Category Archives: Tommy’s Take

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2016 Triple Play Charts End of Year Review

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Those who follow my Triple Play Charts regularly on Stocktwits and Twitter know this as one of the momentum based trend gauges we use to guide us through the markets.  I post the same two charts every day which on one hand can get monotonous, but I feel the consistency keeps us updated on the ever changing view of the markets while also helping teach us the personality traits that can give clues in the future.  I wanted to do an end of year review.  In this exercise I take a look from the quarterly view using Index charts (since the ETFs don’t really go back far enough to use my indicators at this level) and methodically move down to the 65 minute chart that is part of the daily routine. Let’s get started.

(for those new to these charts you can learn more about them here and here)

Quarterly (Index)1-1-2017-9-10-42-am-tp-qrtly-index

This level is for a 50000 foot view or a very long term investor.  Don’t forget as we move down each time frame how much time each one devours to make a new candle.  This quarterly chart is made up of the $RUT $NDX and $SPY since the $IWM $QQQ $SPY ETFs don’t have enough history to complete the charts.  These cover the last 26 years of data give us a view of the long term uptrends we are seeing across all three at this point.  This uptrends started in 2009, but do not signal the start of this bull market in my opinion.  The recent consolidations on this chart I believe can serve as reset which means the new bull markets is less than 15 months old by most measures. The biggest detractor here is the $NDX ended the year with a d0ji with RSI elevated, but also firing a high level RSI Positive Reversal as this chart finally breaks above the 2000 highs.  Even elevated, the RSI Positive reversal  suggests the move might not be ready for a larger consolidation just yet.  The $SPX chart also shows an RSI over 70, but a new longer term CFG Positive Reversal fired there as well in 2016.  Finally, the $RUT is coming out of a long consolidation with a +20% drawdown or bear market and now has its own RSI (tighter) and CFG (longer term) Positive Reversals firing as it closed the year on a strong breakout.  RSI are elevated but still acting pretty strong and all CFGs are turning up without making it down to Oversold territory.

Monthly1-1-2017-9-06-45-am-tp-monthly

The Monthly ETF charts are all in RSI bull ranges and have been since late 2009 for $IWM $QQQ and late 2010 for $SPY.  We have seen a few deeper pullbacks along the way (especially in $IWM) but all in all the longer term RSI bull ranges have held very well and CFG getting to or near Oversold levels has serves as decent entries.  All of the RSIs have been trending higher since early 2016 and are just now moving back over 60 giving lots of room to move higher if they want it.  We even saw the $QQQ & $SPY hit the Nitrous Button closing the year with $IWM not far behind and trying to play catch up.  Divergences are potential here and would be a warning, but I believe it is too early to start that talk until they form a little better.  The biggest warning I see here is the waning CFG here before getting over the 100 level showing a loss of ST momentum into the end of the year, but the elections might have been a culprit there.  The Monthly RSI bull ranges are fully intact after being tested in early 2016 and now heading back higher over 60. Many will see this a sign of getting overbought, but a strong RSI can run for longer than most believe. The set up here remains one of strength with potential to continue higher.

Weekly1-1-2017-9-03-27-am-tp-weekly

The Weekly level is where things start to get a little more wiggly as larger black candles have began to show up.  $IWM & $SPY look fairly extend and could easily pull back some or flag a while longer without much if any damage to the higher time frames.  The RSI aren’t particularly Overbought, but are rolling over a little here. Interestingly the $IWM & SPY are also hitting the Nitrous here which always catches my eye. I want to see if these pullback remain muted and just flag from here.  $QQQ is in a little different spot just breaking out and now backtesting those previous highs with RSI finding some resistance at 60.  A successful backtest here could set the tone for all the major indexes in on this level. Weekly charts are starting to show signs of a reversal or consolidation, but too early to tell how it will materialize. I would cue on $QQQ & $IWM to dictate market direction in the early part of the year.

