Archive for the ‘Chart School’ Category

50% Correction Is Impossible! Really?

Courtesy of Lance Roberts via

There is little doubt currently that complacency reigns in the financial markets. Nowhere is that complacency more evident than in the Market Greed/Fear Index which combines the 4-measures of investor sentiment (AAII, INVI, MarketVane, & NAAIM) with the inverse Volatility Index.

The reason I revisit the index above is due to last Thursday’s “3-Things” post in which I presented two arguments concerning the potential for a 50-70% decline in the markets. John Hussman’s view was simply a valuation argument stating:

“To offer some idea of the precipice the market has reached, the median price/revenue ratio of individual S&P 500 component stocks now stands just over 2.45, easily the highest level in history. The longer-term norm for the S&P 500 price/revenue ratio is less than 1.0. Even a retreat to 1.3, which we’ve observed at many points even in recent cycles, would take the stock market to nearly half of present levels.”

The second argument was from Harry Dent based on demographic trends within the economy as the mass wave of “baby boomers” become net-distributors from the financial markets (most importantly draining underfunded pension funds) in the future. 

At heart, I’m a cycle guy. Demographics just happens to be the most important cycle in this modern era since the middle class only formed recently — its only been since World War 2 that the everyday person mattered so much; because now they have $50,000-$60,000 in income and can buy homes over 30 years and borrow a lot of money. This was not the case before the Great Depression and World War 2.

And based on demographics, we predicted that the U.S. Baby Boom wouldn’t peak until 2007, and then our economy will weaken — as both did in 2008. We’ve lived off of QE every since.”

Not surprisingly, those two comments drew a lot of fire from readers such as this one:

Or this one…

Hmmm….where have I heard this before.

“Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or

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Weekly Market Recap Feb 5, 2017

Courtesy of Blain.

The week that was…

Three very quiet days were bookend-ed by moderate moves on Monday (down) and Friday (up).  This despite a lot of generally market moving events such as a Federal Reserve meeting and the monthly employment data.   Major NASDAQ names ala Apple, Amazon, Facebook took the stage midweek and Trump’s comments about rolling back Dodd-Frank reforms Friday helped boost the financial sector.

Trump signed an executive order directing the Treasury secretary to review Dodd-Frank legislation, implemented in the aftermath of the 2008-09 financial crisis. The president signed a separate order that will delay the implementation of the “fiduciary rule,” which requires that the financial advisers and brokers who handle individual retirement and 401(k) accounts act in the best interest of their clients. Deregulation, proponents say, could improve the sector’s profitability, especially in an environment with rising interest rates, which is typically good for banks.

On the economic front, the first week of the month brings a big haul of interesting data but Friday’s employment data is always front and center.

The U.S. generated 227,000 new jobs in January, the biggest gain in four months, comfortably topping the 197,000 that had been expected. However, the unemployment rate rose to 4.8%, and wage growth was an anemic 0.1%.  Combined employment gains for December and November, meanwhile, were 39,000 lower than previously reported.


ISM Services came a bit below expectations at 56.5, while ISM Manufacturing beat expectations with a reading of 56.  Any reading over 50 indicates expansion.

The Federal Reserve was …dovish again?

The Fed held steady on interest rates and offered a positive view of the economy, but the central bank declined to telegraph the timing of its next hike, which fostered some concern that the Fed may fail to produce three interest-rate increases in 2017, as its most recent forecasts imply.

Here is a 5 day “intraday” chart of the S&P 500 via Doug Short.


Just for fun:  If you want the market to go up, you want the Atlanta Falcons to win Sunday night!

If the Super

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S&P Holds Breakout as Tech Indices Near All-Time Highs

Courtesy of Declan.

Aside from the light volume it was a solid finish to the week for indices. Tech Indices are very close to new all-time highs as the post-Trump rally continued its unabated ascent; the rally in the Nasdaq 100 has even managed to stay ahead even of its 20-day MA.

The only concern for Nasdaq 100 is the loss in relative strength against the Russell 2000, although this hasn’t flipped negative. Despite this, a push above 5,172 is likely to trigger short covering and another buying surge.

Gains in the Nasdaq have been a little slower as it has tagged its 20-day MA a couple of times since November’s election result. As with the Nasdaq 100, a push above 5,669 is likely to attract short covering.

