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January 2018

ChartWatchers

Falling Dollar Favors Foreign Stocks, EU Stock ETFs Benefit From Stronger Currencies

by John Murphy

The direction of currency markets tells us a lot about the relative strength (or weakness) of global markets. As a rule, stronger economies have stronger currencies, while weaker economies have weaker currencies. As a result, the direction of the U.S. dollar tells us whether to favor U.S. stocks or foreign stocks. Generally speaking, a weaker dollar favors investments in foreign stocks. The green line in the chart below shows the Dollar Index (UUP) falling since the start of 2017 to the lowest level in three years. During that time, global stocks rallied. But foreign stocks rose faster Read More 

ChartWatchers

Want to Make Money? Show Great Patience

by John Hopkins

Earnings season is about to kick into high gear. Over the next few weeks thousands of companies will report their numbers. Some will beat expectations and some will disappoint. And some will present some great opportunities to make nice money, especially for those of you who are patient enough to pounce at the right time. Here's a real life example. This past week as I was searching for high reward to risk trading candidates I uncovered a stock - CLDR (see below) - on our ChartList that reported and beat earnings expectations, rose on nice volume, pulled back and then consolidated some Read More 

ChartWatchers

What To Buy In An Overbought Market

by Tom Bowley

Bull markets can advance very quickly and can become extremely overbought.  It's a challenge psychologically at times to commit new money t0 a stock or ETF, knowing that just days or weeks ago prices were so much cheaper.  So what the heck do you do when looking to invest cash in your account?  Well, for starters, you need to realize that rotation plays a huge role in stock markets.  Sectors and industry groups that once led the S&P 500 on a relative basis begin to struggle as money rotates and moves to other areas, which then begin to lead.  Want an Read More 

ChartWatchers

China ETF's Show SCTR Strength

by Greg Schnell

China has been improving in performance over the last few months. The various ETFs that track China have really started to dominate the SCTR list. Part of this is in US Dollar weakness, but we are also seeing the broader Asian markets start to kick it up a gear. As an example, Russia and Vietnam have also been surging and India is racing higher. I am pretty sure everyone has heard of the outperformance by emerging markets but the resurgence of China is particularly noticeable as we enter 2018. Searching on 'Chin' (to capture both China or Chinese) on the US ETFs page we can see the Read More 

ChartWatchers

A Surprising Small-cap Sector is Leading in 2018

by Arthur Hill

2018 is off to a great start with the S&P 500 SPDR (SPY) up 5% in just 13 trading days. The rally is quite broad with six of the nine equal-weight sectors up 5% or more. I am showing the equal-weight sectors first because they reflect performance for the "average" stock in the sector. The PerfChart below shows year-to-date Rate-of-Change for these sectors.  Technology (green) is the clear leader with a 7.71% gain and Healthcare (teal) is in second place with a 6.83% gain. Consumer Discretionary (red) and Energy (black) take third and fourth place Read More 

ChartWatchers

PMO Analysis Chart - Market Isn't As Overbought As You Think

by Erin Swenlin

Most of you are familiar with the Price Momentum Oscillator (PMO) and its use on my individual stock, ETF, index charts. However, by analyzing the health of the PMOs within an index, we are able to get a reliable market indicator.  The PMO Analysis charts that are in the DecisionPoint Market Indicator ChartPack tally up whether the PMOs on each component of the index are rising, on buy signals or have PMO readings that are above the zero line. Each pane gives us a short-, intermediate- and long-term picture of the health of an index. Using the first pane (the PMO), you can Read More 

ChartWatchers

2018 Stock Market Forecast

by Tom Bowley

HAPPY NEW YEAR! In my first Trading Places blog article of 2018, "Here's One Chart That Screams BUY As We Begin 2018", I highlighted my favorite relative chart in the Current Outlook section.  It's one of the biggest reasons why I believe 2018 will simply be an extension of what we saw in 2017.  The bull market appears to be quite sustainable as we enter 2018.  But what areas will lead the stock market in 2018? The two best performing industry groups in 2017 were renewable energy ($DWCREE) and home construction ($DJUSHB).  The Read More 

ChartWatchers

Global Stocks Start Year With a Bang, S&P 500 is Well Into a Five-Wave Advance

by John Murphy

Global stock markets started off the new year with a bang. U.S. stock indexes exploded to record highs for the best start in years. Foreign stock benchmarks did the same, including the FTSE All World Stock Index which also hit a new record. New records were set in North America, Europe, and Asia and in both developed and emerging markets. So what's there not to like? Well, there is one thing. Stocks are very stretched on a historical level. That may not be a problem at the moment. But could become one later in the year if some things start to go wrong. But first let's look at how much Read More 

ChartWatchers

Here's A Trading Strategy That Works In Any Market

by John Hopkins

Ultimately, the U.S. stock market lives and dies by the performance of its economy and how that translates into earnings growth of U.S. companies.  Nearly every economic report that we've seen of late has been strong or strengthening.  The number of companies that are performing well on their top and bottom lines has been growing.  It's evidenced by the number of stocks that we currently have on our Candidate Tracker at EarningsBeats.com.  We have nearly 300 companies on this Candidate Tracker ChartList and it's by far the most we've ever had.  It tells us a few Read More 

ChartWatchers

Awaiting Some Relative Strength Clues In Energy Related Stocks

by Greg Schnell

Oil trades have had a big beautiful run from June into early January. The commodity related stocks have also run since August. But there are some relative strength relationships we need to see break out to launch the next phase of stock runs. Within the energy space, the recent flare-up in Natural Gas prices appeared as NYMEX traders felt the cold come in. Oil has been a persistent bull and just keeps adding a new high every week. But the energy exploration stocks and the oil service stocks had not broken out of their big down trends in relative strength (RS) during 2017 Read More 

ChartWatchers

Pockets of Strength Outweigh Pockets of Weakness

by Arthur Hill

The stock market is never 100% bullish with all stocks participating in an uptrend. There are always some holdouts and pockets of weakness, but the broader market can continue higher as long as the pockets of strength are greater than the pockets of weakness.  The percentage of stocks above the 200-day EMA is a great way to measure internal strength and this indicator has remained strong since mid September. Of note, S&P 500 %Above 200-day EMA (!GT200SPX) has been above 70% since September 12th and large-caps show the most internal strength overall. Mid-Cap %Above 200-day EMA Read More 

ChartWatchers

Market Still Overvalued, or Maybe Not

by Carl Swenlin

Earnings for 2017 Q3 will be finalized soon, but on a preliminary basis the S&P 500 has a P/E of 25, which is extremely overvalued. The chart below shows the S&P 500 Index (black line) in relation to where it would be if it were undervalued (P/E 10 - green line), fair value (P/E 15 - blue line), or overvalued (P/E 20 - red line). Price moved well above that range over two years ago, just before the current cyclical bull market began. Earnings growth through 2018 Q3 will bring the P/E down to 21, but only if price goes no higher. If the bull market Read More