HeadlineCharts.blog.com

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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You're probably wondering what happened Tuesday Interest Rates.  The entire post was lost when I went to save it.  Very frustrating.  And today I don't have much time.

New lows are increasing and it could mean a correction is coming.  The NAS new lows have increased five days in a row to over a 100 today.  The NYSE are still below the 50-level which is healthy but have been increasing as well.  The 10Y rose today working against stocks as well.

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You probably already know this, but here it is anyway.  The SPX is under the 200-day, horizontal and downtrend line resistance.  That's a lot for a short term uptrend to overcome.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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I was shaken out of my positions today in SSO, ROM, MVV.  Now I am about 10% cash.  I was really surprised to see the market rally towards the end of the day.

Coal, Chemicals, Steel, Metals, Computers, Oil, Rails... these aren't the industries of a recession.  These are growth industries.

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This spreadsheet really helps me to step back and see the leading indexes.  I like to buy the groups in the blue and green.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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Red is a column of O's in a downtrend, blue is a column of X's in an uptrend.  Below 30% is oversold, and above 70% is overbought.  Yellow is a shift down, green is up.

There was excellent upward movement in the bullish percents this week confirming higher prices and bullishly broadening out the number of stocks participating in the rally.  All the yellow is related to the commodity-inflation area that is correcting. 

The IBD bullish percent has been updated to include the latest components of the index, and I figure it needs to be reset twice a year or so to bring it up-to-date. 

The agriculture bullish percent is also new and it consists of the stocks in the MOO ETF that trade on the US stock exchanges.

Also added is the commodity bullish percent for the components of the CRB.  I had wanted to use a broader range of commodities but it is hard to get good P&F charts so I'll settle for the CRB components for now.  There is a little more strength in this bullish percent at the moment than I expected.  Here are the components.

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I'm cautious on the market because the new highs /new lows refuse to fully cooperate and confirm this uptrend.  The new lows on the NYSE are really good, but the new lows on the NASDAQ just refuse to settle down.  They were 65 last Friday which isn't enough to ring alarms but slightly higher than expected for an uptrend.  Ken Tower is also cautious on the market primarily for same reason.

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The new lows aren't cooperating on the NASDAQ, but it's the new highs that aren't cooperating on the NYSE.  It makes some sense.  Most new highs had been in the materials and energy groups, and now that they are correcting tech and consumer stocks are too far in the hole to register new highs.  Let's give this some time to see if the new leaders can start hitting new highs and improve these numbers.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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The ECRI leading economic index ticked a bit lower which is quite a disappointment.  I have been a believer that the US economy is very weak but recovering quickly, or maybe I just want to believe that.  The ECRI future inflation gauge hasn't moved from its low level.



There was a comment yesterday questioning whether these sentiment surveys can help determine whether a rally is a bear market retrace or the beginning of larger bull market.  In my opinion, the surveys can't be used alone and have to be used with other technicals.  For instance, there is no way I would be bullish on the market if the sentiment survey were highly favorable but the level of new lows and TBill rate were unfavorable.  These things have to be lined up properly.

The sentiment surveys do fall to extremes corresponding with significant market bottoms and turning points.  The survey readings this spring fell to levels corresponding with the survey lows of the fall of 2002 when the prior bear bottomed out.  That is a good sign that a new bull is likely to emerge, but no guarantee by a long shot.  However, if you combine the extreme survey low with the Dow Theory buy signal, favorable Fed Funds, strong insider buying, breakouts in the early growth sectors, etc., then you can build a pretty good case for a bull.

You can't wait to buy into a market when everything is rosy.  In my opinion, you have to watch your favorite indicators, listen to your favorite market timers (IBD, Ken Tower, Bob Brinker), then make your move.  At least, that's what I do.  Hope that helps.

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Sorry, these free charts don't go back any further than 2005.  It would be nice to see the 1999 through 2004 period for comparison to what is happening currently.  II produces charts that go back 10 years, but I don't want to post their charts without permission.

To be clear, I'm not telling anyone to buy stocks.  I'm just offering my interpretation of contrarian sentiment using the above chart of the newsletter writer's survey... it is still favorable, but the window of opportunity it creates to buy stocks may be closing soon.  The survey has ticked higher for a number of weeks now and soon it is likely to move to the neutral zone.

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Brent Leonard is starting to see signs that sentiment has moved up to bullish levels that work against higher stock prices.  One factor he mentions is that insider selling has picked up from it lows.  However, Investor's Intelligence still likes the current level of insider selling stating that it is well below the levels of Q4 2007 when insiders were selling heavily.  Note, newsletter sentiment is used a contrarian indicator but insider purchases are not.  Insiders tend to be right about the prospects for the stock price of their own company.

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Ken Tower likes this chart of the VIX.  He has stated that the break below the 200-day is very bullish longer term.  He thinks that if we were just in a bear market retrace then the VIX would have held this moving average.  If the 50 crosses under the 200 it will be added confirmation that the larger trend of the VIX is lower rather than higher, and lower trend favors stock prices. 

