections this week, because a string of recent elections have led to unexpected outcomes, even though US exposure to the French economy is quite small.  Earnings season helped risk-on sectors gain this week, and risk-off groups waned.  However, trader anxiety, doused early in the week, flared up again after the terrorist incident on Champs Elysees.  As a famous French historical figure might have tweeted today, "Let them eat risk-off cookies!" (Yes that rhymes with Biscoff cookies. More on that later.)

 

Chart 1: The market was put on a diet of French risk-off cookies this week, in anticipation of the first round of French Presidential Elections on Sunday, 23rd April. The ones in the picture are from Ikea.

Continue reading "Vive la Volatilite (Or, Let Them Eat Risk-Off Cookies!)" »

Fear Index Drops To Lower Gear

The $VIX index closed below its prior two lows today.  It's 7-day RSI has dropped below 70.  In the past this has generally turned into an important reversal in the VIX index.  Today, key market indexes and sub-sectors, such as the NYSE composite and XLF held support and bonds (and gold) reversed.  A typical unwinding of the defensive selling ahead of the long weekend, a possibility I had suggested at the end of my previous post.  I look at a few charts to understand if the reversal could continue.

Continue reading "Fear Index Drops To Lower Gear" »

A Brief History of Post-Election Rallies (Or, could the "Trump Rally" go even higher?)

As dark clouds gather over the investment horizon this Easter weekend, the post-election rally in the US stock market (the "Trump Rally") seems to have faded just a bit.  Is the rally over? Or, can the recent history of US stock returns during the first year of a new presidential four-year term give us some useful guidance?  We explore this question, in the hope we will find an Easter egg after all, if not now, perhaps later this year. However, the really tough question this weekend is this: Should the Easter chocolate bunny be consumed feet first, or ears first? (More on that later.)

 

Figure 1: Kites riding a stiff breeze keep watch under stormy skies over vast fields of tulips just reaching their peak this weekend in the Great Northwest.

Continue reading "A Brief History of Post-Election Rallies (Or, could the "Trump Rally" go even higher?)" »

Dow 30: Less Vol Now, More Vol Later? -- Trend Checking Bonds and Dollar -- Market's Path of Least Resistance

We explore the implications of the very narrow trading range in the Dow.  Then we trend check bonds and gold.  The NLY chart caught our eye. I also annotate the market's path of least resistance.

 

Dow 30 Industrials: Less Vol Now, More Vol Later?

The Dow 30 is showing a 5-o'clock shadow.  They have traded in such a narrow range, that the shadows of the candlesticks are growing like whiskers (see Chart 1).  Since the end of January, about 70% of the closing percentage changes have been within +/- 0.25% of the previous close.  The narrow range makes the market vulnerable to event risk, as we saw in August, 2015.  Today the market spent most of the day below its 50-day average.  An outside event could easily stampede the market lower toward 19,750 and the 200-day average.  A raft of technical levels offer support in that area.  On the other hand, it could bob along, like an aircraft on autopilot at cruise altitude.  Geopolitics, the French elections and the earnings season are just a few of risk factors.

Chart 1: The Dow 30 has traded in a very narrow range for the past three weeks.  The Chande Trend Meter (lower panel) has trickled down into the trend-less region.

Continue reading "Dow 30: Less Vol Now, More Vol Later? -- Trend Checking Bonds and Dollar -- Market's Path of Least Resistance" »

Bonds Reach Resistance -- Market Environment Weakens Ahead of Jobs Report -- Top Trending Vanguard ETFs -- Top Trending S&P 500 Stocks

  • Bonds reach critical overhead resistance ahead of jobs report
  • Market environment weakens over short- and medium-term
  • Top-trending Vanguard ETFs rankings are consistent with strength in bonds
  • Top-trending S&P 500 stocks are led by McDonald's (MCD)

 

Bonds Reach Critical Overhead Resistance

Bonds have rallied into critical overhead resistance ahead of the jobs report (see Chart 1).  Oddly, the overall economy has been firm, with the third revision of 2016Q4 GDP now at 2.1 percent, and the Atlanta Fed GDPNow at 1.2 percent for the first quarter of 2017.  The February ADP employment report estimated that private sector employment increased by 298,000 and the Chicago Fed National Activity Index also ticked up in February. Thus, bonds have rallied in the face of firmer data, but with increasing uncertainty whether fiscal stimulus from Washington will arrive any time soon.  Thus, the upcoming jobs report might provide the impulse for the next move in bonds.

                                              Chart 1: BND - Vanguard Total Market ETF

Chart 1: The CTM shows the highly diversified BND ETF trending as it reaches overhead resistance from 81.25-81.50. The jobs report should provide the impulse for the next big move.

Continue reading "Bonds Reach Resistance -- Market Environment Weakens Ahead of Jobs Report -- Top Trending Vanguard ETFs -- Top Trending S&P 500 Stocks" »

Engage More Closely with the Market (via the Trend Check Carpet)

NELSON'S LAST SIGNAL TO THE FLEET AT TRAFALGAR "ENGAGE THE ENEMY MORE CLOSELY"

The great naval battles of the 16th-18th century were fought with a large number of huge sailing ships all moving in a straight line, firing batteries of cannon broadside at each other at short range.  Hence, the biggest warships were called line-of-battle-ships. The commanding Admiral could only use flags to signal maneuvers to his fleet, through all the din and smoke, and hence information compression took on a whole new role (see more about Trafalgar later).  Naturally, the ship that bore the Admiral was called the flagship, and even today, the largest ships are called battleships. If I were to use flags, the name Trend Check would appear as shown in Chart 1.

 

Chart 1: There are so many rules on composing flag messages at sea, that I almost certainly have it wrong, but here I am trying to say "Trend Check".

Continue reading "Engage More Closely with the Market (via the Trend Check Carpet)" »

The Shortest Distance Between Two Points is a Crooked Line

"The shortest distance between two points is a crooked line."

Sure, that may be out of line with Archimedes, but it is perfectly in line with how markets work.  If nothing else, that's what two decades of trading the futures markets taught me. The title just means that we typically underestimate the randomness of the markets and overestimate our ability to predict them.

I am Tushar Chande and welcome to my first blog post on StockCharts.com.  I know many of you will question the wisdom of launching a new blog on April Fool's Day (trivia buffs: more on this at the bottom of the post).  But hey, I am used to market risk, since my "stock equivalent positions" exceeded many hundreds of millions of dollars as a CTA and hedge fund manager.

Continue reading "The Shortest Distance Between Two Points is a Crooked Line" »