Daily12-30-2016-4-03-14-pm-tp-daily

The Daily view shows after consolidation most of December after the early surge with $QQQ struggling to hold the recent range break.  All three are still in RSI bull ranges.  $QQQ looks the weakest, but if it can reverse with RSI remaining above 40 and without turning down the MA bands it will be a good sign.  $IWM $SPY still have a good ways to go to test RSI 40, but they don’t have to get all the way there, a reversal at 50 is fine and might be all we see with almost 3 weeks of sideways to down action behind us here. One thing I do like seeing is the faster CFG getting close to Oversold levels without seen a lot of damage to the RSI. if the CFG can reverse form Oversold before the RSI break their bull ranges (40) then it can often lead to a nice move higher to continue the trend.  A reversal of trend can strike at any time, but all with all the higher time frames still in RSI bull ranges, we are watching to see if the daily charts can hold their respective RSI bull ranges on this consolidation.  If so, the trend can continue higher sooner than later, but if they fail we can move a little more cautious and wait for them to set back up and align themselves again.  The 1st tell her is likely the $QQQ since it is already pressing down on some important levels to start the year.

65 minute12-30-2016-4-07-27-pm-tp-65min

The 65 minute view gives us a good breakdown of intraday price action which is currently losing momentum and ground as all these charts are in RSI bear ranges to start the year and need a move back over RSI 60 and the MA bands to improve the picture.  Until that happens the burden of proof is on the buyers to show up and take charge of things.  The $IWM looked the best into the close with multiple divergences showing and the best RSI & CFG levels, but that is not saying much.  $SPY & $QQQ both look extended to the downside short term, but it will take some heavy lifting to shift these back to RSI bull ranges.  That said, being an intraday chart, that lifting can be done within a day if aggressive enough, but is more likely to take a few days to week to play out and see if a shift back to the upside can happen before we pull the Daily charts into larger downtrends.

Good Luck and I hope this helps!

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth here was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation

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Triple Play Drill Down

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With Friday’s close of the quarter, let’s take a quick look down this weekend.  In Technical Analysis we talk a lot about looking at one or more time frames higher than the one you trade to get the bigger picture; similarly, this top down process looks at all the time frames to help us adjust our near term outlook and holding periods based on which levels are working better in the current market environment.   If you are not familiar with my TP charts you can start with a these two posts here and here to learn more.

TP Index* Quarterly10-2-2016-11-07-26-am-tp-quarterly

Starting at the highest levels we can see the strength the major indexes have seen since the 2009 lows, but nothing here on the RSI chart that screams that is ending.  All three had strong candles this quarter and are on Nitrous in RSI bull ranges showing on this long time frame buyers are still in control.  The RSI do remain elevated with $QQQ closest to 80, but in strong trends moves over 80 are better overbought signals normally.  The CFGs in the bottom pain are also turning back up here before reaching oversold which also suggest the trend is still in the bull’s camp.  This timeframe is helpful, but will take a long time to change character which makes it less directly relevant to most traders

TP Monthly10-2-2016-11-13-12-am-tp-monthly

Dropping down to the monthly view, we still see all in RSI bull ranges moving back over 60 recently and not overbought. $SPY $QQQ have already moved to new highs and backtested those in the case of $SPY.  $IWM is not quite there yet, but has been the strongest move off the February lows.  If October can buck the seasonality and see $IWM break to new highs it would be a pretty big deal and could fuel these RSIs to overbought before done, but again intra-month volatility can still be high enough to frustrate many out of good opportunities.

TP Weekly10-2-2016-11-15-37-am-tp-weekly

ON the weekly level, once again we see all three on Nitrous in RSI bull ranges, but not really near overbought territory on any of them yet.  This level shows the recent breakouts and backtests on $QQQ and $SPY which proved to be successful so far.  The CFG’s all just recently turned back up with $IWM and $QQQ not even breaking 50 on the pullback.  It is the $SPY charts that is beginning to lag from this level.

TP Daily9-30-2016-4-01-22-pm-tp-daily

The daily view is where we can really start to see the chop over the last couple of weeks that has created the volatility in both directions, without either side gaining any traction.  Here to we see the $IWM is the only one that never lost the RSI bull range in September.  $QQQ broke RSI 40 barely, but snapped right back in what we call a range spike.  This is when officially the bull or bear range in RSI is broken, but quickly moves back over RSI 60 to confirm the bull range is still intact.  In the Weekly time frame I mentioned the spy $SPY was lagging which comes into clearer focus as we move down to the daily level.  The $SPY is the one of the three that actually looks like it could be shifting into a RSI bear range, but with it being the only one there yet, we want at least one of the others to join it before it gets more concerning.  Overall the grind off the September lows has been good to see from a strength standpoint.