The S&P successfully defended former resistance, now new support, at 2,280. The MACD is holding on to a ‘sell’ trigger, but it’s very close to a fresh trigger ‘buy’.  Given the prior consolidation, this is perhaps best placed to enjoy more sustained gains.

The Russell 2000 had the best of Friday’s action with a 1.50% gain.  The gain was enough to finish the tit-for-tat bull/bear trap and redirected the index to a broad consolidation.  Buyers have defended the 50-day MA; watch for fresh buyers on the pending MACD trigger ‘buy’.

For Monday, the S&P is the index to watch as it works to build a new rally. However, the Russell 2000 could surprise if it can break above 1,380 and out of the 2-month consolidation. Day Traders can look to the Tech Indices to take advantage of short covering.

You’ve now read my opinion, next read Douglas’ blog.

I trade a small account on eToro, and invest using Ameritrade. If you would like to join me on eToro, register through the banner link and search for “fallond”.

If you are new to spread betting, here is a guide on position size based on eToro’s system.

Investing Themes To Consider

Courtesy of Read the Ticker.

investing-themes-to-considerFollowing winners is natural, is the same. These names represent the investing themes liked by Richard Wyckoff, Jesse Livermore, Richard Ney, William Gann, Jim Hurst, Sir John Templeton, Peter Lynch and William J O’Neil. These are the best gunslingers!

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NOTE: does allow users to load objects and text on charts, however some annotations are by a free third party image tool named

Investing Quote…

..“The only way you get a real education in the market is to invest cash, track your trade, and study your mistakes…. The examination of a losing trade is tortuous but necessary to ensure that it will not happen again.”..

Jesse Livermore

..”Money can’t buy you happiness but it does bring you a more pleasant form of misery”..

Spike Milligan

..”Stock market bubbles don’t grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception”..

George Soros

..”Money couldn’t buy friends, but you got a better class of enemy”..

Spike Milligan

..“Bull markets are born on pessimism, grow on scepticism, mature on optimism and die of euphoria.”..

John Templeton

Bulls Struggle on Volume

Courtesy of Declan.

There wasn’t a whole lot of action in terms of price movement, but what action there was came on heavier volume and reflected a lack of buyer strength as they struggled to challenge last week’s highs.

Of the indices, the Dow Jones flashed a ‘bull trap’ to join another in the Russell 2000:

The Russell 2000 wasn’t able to close higher, leaving a spike high for the index. There is a play against the ‘bull’ and ‘bear’ trap, but this is looking more like a widening of the December-February trading range. Technicals are close to returning to a net bearish picture (when slow stochastics [39,1] drops below the 50 mid-line).

The Nasdaq is the strongest index and is enjoying solid relative performance against its peers. While today did finish with a bearish ‘black’ candlestick, it is best positioned to challenge last week highs and is a long way from turning into a ‘bull trap’.

For tomorrow, bears should keep an eye on the Russell 2000 – which is struggling. Bulls can look to follow the trend in the Nasdaq, which is moving up nicely.

You’ve now read my opinion, next read Douglas’ blog.

I trade a small account on eToro, and invest using Ameritrade. If you would like to join me on eToro, register through the banner link and search for “fallond”.

If you are new to spread betting, here is a guide on position size based on eToro’s system.

Markets Sell Off But Recover Into Close

Courtesy of Declan.

Trump kicked off the week with some market turmoil, but market participants still seem to consider his presence good rather than bad for the market.  The only exception was the Russell 2000, which sold off and stayed sold off. This has created a ‘bull trap’ next to last week’s ‘bear trap’; a neutral setup.

For the Russell 2000, a loss of 1,341 opens up for a retracement down to the 200-day MA at 1,233 and the November swig low of 1,156 (which looks a long, long way away). Technicals saw the trend metric +DI/-DI turn negative as the MACD pulled away from a potential trigger ‘buy’; shorts should probably be looking at shorting rallies from here.

The S&P recovered the threat on its breakout – but it hasn’t yet confirmed a ‘bull trap’. While the breakout held, there were technical ‘sell’ triggers for MACD, On-Balance-Volume, and +DI/-DI.  Relative performance against Small Caps saw improvement.

The Nasdaq tagged breakout support, but hasn’t yet threatened a ‘bull trap’. Technicals are all still in the green.

Tomorrow looks to be all about the Russell 2000. If loses accelerate, then it will likely spread to Large Caps and Tech, but for now, only one index is feeling the heat.

