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Long-term Rates Moving Before Stocks

The 10-Year Treasury Yield ($TNX) is largely positively correlated with the S&P 500 - and also shows a propensity to lead the stock market. The chart below shows the 10-Year Treasury Yield peaking in July 2007 and stocks peaking in October 2007, three months later. Similarly, the 10-Year Treasury Yield bottomed in December 2008 and stocks bottomed in March 2009, again 3 months later. The 10-Year Treasury Yield now has peaks in early June and early August. In addition, the 10-Year Treasury Yield broke below its July low with a decline into early October. Should the current pattern hold, the stock market would be expected to peak between September and November. This period is three months after the June peak and three months after the August peak in the 10-Year Treasury Yield ($TNX). If we take the middle, then that means an October peak for the stock market. So far the S&P 500 remains above its early October low and the medium-term trend has yet to reverse.

Click this chart for details.

Nvidia Bounces off Broken Resistance

Broken resistance turns into support. This is a classis tenet of technical analysis. Nvidia (NVDA) broke resistance around 12-12.5 in July and returned to this breakout area in late October. Notice that I drew a zone. Support and resistance levels are rarely exact. With a gap and surge today, Nvidia is trying to break channel resistance.

Click this chart for details.

How are Sector Carpet values computed?

The Sector Carpet values reflect the average change for the stocks in that sector. First, let's take a look at the default sector carpet. Nine sectors are represented. Each sector has a title box with its name and the average change for each stock. You can click on the title box to focus on a sector exclusively. Before leaving this image, notice that +2.1% is the average gain in the utilities sector.

After clicking on the utilities title box, I am now focusing exclusively on the stocks in the utilities sector. Hover over the green boxes, right click the mouse and choose "show values" to see individual price changes. The numbers in each box reflect the percentage change in each stock. Remember, +2.1% was the average gain for the utilities sector. This average gain is found by adding these numbers together and dividing by the total number of stocks. 

Think of the average gain/loss as a breadth indicator of sorts. If the Utilities SPDR (XLU) is up strong, then you can dive into the Sector Carpet to see where the gains are coming from. XLU is a market-capitalization weighted ETF that can be dominated by large-caps. The current utilities carpet shows gains across the board, which means all stocks are participating and this is bullish. If the Utilities SPDR (XLU) was up and the utilities carpet showed an average loss, it would show underlying weakness within the sector. In other words, the gain in XLU would be attributable to a few large-caps and not representative of the entire sector. Click here to learn more about Market Carpets.

New Look for CandleGlance and PerfCharts Pages

We've also updated our CandleGlance and PerfChart pages with the new, clean look now.  Please let us know what you think. Is everyone enjoying the lack of ads on these new pages?

CCI Signals for Jones Apparel

On the Stockcharts.com scan page for Wednesday evening, there were 20 CCI sell signals among NYSE stocks. A CCI sell signal occurs with a plunge below -100. Conversely, a CCI buy signal triggers with a surge above +100. CCI for Jones Apparel (JNY) surged above +100 on July 23rd and plunged below -100 on October 28th, four months later. There was a second dip below -100 on Wednesday to affirm the sell signal.

Click this chart for details.

Merck Propels XLV Higher

With help from component Merck, the Healthcare SPDR (XLV) bounced off support around 28. The ETF established support here with reaction lows in early September, early October and now early November. It is safe to say that the trend is clearly up as long as this support level holds.

Click this chart for details.

Calling All "Stocks and Commodities" Subscribers!

It's that time of year again.  Time for the annual "TASC Readers' Choice Awards" voting.  If you haven't done so already, please fill out your online ballot and submit it before the deadline. 

This year we've been nominated in the "Online Analysis Platform" category which is quite flattering however we aren't holding our breath for that one.

The one we really hope to do well in is the "Technical Analysis Website" category which is, once again, a write-in only category.  That's why we need your help.  Please make sure to fill in our name - "StockCharts.com" - in that category and vote for us.  Without lots of participation by our users, there's no telling what will happen when the votes are counted.

Once again, thanks for taking the time to fill out your ballot - these awards mean a lot to everyone that receives one.

(BTW, if you don't subscribe to "Stocks and Commodities" magazine, do yourself a favor and sign up for it.  It's a never-ending source of inspiration for technical traders.  Highly recommended.)

New Look for GalleryView

We've completed our updates to our GalleryView tool.  The new version is cleaner and matches our updated site design.  Let us know what you think and keep an eye out as more and more of our pages get updated in the coming weeks.

QQQQ Turns Indecisive at Support

After a sharp decline the prior two weeks, the Nasdaq 100 ETF (QQQQ) turned indecisive with a spinning top on Monday. This candlestick reflects a wide high-low range during the day, but little change from open to close. QQQQ surged above 41.5 in early trading, plunged below 40.8 in the early afternoon and then rebounded to close at 41.13. The day was a wash and the battle for support hangs in the balance.

Click this chart for details.

Bonds Fall As ISM Rises

The 20+ Year Treasury ETF (TLT) bounced off support last week, but fell today as the ISM Manufacturing Survey surged to 55.7. Readings above 50 favor economic expansion. Bonds fell and the 10-Year Treasury Yield ($TNX) rose with this positive economic news. Signs of strength in the economy increase the chances that the Fed will raise interest rates in the future.