TP 65min9-30-2016-4-06-12-pm-tp-65min

The 65min Charts actually shifted back into RSI bull ranges in mid September and are currently still holding them even among the chop we have seen.  Friday’s closing candle does look ugly here and will be watched, but until we lose the MA bands and the RSI bull ranges break here the this level continues to support that move off the lows this month.  Don’t read too much into that last candle as quarter end could have a bit of squaring going one.  Monday will be here soon enough and our next set of candles will bring the next clues for us to work from.

After going through this drill down, the one thing that stands out to me the most is almost every chart on every time frame is currently in a RSI bull ranges and moving higher.  Contrast this AAII bulls nearing the lows this suggests to me the wall or worry is still out there even with the progress the markets and their charts have made this year since forging those February lows.  Now you know my views, feel free to incorporate that into yours any way you like and as always, I hope it helps!

Have a great week!

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth here was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation

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Drilling down the Triple Play

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I always love it when the month ends on a weekend (even better when it’s a quarter end), because it allows us to take a very clean top down view of the major indexes using the TP charts I post everyday. The markets have been showing signs of strength we haven’t seen in awhile, but that hasn’t deterred nor diminished those looking for another big bear right around the corner.   And, the could be right, but I prefer to let my charts guide me to such a decision.  This top down view allows us to move from the 50,ooo foot view quickly down to an intraday chart.  For all traders or investors at least one or two of these views can be helpful even if you don’t trade the indexes.  Let’s dig in. (disregard the arrows charts, they are not meant as highlights).

 

7-31-2016 1-16-56 PM TP Monthly

 

Not much to argue with here as we start with the monthly view.  $SPY has already left the station, $QQQ challenging now and $IWM still has a ways to go, but is giving a good effort since bottoming in February.  This shows only $IWM was officially in a bear market by percentage decline, but I would say two years of this action worked off excesses in many stocks throughout the markets and could be qualified as a stealth bear market if it must be labeled (labels don’t usually help much). RSI did work off the overbought nature during this time period, but never threatened breaking down into a bear range even in the $IWM during this decline. In fact, $SPY $QQQ RSI never even lost 50.

7-31-2016 1-11-06 PM TP Weekly

On the Weekly time frame you get a better feel for just how much the $IWM underperformed over the last year, but it has also been the most aggressive off the lows in an attempt to play some catch up.  RSI here did move into bear ranges last year and recently moved back into RSI bul ranges across the board.  $IWM & $SPY are even close to hitting the Nitrous.

7-31-2016 1-09-26 PM TP Daily

The daily charts are all sitting in RSI bull ranges, above the MA bands, on Nitrous and none are overbought at the moment.  This momentum won’t last forever, so enjoy it while it’s here and stay attentive for signs it is waning.

7-31-2016 12-50-27 PM TP 65min

Even drilling all the way down to the intraday view of the 65min charts you can see the recent sideways action in $SPY & $IWM are hardly bearish so far and helped work off the oscillator so another surge could certainly happen if we break out of these creeping ranges.  $QQQ is doing its best to lead the way.

That is my view of where we are right here right now.  It can change within just a few candles if the action changes, so there is no need for me to rush to judgement or attempt to anticipate when the buyers will take a break.  Like I said above, enjoy it while it lasts and let your risk management plan take care of the rest.

Good Luck and I hope this helps!

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth here was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation

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IWM: Momentum vs. LT Potential Resistance Confluence

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I haven’t done videos in a while, but really like them when I do (not a big fan of typing).  I think they can make it easier for me and by followers if I can go more this way, so Let’s start off with a few thoughts in IWM.  I take a look over 3 timeframes with two different technical tools on each level.

As always I hope this helps!

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth herein was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation.


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Breadth Checkup

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Right now there is a lot of noise about this being a dead cat bounce that is about to top.  It certainly may be, but to be fair, the same people have been saying that since a couple weeks off the lows and a ton of $SPY points lower.  One thing I like to look at is how the breadth picture is progressing off the lows so let’s take a quick check and see how the broad internals are holding up.