You’ve now read my opinion, next read Douglas’ blog.

I trade a small account on eToro, and invest using Ameritrade. If you would like to join me on eToro, register through the banner link and search for “fallond”.

If you are new to spread betting, here is a guide on position size based on eToro’s system.

Weekly Market Recap Jan 29, 2017

Courtesy of Blain.

The week that was…

After being non stop bullish since mid November, we turned cautious last week for a number of reasons:  the length of this rally, the small cap index (Russell 2000) which had led this market had weakened significantly, the NYSE McClellan Oscillator went negative, and the DJIA looked like perhaps it had formed a double top.  Welp, that was not the correct view as rallies on Tuesday and Wednesday served to make any bearish view wrong yet again.  Even Friday’s advanced reading of 4th quarter GDP – which was poor – didn’t dent the market.  So we’ll reassess some of the data below.

Finally Dow 20K – certainly not with the fanfare I remember about Dow 10K.


Since the Dow first crossed 19,000 on Nov. 22, the biggest contributors to the blue-chip average’s quick 1,000-point rise were Goldman Sachs Group Inc. (154.6 points), International Business Machines Corp. (90.6 points), Boeing (75.5 points), Walt Disney Co. (69.8 points), and UnitedHealth Group Inc. and Apple Inc.   tied at 56 points a piece, according to Dow Jones data.

A slew of major companies such as Microsoft, Google, Starbucks, Intel, Boeing, Ford, etc hit this week – we’ll highlight some larger movers later in the recap.

New home sales fell to a 10 month low.  Still, the trend in new-home sales is up: the Commerce Dept. estimates 563,000 new homes were sold in 2016, 12.2% higher than in 2015, making 2016 the best year since 2007.

As mentioned above, on Friday a reading of U.S. gross domestic product showed that economic growth slowed in the fourth quarter and annual growth failed to reach 3% for the 11th straight year. Meanwhile, durable-goods orders also fell in December for the second month in a row.

Gross domestic product, the official score card for the economy, expanded at a 1.9% annual clip from October to December, the Commerce Department said. That’s a marked drop from a 3.5% growth rate in the third quarter and below the 2.2% consensus.  For the full year, the U.S. grew just 1.6%, compared with its 2.6% clip in 2015.

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Markets Finish Week Maintaining Breakouts

Courtesy of Declan.

Friday’s action was relatively muted, but really it was all about holding the breakouts generated in the first half of the week. While low unemployment suggests the economy is running close to maximum, it’s hard to see when this Trump rally will end. It looks like Trump himself will probably kill it with his immigration policy as skilled workers (H1B, Greencard workers) get caught in the sweep. But until then, with buyers exceeding sellers, bulls don’t yet have a reason to worry.

The S&P has net positive technicals, with relative performance against Small Caps also ticking higher. Of technicals, On-Balance-Volume is looking the weakest and is likely to be the first to turn negative (and suggest sellers are gaining the upper hand).

The Nasdaq is enjoying excellent relative (out-performance) against the S&P and this pressure has delivered a well angled rally off November lows.  Also, unlike the S&P, there are no obvious or upcoming technical weaknesses.

The Russell 2000 has struggled a little over 2017. This index is perhaps the bellwether for the year and a potential fly in the ointment for bulls. Small Caps are key drivers for long term bull rallies, but without their participation it suggests a flight of safety and move away from speculative companies.  The index is sharply under-performing its peers and still retains a MACD trigger ‘sell’. Last week’s ‘bear trap’ was a good start, but the work isn’t finished yet.

For Monday, bulls need keep an eye on S&P On-Balance-Volume and look to ensure the Russell 2000 doesn’t fall further back into last week’s ‘bear trap’ – threatening negation. Trump’s executive actions in the first week are not good news, and are certainly unsustainable. Surrounding himself with lackeys and family will not help alternate thinking and while he will have a forgiving Congress and Senate, the vultures will be out if there is a sniff of weakness. Markets will be sensitive to his crazy policies and are likely to remain very volatile; good and bad (like the man himself).

You’ve now read my opinion, next read Douglas’ blog.

I trade a small account on eToro, and invest using Ameritrade. If you would like to join me on eToro, register through the banner link and search for “fallond”.

If you are new to spread betting, here is a guide on position size based on eToro’s system.