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The survey information below can be obtained for free via the following sites.  Investor's Intelligence is from Market Harmonics.  Individual Investors is from aaii.com.  Birinyi Bloggers is from Ticker Sense. 

For a thorough review of market sentiment, I recommend Brent Leonard.  For excellent information about the VIX, check out VIX & More and Marty Chenard.

Sentiment analysis is an important component when following the markets, and is considered a “contrary” indicator.  Contrary because if too many people are bearish then there aren't enough sellers left, the balance tips to buyers, and the market starts to advance.  If too many people are bullish, most funds are already invested, the balance tips to sellers and the market weakens.  One way to determine if investors are bearish or bullish is by taking surveys and tracking at what levels these polls indicate investors are at the extremes of bearish or bullish sentiment.

Keep in mind, sentiment analysis is not a science and only provides very general information.  Sentiment is not a signal to take action, but provides background about the current state of the markets.  For instance, there have been many occasions when bullishness reached high levels well before the market started to weaken.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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Well how boring.  No new highs, no shifts.  Commodities are taking a breather while the US Dollar finally rallies.  The industrial metals have continued to hold their value, and this points to global growth.  I'm done trying to trade in and out of the commodity ETF's and the commodity-related shares.  I'm continuing to average into these positions and hold through the corrections.

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I keep hearing about how gold is leading commodities lower.  This chart does seem to confirm this.  The GOLD /CRB ratio peaked back in January and now the commodities are following lower.  The CRB is 70% energy weighted, so this means there is a bit of break in these commodities.

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I keep waiting for a better opportunity to buy this ETF of coal companies.  Should I just close my eyes and jump in?  I've been reading about coal, knowing almost nothing to start.  Now I'm a convert.

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This DGP double gold fund is starting to tempt me.  We may not be quite there yet, plus gold often tests its lows over the summer.  I'm ready when the opportunity comes.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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There are a lot of good charts out there in the blog world showing the basics of today's bullish breakout.  I'm not sure I have a lot more to offer.  The break above 1400 came after a steady uptick in the SPX bullish percent through the 50% level, which gave a fairly good advance signal that the break out was likely to happen.

To recap, we went bullish on Mar-24, but then got cautious on the market a couple weeks later when the new lows started to spike up to uncomfortable levels.  We didn't do any selling because the new lows peaked out and the market seemed to be in a sideways trend rather than building up for another leg down. 

Then late last week the bullish percent of the tech sector gave an excellent advance warning that it wanted to break out just ahead of the Microsoft earnings.  We bought the ROM ETF which is the broad, leveraged way to play a tech rally, and then watched with disappointment while the ETF sank after Microsoft announced.  This purchase occurred while we were still cautious on the market, but the bullish signal in this sector was too good to pass up.

I think you know the rest of the story.  The market rallied on Monday only to fail at the close.  Then the market sold off Tuesday, but rallied late in the day.  The market broke out Wed with the Fed news, only to fail again. 

Finally, the SPX has broken above very important resistance to confirm the INDU and TRAN breakouts, and it seems that after a lot of indecision, the market is giving a fairly good confirmation that the trend is higher... although it is hard to say how solid the trend is or how long it will last.  It is a day-to-day situation.

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The breakout of the SPX came on a day when there was huge sector rotation from late stage, inflation sensitive sectors energy and materials, to early stage, rate sensitive consumer and tech sectors.  So the lousy breadth today makes some sense as the leaders formerly making new highs corrected, while the laggards are now rallying but aren't yet in position to register new highs or bullish P&F patterns.  I guess the key is the consistently depressed level of new lows which is currently at a very bullish uptrend levels and has been for a while.

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There was a comment yesterday critical of the IBD market calls.  The comment is right that these are basically mechanical signals on the market, but when I read the commentary when the calls are made there seems to be some judgment as well.  But it doesn't really matter because their ability to read the market is as good as anyone out there however it is done.

Also, the comment mentioned that IBD is 4-for-7 in their success ratio.  I don't get that at all.  I think success is measured by whether the rally succeeds in pushing the market higher.  The inevitable correction should come at a price level higher than the follow through buy signal.  So it seems to me there are two successes and two failures as shown.   IBD's ability to read the market speaks for itself everyday, right there in newsprint and seems to me to be worth every penny people pay for it.