For those not familiar with my process.  We always start with the long term readings.  First we have the NHNL Differential

4-2-2016 4-31-47 PM TU NHNL

With this indicator you have 3 triggers, the actual NHNL Differential (black bars), the 10sma of the NHNL (red line) and the 30sma of NHNL (blue line).  each signal heightens the risk and when they are all triggered it is usually time to get out of the way.  We saw all of that starting last August, but the big divergence in late September saw a dead cat bounce, but failed to get the traction needed.  However, we got another new lows with divergence in early February.  One failure is fairly rare, but two would be very unusual.  Well, since then we have seen a strong move of the lows and just last week we have reset all 3 triggers putting this back on the buy side.  Next long term reading is the Advance Decline Line which I have posted a few times during this rally showing it have been leading price during much of this rally.

4-2-2016 4-32-44 PM TU AdvDec Line

The Advance Decline Line is not leading as well at this point, but still moving higher with price at the least.  The final long term reading I watch is the %>200sma (top window) in the next chart which is also moving well off the lows and has almost retaken the 50% line.  From an intermediate perspective the %>50sma crossed 80% in February and remained strong all March.

4-2-2016 4-35-21 PM TU MA Breadth

This level of movement in the long term and raw strength in the intermediate reading doesn’t hint at the dead cat resolution.  Our next intermediate reading and probably my favorite breadth indicator is the McClellan Summation Index which also showed a divergence right at the lows and hasn’t looked back.  Not even a flinch.

4-2-2016 4-33-38 PM TU McClellan

That type of move takes a very strong and broad move to create.  The shorter term Oscillator has also remained solid with only one dip below zero since the lows were put in.  The Breadth Thrust indicator is similar to the Oscillator, but bound from 0-1 to help with cross comparisons.  It also shows the breadth has held up well on the way up, but is working on multiple divergences which often precedes a pullback even if just short term.  One final chart we look at this the Percent Days chart which calmed down a lot since the lows.  In fact most of the readings have been to the upside.

4-2-2016 4-36-17 PM TU Percent Days

That level of calmness usually accompanies uptrends more often than it does during downtrends where the volatility is noticeably higher giving more readings here.

So reading through each of these charts we can see the progression off the lows has been more than just good, it has been excellent.  That doesn’t mean we make new highs right away, but it does raise the odd that the February low was a significant one.  As we enter the resistance zones in the major indexes we are likely to see pullbacks and consolidations, but as long as we continue to see breadth signals progress are chances of grinding back to the highs remain good.

Good Luck and I hope this helps!

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth here was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation

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Measuring Time Frames with the Triple Play Charts

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Monthly11-1-2015 3-12-04 PM TP Monthly

Starting with the longest time frame, the monthly candles are impressive.  All bullish engulfing patterns after working off the overbought RSI readings while remaining in solid bull ranges and checking back with the MA Bands.  Long term trend remains up with RSI & CFG turning up in bull ranges

Weekly11-1-2015 3-10-53 PM TP Weekly

The weekly level shows just how bad the $IWM has been lagging as it can’t get over the MA Bands and remains in an RSI bear range.  The SPY has moved back into the summer range, but hasn’t quite gotten the RSI back above 60 to resume its bull range.   Interestingly, $QQQ actually had the most dramatic drop, but never actually shifted to an RSI bear range and closed back over 60 this week.  $SPY $IWM still work to do before moving back to bull ranges while $QQQ never left.

Daily10-30-2015 4-06-28 PM TP Daily

On the Daily view it is clear $QQQ has led by the chart as well as its RSI has moved up the fasted.  Both $SPY and $QQQ also hit the Nitrous last week.  $IWM has not been able to break over 116 for weeks.  It got there on Wednesday, but couldn’t hold it yet.  this is not the end of the world with the other two performing so well, but the non-confirmation is one concern.  The $IWM not shifting to a RSI bull range is the big drag still on the daily level.