NYSE no break out yet!

Courtesy of Read the Ticker.

nyse-no-break-out-yetNYSE magic number is 11,500 and we are not there yet! So things can get a little hairy at resistance.

The TRUMP PUMP may be coming to an end, expect a consolidation to allow the market to determine what to do next, or of course the next week FOMC could blow it all up.

Click for popup. Clear your browser cache if image is not showing.


NOTE: does allow users to load objects and text on charts, however some annotations are by a free third party image tool named

Investing Quote…

..”Money is made in tape reading [chart reading] by anticipating what is coming — not by waiting till it happens and going with the crowd”…

Richard D Wyckoff

…”The four most dangerous words in investing are ‘This time it’s different’ “…

John Templeton

..“By failing to prepare, you are preparing to fail”..

Benjamin Franklin

Novice Traders trade 5 to 10 times too big. They are taking 5 to 10% risks on a trade they should be taking 1 to 2 percent risks.

Bruce Kovner

..”A market is the combined behavior of thousands of people responding to information, misinformation and whim”..

Kenneth Chang

Retail Sector – Doomed as Doomed Can Be

Courtesy of Slope of Hope

Being an equity bear has been brutal for, oh, nearly eight years now. With the S&P up about 250% since bottoming in March 2009, equities have been, on the whole, raging higher, with some sectors in particular benefiting tremendously from the Trumpgasm. One area, though, seems to be recognizing a bitterly cold chill of reality, and that is retail.

Not everything retail is weak, of course, Amazon has had an astonishing run (and we'll see if it holds together when they report next week), and some stocks such as Autozone (AZO) and O'Reilly Auto Parts (ORLY) have cranked out multi-hundred percent gains for years now. But many retail companies, particularly those having to do with clothing, have been getting whacked. Take, for instance, Abercrombie & Fitch, which I've picked on endlessly: it is actually lower than it was at the greatest depths of the financial crisis. For how many stocks could you make that statement?


Bed Bath & Beyond has a quite well-formed head and shoulders pattern (whose neckline is shown with a red horizontal below) that suggests much lower prices to come.


Be careful not to confuse this with a very similar symbol, however – Best Buy – which, competition from Amazon be damned, is defying gravity and broke above resistance this year.


Let's get back to the bearish charts, though: Shoe retailer Finish Line has been trending lower for months, and the analog is going beautifully:


Another storefront at your local luxury mall is Kate Spade. It found strength off and on recently due to buyout chatter (they are desperately trying to sell themselves), but the pattern is bearish, and just so you are clear, just because a company is for sale doesn't mean there will be any buyers. Just ask Twitter.


Speaking of analogs, take a look at Macy's. Even though the stock has lost over half its value, if history is any guide, they are doomed as doomed can be (this is more impressive if you say it in an Ed Grimley voice).


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Zero Hedge

Oops! The Economy Is Like A Self-Driving Car

Courtesy of ZeroHedge. View original post here.

Submitted by Gail Tverberg via Our Finite World blog,

Back in 1776, Adam Smith talked about the “invisible hand” of the economy. Investopedia explains how the invisible hand works as, “In a free market economy, self-interested individuals operate through a system of mutual interdependence to promote the general benefit of society at large.”

We talk and act today as if governments and economic policy are what make the economy beh...

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Phil's Favorites

Zero Percent Down Loans in a Raging Bubble: Didn't We Try This Before?

Courtesy of Mish.

Australian parliament member Andrew Broad wants banks to accept zero percent down loans.

New.Au calls the proposal a “creative idea”.

Please consider First homebuyers with a good rental history shouldn’t have to save a deposit, Federal MP says.

IS THIS the lifeline struggling first home buyers have been waiting for?

Well, it’s certainly one of the more creative solutions to the country’s housing affordability crisis.
Federal Nationals MP Andrew Broad has suggested banks should forgo a deposit from first homebuyer...

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Chart School

RTT browsing latest..

Courtesy of Read the Ticker.

Please review a collection of WWW browsing results.

Date Found: Wednesday, 13 July 2016, 03:17:09 PM

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Comment: .."But, investors truly wonder if the moves are sustainable. As we have stressed, the valuation on Utilities looks stretched..."... RTT: No kidding!!

Date Found: Monday, 18 July 2016, 03:28:53 AM

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Comment: Catherine Austin Fitts-The Debt Game Is Over

Date Found:...

