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Technical Take

 
The purpose of this blog is to present one person’s view on what the markets are telling us through its price action.  My intention is to provide my observations about the market landscape as it unfolds in the charts, focusing on the “what” rather than the “why”.  It is my hope that this can be helpful and educational to both new and experienced investors, as we all try to make well-informed decisions. I will be posting to this blog regularly.
 
“That which has been is what will be, that which is done is what will be done, and there is nothing new under the sun."  – Ecclesiastes
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Top O' The World

“The fact that a believer is happier than a skeptic is no more to the point than the fact that a drunken man is happier than a sober one.”  - George Bernard Shaw
 

 



The Dow made history last week by trading to new all-time highs, pushing through – and closing above – the August 2007 high.  The broader-based S&P 500 has yet to follow suit, which provides an easy point of observation for traders and investors.  If the S&P can join the Dow in making history then higher price targets can come into play.  Conversely, if the market were to start to struggle in this area, then a more notable pullback might quickly result.
 
 
 

 
 


10-year yields continue to trade around the 2% level, holding above support on every pullback.  This continues the significant change of character for yields, which have been able to make and maintain higher lows, and hold above well tested support, since the low in July 2012.  As long as this behavior continues, a creep towards 2.25%, followed by 2.5%, is a possibility going into the middle of the year.
Posted by Chartologist on Mar 11, 2013 10:46 AM CDT
Floating

“Markets can remain irrational longer than you can remain solvent.” – John Maynard Keynes
 
 





While the S&P continues to trade firmly, the Nasdaq continues to lag the broader market.  However, the divergence that we previously highlighted has been worked off with the Nasdaq trading to (marginal) new highs on the year.

 
 

 
 


European markets are slowly beginning to make headlines again, as weakness is appearing in some of their stock indexes.  The German stock market broke sharply two weeks ago, rallied into mid-week last week, then turned back down into week’s end.  It remains to be seen how, or if, this affects U.S. equities, but any continued weakness across the pond bears watching.
 
 
 

 


 
10-year yields continue to trade higher after breaking out of the multi-month trading range last month.  Support around the 1.85% (the old range’s high) held on initial pullback, and rates are now testing round-number resistance at 2.0%.  If interest rates continue to climb, the next possible target level comes in around 2.15% followed by the 2012 high around 2.4%.
Posted by Chartologist on Feb 18, 2013 3:38 PM CST
Tip-Top Shape

“Courage is resistance to fear, mastery of fear – not absence of fear.”  – Mark Twain
 
 
 

 

The S&P 500 (top chart) closed strongly yet again, testing the 1500 level in the process.  A potentially significant divergence is developing between the S&P and the Nasdaq (bottom chart), which has not been able to trade above its 2012 high.  Traders and investors can watch this relationship to see if the Nasdaq begins to act as a drag on the broader market, or if the strength in the overall market can pull technology stocks higher.
Posted by Chartologist on Jan 28, 2013 3:34 AM CST
Pushing the Envelope

“Faith is taking the first step, even when you don’t see the whole staircase.” – Martin Luther King, Jr.





The S&P 500 continues to press higher after the breakout from the multi-month triangle last month.  1500 remains possible resistance overhead, while support on any pullback could emerge between the daily moving average and the area of December’s high.
 
 
 

 
 


The weekly chart of the Dow Industrials still shows an intact, large rising wedge pattern.  The market is nearing the upper boundary of that wedge again, which gives a nice point of observation:  Does the market get rejected at this area of potential resistance, or will there be enough strength to finally push through to the upside?  Stay tuned…
Posted by Chartologist on Jan 22, 2013 8:00 AM CST
Reach For The Sky

“Doubt is not a pleasant condition, but certainty is absurd.” - Voltaire





The S&P 500 held onto its recent gains last week, even strengthening into week’s end.  Initial resistance remains at the 2012 highs, with likely support lying at the December high.  A trade through resistance opens up the possibility of a move towards 1500.
 

 
 
 


 
The 10-year yield tested and held above initial support around the 1.85% level last week.  As long as this level continues to hold, a move through 2% remains a possibility.  If support at 1.85% gives way, then the possibility of a sharp slide comes into play.
Posted by Chartologist on Jan 14, 2013 8:01 AM CST
Back With A Bang

“Price makes news.” – Paul Tudor Jones
 




The S&P 500 kicked off the New Year with an explosive move from a very low-ADX environment.  This strength puts the 2012 highs in play, and that level can be watched to see if it offers meaningful resistance to the market or is overcome to give confirmation to the recent move higher.
 