65 minute10-30-2015 4-09-48 PM TP 65min

This chart shows October broken down into 65 minute candles. This level still shows all three in RSI bull ranges giving a positive skew, but the $IWM continues to oscillate through bull and bear ranges as prices consolidates sideways.  So far neither side can take the baton and run with it in small caps.  $SPY $QQQ are both in solid RSI bull ranges currently testing 50 after the late week.   Fridays close did not look great and could lead to a test of the ranges as well as the MA Bands or we could get a reversal from here which would create some RSI Positive Reversals to consider.  Remember, this is the shortest time frame in this study, so it should also take the least precedence, but come Monday morning it will be where the process begins once again to build the next installment.

Good Luck and I hope this helps!

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth here was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation

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Drilling Deep Into the Oil Patch pt 2: Sizing up the Fields

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Yesterday’s original post, Drilling Deep into the Oil Patch built the case for a potential bottom in energy even if short-term.  I also pointed out that when things get this stretched to one side and short-term divergences start showing up then the snap back move can be fast and furious.  After a slow morning, the Energy space turned in a pretty solid day in a volatile environment.

Today I wanted to follow-up and give you the raw relative strength lists for the subsectors so you can do some of your own digging around.  This data is as of last night, so it does take into account Monday’s action.  It is also worth noting there is no filter on these groups so you will see some sub $3 securities of which many are making big moves.  Just realize those big moves come with an extra helping of risk, so be careful.  If you want a quick view of the charts, just click on the FINVIZ links below each table and you are there.

Independent Oil & Gas8-12-2015 Energy IndOG Relative StrengthFINVIZ Link

Oil & Gas Equipment & Services8-12-2015 Energy OG EquipSvc Relative Strength

FINVIZ Link

Oil & Gas Exploration & Production8-12-2015 Energy OG ExplProd Relative Strength

FINVIZ Link

Oil & Gas Integrated, Refining & Marketing8-12-2015 Energy OG IntRefMkt Relative Strength

FINVIZ Link

Oil & Gas Pipelines8-12-2015 Energy OG Pipelines Relative Strength

FINVIZ Link

Above has all the subsectors,  I know it can get a little hard to read the longer lists, but am still trying to find a gallery that allows for more zooming.  Until then, get the basics from the tables and use the FINVIZ from there.  Don’t forget to look back at the original post to see the movers and check on how they performed with the included links.

Good Luck and I hope this helps!

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth here was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation

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Drilling Deep into the Oil Patch

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Over the last year one of the toughest sectors in the markets has been Energy.  After a long run something changed last summer and the sector began to underperform.  Earlier this year the space bounced when it looked like oil wanted to retrace some of the losses, but that attempt got thwarted in late April or early may.  Only to drive the sector back to new lows again.  This the noise around the industry is getting even louder about how bad the outlook is for the sector.  How low oil will drop from here, and how many will go out of business.  All of that could be true in due time, but if so, on our way there we are likely to see some violent bounces.  If that is not what is in store for the energy space, then this level of noise and the data we are about to look at could be trying to tell us now.  Each week in the SIN report I monitor sector breadth as well as relative strength to see how things are going.  Of course we all love strength, but I also like to watch for extremes in general and the Energy situation definitely qualifies.  The number of new 52wk lows in the space starting at the end of last year was eye-opening (accounting for much of the negative skew in the broad NHNL Differential).

Energy Sector NHNL Differential8-11-2015 Energy NHNL DIfferential

The first thing that caught my eye here was the divergence in the NHNL and new lows over the recent weeks; then looking back you see there is also a divergence from the December lows as well.  I haven’t studied how well this setup of long followed immediately by a short-term divergence works on breadth, but on RSI it is one of my favorite signals to look for a fast move.  But the divergences in themselves are the key.  Then I looked over to the Moving Average Breadth chart which is showing similar both long and short-term divergences in the %>20sma & %>50sma windows (not marked).

8-11-2015 Energy MA Breadth

It is also worth noting the %>200sma has been below the signal line for a long stretch. It can get longer, but going back on my charts to 1998 this is already spent the most time in the oversold zone than any other time period I can find.

8-11-2015 Energy McClellan

Next, the McClellan chart shows the Summation Index is not diverging, but it is at its lowest reading back to 1998.  So all of our long and Intermediate readings fit the washout definition; now we will turn to the short-term breadth Indicators to see what message they are giving.  First, sticking with the McClellan chart, note how the Oscillator has actually been spiking above zero recently and trying to make new highs here.  Next we look at its cousin, the Breadth Thrust Indicator which is sporting some of the same divergences we saw above.