Click this chart for details.

How do you construct a cumulative indicator?

A cumulative indicator can be constructed for any price series that oscillates above/below zero. Cumulative adds when positive and subtracts when negative. Therefore, this setting will not work for a price series that is always positive. Net Advances, Net Advancing Volume and Net New Highs fluctuate above/below zero. Net Advances equals advancing stocks less declining stocks (advance-decline issues). Net Advancing Volume equals volume of advancing stocks less volume of declining stocks (advance-decline volume). Net New Highs equals new 52-week highs less new 52-week lows (new highs-new lows). These "breadth" statistics are available for the NYSE, Nasdaq, Amex, TSE and TSX. In the symbol catalog, search the terms "issues", "volume" or "highs" to find corresponding symbols. Below are the search results for "highs".

To create a cumulative chart, first open a SharpChart with the appropriate symbol. In this example, I am using Net New Highs for the Toronto Stock Exchange ($TOHL). Your default chart will come up and we can then adjust the settings. First, select "plain OHLC bars" under "ChartStyles" and click update. A plain chart will then appear. Second, select "cumulative" under chart "type" and "price" in the indicator window. Enter $THOL for the parameters and set the "style" as "area.

Click update and you will see a chart for cumulative Net New Highs in the main window and an area chart of daily Net New Highs in the indicator window. This is a good base for other breadth charts. Now try changing the symbol to $TOAD to see the Advance-Decline line in the main window and Net Advances in the indicator window.

Click this chart to see the settings.

Broken Resistance Turns Support for GDX

The Gold Miners ETF (GDX) is in for a big test as broken resistance turns into support. GDX broke resistance around 41-42 with a big surge in September. This level turned into support, and held, in early October. After a sharp decline the last two weeks, GDX is once again testing this important level. 

Click this chart for details.

Bond Funds Outperform

Even if you do not trade Fidelity Funds, the Fidelity Funds Carpet can be useful for providing an overview of market action. All stock index funds, domestic equity funds and international funds are down over the last 10 days (lots of red). The only green (gains) can be found in the bond funds. 

Click this image for more details.

$ALUM Removed

Unfortunately, we no longer have access to data for the Aluminum Index ($ALUM).  That index has been removed from our system until we can find a replacement.

Investing Quotations Added

We've added random interesting investing quotations to the bottom of our SharpCharts workbench and blog pages today.  Look for quotes that will educate, amuse and inform you whenever you have a spare moment.

Small-caps Lead Decline

The Major US Markets Perfchart shows the Russell 2000 ($RUT) leading the way lower over the last two weeks. Notice that the Russell 2000 has not even been positive (above 0%) over the last 10 days. In contrast, the other major indices were in positive territory at some point over the last 10 days. 

Click this image for more details.

Bearish Engulfings Mark Resistance for JNPR

Two big bearish engulfing patterns solidify resistance around 28-28.5 for Juniper Networks (JNPR). JNPR first established resistance at 28 with a doji. A few weeks later, the stock opened strong and closed weak to form its first high-volume bearish engulfing. After a pullback and second attempt at 28.5, the stock again formed a bearish engulfing with even higher volume. This shows lots of supply around 28-28.5. Read more on candlestick reversals in the chart school.

Click this chart for details.   

Intel Hits Support Zone

After a decline the last eight days, Intel (INTC) is showing signs of firmness near a support zone. First, notice that the decline retraced 62% of the prior advance. Second, notice that broken resistance turns into support. Third, notice that MACD has a bullish divergence working. A break above 20.5 would reverse the eight day downtrend. 

Click this chart for details.

What does the Stochastic Oscillator measure?

Knowing what an indicator measures is the first step to really understanding it. Sure, the formulas can get technical, but it is important to understand an indicator before using its for trading. Today we are going to dive into the Stochastic Oscillator, a popular momentum oscillator developed by George Lane.

The Stochastic Oscillator is composed of two parts: %K and %D. %K measures the current price level versus the high-low range over a given look-back period, typically 14 days. %D is a 3-day SMA of %K and acts as a signal line. This discussion will focus on %K, which is referred to as the Stochastic Oscillator in this article.

The Stochastic Oscillator fluctuates between zero and one hundred. High values (80-100) indicate that prices are at the upper end of the high-low range for the look-back period. Low values (0-20) indicate that prices are at the bottom end of the high-low range. Middle values (40-60) indicate that prices are near the midpoint of the high-low range.

The example above shows QQQQ with the Fast Stochastic Oscillator (%K). QQQQ is trading near the top of its 14-day range in October (yellow area). As expected, the Fast Stochastic Oscillator is above 80 currently and has been largely above 80 since early last week. This tells us that QQQQ moved to the top of its 14-day range early last week and remained at the top of its 14-day range for over a week. In other words, it remained strong. Don't forget that the 14-day range changes as new days are added and older days fall off.

You can read more on the Stochastic Oscillator in the Chart School (click here). This article also explains the difference between the Fast, Slow and Full Stochastic Oscillator.

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