The Dow Transportation Index has been a relative strength leader of late, and is less than 2% away from its all-time high.  This is a significant change from the September 2012 time frame when this index lagged the broader market.  That lagging of the overall market ended up being an early warning sign of waning momentum which preceded the selling last fall.  Now that the Dow Transports have actually been leading it has provided additional support to the market, instead of a drag. Traders and investors can watch this relationship to see if the Transports can continue to be supportive.  
 







Even more significant than the recent strength in the Dow Transports is the move to new all-time highs in the Russell 2000 index.  Historically, the best market rallies tend to see the broadest participation and, in this case, we are seeing strong leadership from small-cap shares. Keep an eye on this index to see if it can generate good follow through in the coming weeks.  Recently-broken highs can also be observed for support on any pullback.
 







After spending the last four months of 2012 trading between roughly 1.57% and 1.85% the 10-year yield broke out to new highs in the first week of 2013.  With the large round number level of 2% looming we may see some pullback or consolidation, however, as long as the recently broken highs are able to act as support we can see rates move higher in the first quarter of the year.  Conversely, if rates were to plunge back into the recently broken range then we may be headed back to the status quo back-and-forth of the past several months.
Posted by Chartologist on Jan 7, 2013 10:07 AM CST
Happy Holidays

Market analysis will return in 2013!  Best wishes to all for safe and happy holidays and a prosperous New Year! ! 


Posted by Chartologist on Dec 24, 2012 8:06 AM CST
Pushback

“Just because something doesn't do what you planned it to do doesn't mean it's useless.” – Thomas Edison
 
 
 


The S&P 500 made two attempts to break above the level of the “right shoulder” last week but was unable to close above that level.  The index remains trapped between the old pattern neckline and that right shoulder.  Even though that old pattern may not be valid anymore, its structure and levels can provide useful areas to watch for support and resistance.
 
 
 





In a major role reversal from recent months and years European stocks are showing significant relative strength to their U.S. counterparts.  This chart of the German stock market is one example as their shares are trading at new highs for the year.  Traders and investors can monitor this divergence between the two markets for an indication of how it might be resolved – can Europe pull the U.S. higher, or will relative weakness in the U.S. drag other markets lower?
Posted by Chartologist on Dec 16, 2012 1:50 PM CST
Steady As She Goes

“Workin’ on a mystery, goin’ wherever it leads, runnin’ down a dream…” – Tom Petty
 
 



The S&P 500 held in a relatively narrow range for the week, trading around the area of the Head & Shoulder neckline.  Going into the new week we remain in a similar place to where we began last week – a trade back below the neckline, that sees follow through, could lead to a slide back towards recent lows.  Conversely, a trade above the “right shoulder” of the Head & Shoulders pattern could lead to a retest of the 2012 high.
 

 

 
 


Interest rates have now spent a very quiet four months holding between (roughly) 1.58% and 1.85% in the 10-year yield.  If the new year should bring any economic or geopolitical volatility, we may see rates break out of this narrow range.  Any downside breakout would likely see a test of the historic lows from earlier this year, while an upside breakout could see a move towards 2.2%.
Posted by Chartologist on Dec 10, 2012 7:53 AM CST
Shrugging

“And my head told my heart ‘Let love grow’, But my heart told my head ‘This time no’.” – Mumford and Sons
 
 
 

 
The S&P 500 managed to trade back above the “neckline” of the Head and Shoulders pattern that was broken at the beginning of November.  From the classical, technical perspective the implications of that pattern may be considered null and void if the market is able to trade back above the “right shoulder”, which comes in at 1434 in the S&P.  Below that level the market might still roll back over and see further weakness.  If the index is able to get back above 1434 then a test of the year’s high is possible.
 
 
 

 



 
Helping to buoy the market last week was strength in copper, which had been trading in a bear flag until last Thursday.  The strength at the end of the week negated that bear flag – the lower probability outcome – which leaves this market in an “anything goes” position.  Initial resistance lies just overhead, with support coming in at the highs of the old bear flag.
 
Posted by Chartologist on Dec 2, 2012 4:52 PM CST
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Most Recent Comments

"My next generation will be very rich" or "Any irrationality will be stopped" is the counter to "Markets can remain i...
by shaun60 on Floating
I am still bullish on a weekly time frame, but I hear that shoe shine boy whispering in my ear. Just saying :-)
by 13 Bang Bang!!! on Pushing the Envelope
C, thanks for the charts. It seems to me we are getting very "toppy", if that makes sense? I see a lot of greed in the mark...
by 13 Bang Bang!!! on Back With A Bang
The S & P won't break out (up or down) until the idiots in washinton either come to an agreement or go over the cliff. We s...
by madmaster023 on Pushback
my notes from before getting out of markets; bldng HnS on 1 yr chrt, 1279 is rht shldr and 1159 is support .. 11/20/2012...
by Scott on Shrugging



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