8-11-2015 Energy Breadth Thrust

There are multiple ways you can draw the divergences here, but is suggests the selling pressure is waning.

8-11-2015 Energy Percent Days

The last breadth chart is the shortest term indicator which is the Percent Days chart.  This shows when both the volume and Advance Decline ratios are very skewed.  July showed a lot of energy selling, but can you see how the pressure died down about mid month and actually has flipped to more positive in August even though we have made new lows.  That is a very subtle divergence and change in character that this reading can help pick up.  You can see it occur at many other reversal points to the left.  It doesn’t tell you how long or far the move will go, but give a daily read on changes in pressure.

So, for those who buy strength, which is a fine strategy, this is not where you want to go fishing.  For those who like finding changes in character for either a major change in trend or just a fast retracement move when everyone gets one side of the boat, then this is where we have to dig in and see where the opportunities are. That is where the Relative Strength readings and segmentation comes in.  We all know Energy has some of the worst RS of the major sectors, so we will skip that list and dig right into the sector itself.

Energy Subsector Relative Strength8-11-2015 Energy SS RS

Here we can see how each Susbsector ranks and the price weighted performance of each segment along with the RS rankings gong back.  Refiners have been on top, but Oil Services is trying to make a move in recent weeks.

Another way we can look at this is with the ETF scan I use in the weekly report.  Below I have the list as of yesterday.  I also highlighted the ETFs that have moved over 20 RS points in the last 5 days which would qualify them as movers.  Green for gainers and orange for losers.

Energy ETF Relative Strength with Movers8-11-2015 Energy ETF wMovers markedFINVIZ link

Many can stop there as this sector has plenty of choices and focused products to choose from.  If you are not an ETF fan, then we need to drill a little deeper and see what we can find in the sectors. Today I am only going to concentrate on the Top and Bottom 25 in the entire sector and then look at some various RS Movers scans.

Top 24 Energy Relative Strength8-11-2015 Energy Top25 RSFINVIZ link

Bottom 25 Energy Relative Strength8-11-2015 Energy Bottom 25 RS

FINVIZ link

I would suggest sticking with the gainers side, but some may want to really dig deep or maybe do a pairs trade with the losers list.

Another way I like to spot opportunities is using the RS Movers scan.  Many of you know i do it on the entire market each evening, but I can also do precision drilling to make sure we don’t waste a lot of time and money on dry wells.

Energy RS Gainers8-11-2015 Energy RS Gainers

FINVIZ Link

Energy RS Losers8-11-2015 Energy RS LosersFINVIZ Link

For those who didn’t stop at the broad sector and want to focus on a specific subsector below are the each Subsectors RS Gainers.  Since I am looking for a potential move higher I am not including the RS Loser for each in this.  It is already a good bit to digest.  they are in the order of Relative strength in the list above

Oil & Gas Integrated, Refining & Marketing8-11-2015 Energy OGIntRefMkt RS GainersFINVIZ Link

Oil Equipment & Services8-11-2015 Energy OGSvc RS GainersFINVIZ Link

Oil & Gas Pipelines8-11-2015 Energy OGPipelines RS GainersFINVIZ Link

Independent Oil & Gas8-11-2015 Energy IndOG RS Gainers

FINVIZ link

Oil & Gas Exploration & Production8-11-2015 Energy OGExpProd RS GainersFINVIZ link

This is just the movers, you could also look at the strongest players in each subsector since this is such early stage action.  Lets see how things go and maybe I can do a follow-up with the strongest players in each segment.  Don’t forget, we don’t have a turn yet and this is still a very early read.  As always, price has to follow before action is warranted and even then it should be treated as an oversold bounce until the action proves to you it is growing into more.  If this analysis does pan out there will be opportunities to catch fast moves off the bottom, but with that comes with excess risk as well, so be ready and have a plan for it before you get involved.

Good Luck and I hope this helps!