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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Commodities Have Been Down So Long It May Be Time To Snap Them Up (Forbes)

The post-crisis years have not been good for real assets, the catchall term for commodities, energy, real estate and other investments based on selling real things instead of clever ideas.

A trader psychologist who consulted on Showtime's 'Billions' reveals the biggest mistake traders make (Business Insider)

Denise Shull is a decision coach and performance architect who consulted on Showtime’s&nbs...

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GNC Suspends Dividend: An Important Lesson on Dividend Safety

By Simply Safe Dividends. Originally published at ValueWalk.

GNC (GNC) surprised many income investors when management recently announced that the company’s dividend will be suspended.

After all, GNC has been in business for more than 80 years, maintains a payout ratio below 40%, generates solid free cash flow, and even increased its dividend every year since it began paying one in 2012 – including an 11% boost just last year.

These are some of the qualities we look for when evaluating companies for our Conservative Retirees dividend portfolio.

None of these strengths mattered, however.

GNC’s double-digit yield was wiped out immediately, adding insult to injury after the stock’s 70%+ decline over the past year.


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Swing trading portfolio - week of February 20th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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Digital Currencies

How to Use, Trade, Store and Invest in Bitcoin Digital Assets - Step by Step, Part 1

By Reggie Middleton

(Originally published on Zero Hedge)

I will teach novices and experts alike how to fit Bitcoin into an investment portfolio safely and with the optimum risk-adjusted potential - along with step-by-step guides, instructions and tutorials.

This first part of the series starts with the basics, obtaining and managing your bitcoin.

What is Bitcoin?

First off, we need to know what Bitcoin is since most media pundits and even experienced financial types truly do not know. Bitcoin (capital "B") is a protocol driven network (very similar to that other popular protocol-based network, the Internet). This network is a blank tapestry upon which smart and creative actors can paint a cornucopia of applications (just like applicat...

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Kimble Charting Solutions

Fear Indicator; Hitting highest levels in history, says Joe Friday

Courtesy of Chris Kimble.

Markets have been on a steady rise and the same can be said for Inverse Fear ETF (XIV). Below looks at Inverse Fear ETF (XIV) since the lows in 2011.


What a difference a year can make! One year ago this week, XIV was testing rising channel support, as relative momentum was hitting levels last seen at the 2011 lows.


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Members' Corner

Save Your Relationship?

Courtesy of Nattering Naybob.

Once again it's "in the Toilet Thursday" or "Thursday's in the Loo".

Our last episode How to Poop At Work? answered the question, what to do when your at a big fancy pants meeting, when out of nowhere, you need to download a brown load?

This week's installment, Save Your Relationship, demonstrates that people will do just about anything to save their relationshits...


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Mapping The Market

NSA May Be Withholding Intel from President Trump

By Jean Luc

These GOP guys were so worried about Hillary's email server and now we find out that we had something close to a Russian mole in the White House. In the meantime, Trump keeps on using his unsecured phone, had high level conversation in his resort in front of dinner guests! It's getting so bad that rumors are now circulating that the NSA is not sharing information with the WH:

NSA May Be Withholding Intel from President Trump


….Our spies have had enough of these shady Russian connections—and they are starting to push back….In light of this, and out of worries about the White House’s ability to keep secrets, some of our spy agencies have begun withholding intelligence fro...

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Phil's Stock World's Las Vegas Conference!

Learn option strategies and how to be the house and not the gambler. That's especially apropos since we'll be in Vegas....

Join us for the Phil's Stock World's Conference in Las Vegas!

Date:  Sunday, Feb 12, 2017 and Monday Feb 13, 2017            

Beginning Time:  9:30 to 10:00 am Sunday morning

Location: Caesars Palace in Las Vegas


Caesars has offered us rooms for $189 on Saturday night and $129 for Sunday night but rooms are limited at that price.

So, if you are planning on being in Vegas (Highly Recommended!), please sign up as soon as possible by sending...

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The Medicines Company: Insider Buying

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

I'm seeing huge insider buying in the biotech company The Medicines Company (MDCO). The price has already moved up around 7%, but these buys are significant, in the millions of dollars range. ~ Ilene




Insider transaction table and buying vs. selling graphic above from

Chart below from


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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.

To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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FeedTheBull - Top Stock market and Finance Sites

About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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