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth here was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation

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Dissecting The Markets with the Triple Play

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At the end of May my post Pick Your Poison was about looking at different timeframes and realizing choosing a time frame to focus on can dictate how you view the markets. I also discussed it was an exercise I like to each month.  I find it especially helpful after months like July that shake things up a bit and give us some extra volatility.  It can help ground my views by stepping back and moving from the longer time frame step by step down to the short-term.  So, let’s take a look.  If you are not familiar with my RSI charts you might take a quick peak at this RSI chart explanation video

Monthly8-1-2015 7-01-37 AM TP Monthly

On the monthly chart we have a steep trend in all 3 major ETFs we follow as they are well above the riding MA bands.  $IWM is least extended coming off the breakout from the flag that was 2014.  the July $IWM candle is a bearish engulfing pattern to watch in August, but using the blended candle approach with the last two months would give you a doji which goes well with the indecision we have seen so far this summer.  $SPY $QQQ had both been moving consistently higher until the last couple of months where they began to see more volatility creep in.  All three are still in strong RSI bull ranges.  $IWM is the laggard, but $SPY & $QQQ both are sporting new RSI Positive Reversals after closing higher this month.  All have relatively neutral CFG readings.  The trends are still up and don’t look to be in much danger at the moment.

Weekly8-1-2015 6-59-36 AM TP Weekly

The weekly level shows a little more of the volatity we have witnessed.  $IWM showing the most, $SPY looks more like a flag or box consolidation and the $QQQ aren’t showing any quit.  All three are coming off their MA Bands and in RSI bull ranges with none of the RSI or CFG overbought. Note how steady the trend in $QQQ has been while it has worked off the overbought readings of late 2013.  RSI works better as a trend indicator than moment if you learn to use it as such.  Weekly charts are consolidating but are still configured to favor higher prices.  no major damage to these charts yet.

Daily7-31-2015 9-31-26 PM TP Daily

It is in the Daily charts where we start to see the differentiation more. $IWM is currently the laggard and in a RSI bear range.  However, the $SPY and $QQQ both remain in bull ranges for now and the $SPY successfully held at the recent lows.  The volatility really starts to show up on this level showing the daily battle that was July.

65 minute7-31-2015 9-36-53 PM TP 65min

Drilling down to the 65min level we can actually see all of July’s trading activity 65 minutes at a time.  It was a bit of a roller coaster with the $IWM trajectory down while the $SPY $QQQ were more constructive.  $SPY was iffy for a while, but pulled it out in this last week. All three ended the month with RSI bull range shifts and trying to find support on now rising MA bands.  This is not a strong thrust so far so we need to keep an eye and see if RSIs can move above this week’s peaks for a more convincing range shift or will it fail and show we need more time to regroup before moving to and through the highs?  One good note here is CFGs are falling faster than RSI was on Friday which can be a positive.  More tentative shift back higher on this level;  Okay for now, but needs to build on it early next week to survive.

30minute8-1-2015 7-04-15 AM TP 30min

The 30 minute view shows all three are in RSI bull ranges, moving well off the lows. Friday ushered in a small pullback within the bull ranges.  The week closed with RSI pulling back within a bull range while CFG are getting oversold at or below zero and price is finding some support at the MA bands.  Until we lose the bull range the 30min level looks constructive and could be ready for another move out of the gate on Monday.

5 minute8-1-2015 7-05-22 AM TP 5min

As we get down to the very short-term, the 5 minute charts shows the Friday afternoon dropped blew through the bull ranges and are all now recovering back near the 50 level on RSI.  The trajectory is higher, but being in the bear range and below the MA bands we know a failure is very possible which could leave us with RSI Negative Reversals here showing this timeframe does need more time before it can shift back.  If a failure does happen and the RSI bear range holds it is certainly not the end of the world as this is a 5 minute view after all.  It could delay that move we talked about on the 30 minute for a while or outright negate it, but let’s get there first. The lower the time frame the more shifts we have and the less important they are unless that is the time frame you trade on.

As I said above after a month that can pull you in different directions and leave you a little uncertain, it can help to take a step back and drill down your time frames one by one and see what you can see which should allow us to better plan for the upcoming month.

Good Luck and I hope this helps!

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth here was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation

 


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A Case for Utilities

7-27-2015 10-10-51 AM featured pic

Since peaking in February Utilities have been one of the worst performing sectors in the equity markets; at one point down over 17% at the lows.  There is a good bit of this that is tied to the fear rising rates coming sooner than later.  This has been one of the big clouds over most interest rate sensitive areas so far this year.  Most know I am in the camp of “lower longer” when it comes to the FED which would mean the year to date action in these areas could turn out to be a bit of an overreaction.

There are quite a few ifs that are necessary for this idea to play out, but we are already basing and a potential breakout in $TLT last week which makes me think it might start leaking over into these other sectors.  Real Estate and Utilities are two good places to look. Let’s start with Utilities using $XLU as our proxy.

From a Relative Strength Perspective the sector remains a laggard, but has began to come off the lows in recent weeks.

7-24-2015 Sector Proxy ETF RS Rankings 7-24-2015 EW Sector Proxy ETF RS Rankings

The sector has been mostly ignored in recent action, but when I was looking this weekend the dual view RSI chart caught my attention.
7-26-2015 8-22-47 PM XLU dv

Quickly, the two major trendlines jumped out.  On the weekly, the sector bottomed right at a 3+ year longterm trendline and reversed.  That trend line also happened to converge with a long term horizontal level as well (not marked). Then glancing over to the daily we can see that surge off the lows initiated a break of the daily trendline.  Shortly after testing that line again produced another bounce couldn’t withstand the broad market pressure leading to another even deeper trendline backtest which also corresponds with the 61.8% fibonacci retracement off the recent lows.  Friday’s doji right on that backtest hints we could see a change in direction near here.  If that were to happen it could be forming the right shoulder of a bullish Inverse Head and Shoulders pattern.  Switching views let’s see how other indicators are shaping up..

7-27-2015 9-20-34 AM XLU esig dv

Here the weekly chart is still in a rough spot below the middle Bollinger Band and potentially building a bearish flag, but the large MACD Histogram divergence also stands out if some positive price action materializes.  On the Daily here we can see the middle Bollinger Band has turned up even though price closed the week below it.  A remounting of this average would be a solid sign for more and further building that right shoulder.

One last chart I wanted to view was the Weekly moving average chart with OBV (On Balance Volume) to show how the participation has been during this pullback.

7-27-2015 8-09-12 AM XLU Wkly OBV

The OBV indicator shows participation in a long term uptrend and also breaking the short term down trend on the recent move off the lows.  We also see all the long term moving averages are still steadily rising and the 100sma is currently providing some support as it has many times previously during this uptrend.

To be sure, this scenario is still very early in its development and could fail to materialize at all, but there are some signs of life worth paying attention to.  For those who want to get in early, they can buy on a reversal candle and put a stop below the recent lows for a less than 4% risk.  A more conservative play would be to wait for the Inverse Head and Shoulder pattern to break and then use a close below the right shoulder as a stop.  Either way you have well defined levels to work with which is the key to a good trading plan. I think things are starting to align for some improvement and for those inclined you can enjoy the 3.7% yield while you are waiting.  There are various ETFs you can play the sector with, I chose $XLU for my example as it is one of the largest and most liquid in the space.

7-24-2015 Utilities ETF RS Rankings

Now I know some don’t like ETFs and would rather play the strongest names in the sector on any improvement.  That is fine.  below you will find my relative strength lists with FINVIZ links for the sector to help you in that search.  Don’t get stuck on the long list of the whole sector, once you find out where you want to fish, the subsector lists will likely provide more value.

Utilities Subsectors
7-24-2015 Utilities SS RS

Utilities Relative Strength7-24-2015 Utilities Sector RSDiversifed7-24-2015 UT DiversifiedSector RS

Diversified Utilities FINVIZ

Electric7-24-2015 UT Electric SS RS

Electric Utilities FINVIZ

Gas7-24-2015 UT GasSS RS

Gas Utilities FINVIZ

Water7-24-2015 UT Water SS RS

Water Utilities FINVIZ

On top of the interest rate sensitive nature of Utilities, they are also considered a defensive sector by all measures; and could also be a decent place to park some money if we do fall into a correction sometime this fall as many believe we will.  I am not fully in that camp right here, but it certainly doesn’t hurt to have some defensive ideas in the playbook, especially ones that look to be setting up for a move as well.

Good Luck and I hope this helps!

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth herein was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation

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