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Ken Tower follows the VIX in a way very similar to the way I do.  He just looks at the basics and let's other people do the difficult heavy analysis.  But he mentioned something I hadn't thought of.  He says that because the VIX broke down below its 200-day, it indicates to him that the current rally is unlikely to be just a short-term retrace of larger, bear market downtrend.  This makes sense to me and I like it.  We all know for sure though that the market tends to go up while the VIX declines, and the VIX continues to be in a steady downward trend that is helping push stocks higher.  So we'll be watching to make sure the VIX remains below the shorter term moving averages as confirmation of the equity market trend.  Ken likes to use the 10-day and 21-day moving averages to define the short term.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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The chart above is in response to a really good point made by someone yesterday.  Yesterday's post mentioned the recent bullish chart breakouts of the INDU and TRAN.  The comment was that both indexes had similar breakouts to new highs last summer, just before the bottom fell out from under prices.

The difference, though, is that last summer the new lows were telegraphing that there was a serious problem developing under the covers in the market.  On July 18, the NYSE new lows spiked above 150!  That is bear market territory while at the same time these Dow indexes were at highs.  This was a very bearish negative divergence.

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The current breakouts of the Dow Indexes look a whole lot better to me than the breakouts last summer. 

For one, these breakouts came after enormous, important tests of the lows where the percent of new lows spiked to unprecendented levels.  Huge spikes like this are usually associated with climax selling in which bottoms are formed.

More importantly, the bullish breakouts of the indexes occurred after the new lows had settled way down to levels that support an uptrend.  And I think this is the key and points out really well why I am so focused on new highs /new lows.

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Last week I mentioned that the 2Y Treas rate was likely to break out above the level of Fed Funds indicating that the Fed is close (or done) lowering rates for now.   I usually pay more attention to the TBill rate, but Ken Tower focuses more on the 2Y and now I see why. 

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I couldn't find a chart of my own that I wanted to use, so I just borrowed one from Danny Merkel author of Gold Stock Prophet.  If the US Dollar index breaks above the 50-day, I think the target is the 200-day, and that is quite a move.  Every article written lately includes lots of comments about the dollar, so I won't say any more.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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Mixed news today.  The SPX wasn't able to close above the important 1400 level, but underlying breadth of the market was decent with the NYSE new highs breaking above the 50-level and new lows way down in bull market territory.  And the SPX bullish percent continued to tick slowly higher in positive fashion.  Unfortunately, the NASDAQ new highs /new lows were still inverted on the NASDAQ, although the new lows weren't that bad at 59.

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Good news showing up in the spreadsheet above.  Only gold shares shifted lower which is probably a positive for the market.  Computers, Cyclicals, Software, Industrial Equipment, Automobiles are economically sensitive groups that have broken out above their moving averages.  This is a very favorable development and confirms what was noted yesterday that both ECRI and Trim Tabs are detecting the early, tentative signs of a pickup in economic activity.  Savvy investors are moving back into the market in advance of this news hitting the newspapers.

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IBD is 2-for-4 in their market calls over the last nine months.  They are the first to acknowledge that their method only works 70-80% of the time, and most of the failures happen during bear markets or major corrections.  The last one was a very good call.  They seem to have a very good feel for the market that goes beyond just the rules that they publish.  Investing when they give the all clear gives me added confidence that I'm reading the market correctly.

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Talk about a confidence boost.  Having both the industrials and transports breaking out and leading the market is classic technical action.  Now we really need the SPX to close above the 1400 level.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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ECRI notes that their leading economic indicator has ticked up to an eleven week high, but is still well within recession territory.  This is consistent with what Trim Tabs is reporting.  It is finding the most up-to-date indicators of tax receipts and tax withholdings are showing the economy gaining some steam again. 

Also, the ECRI gauge of current  economic activity still hasn't dipped into negative territory which means that there is still a sliver of economic growth rather than contraction.  Q1 growth therefore should be around the .5% level.  (I'm no economist, I just try and interpret these reports from the people who are... and even that isn't easy).

The ECRI future inflation gauge remains contained but hasn't moved down much lately which is what you'd expect if the economy was contracting.  So this is another positive sign of growth.

This week the worrisome new lows improved, ticking lower on both exchanges until both are now at much better levels.  This development improved the market outlook and I took a position in a Technology ETF because tech looked like it was starting to make its move.  Of course, the bad response to Microsoft on Friday now puts some clouds back above this group.  All eyes are now on the S&P 500 to see if it breaks above 1400 to join the industrials and transports in bullish chart breakouts.  Based on the action in the SPX bullish percent, I suspect it will.

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Red is a column of O's in a downtrend, blue is a column of X's in an uptrend.  Below 30% is oversold, and above 70% is overbought.  Yellow is a shift down, green is up.

The breakouts above the 50% level for the midcaps and the SPX are very bullish.  We need more than 50% of the stocks in the S&P 500 to be on bullish chart patterns in order to push above important resistance and lead the market.  Without the biggest and best companies moving higher, a rally is unlikely to succeed.  The break above 50% for the mid caps is also encouraging because it means the market strength is broadening out into the less financially powerful companies.

Gold, Materials, Agriculture stocks took a bullish percent dip.  Maybe in anticipation of a bounce in the US Dollar?  The Energy bullish percent is very overbought, so if the dollar does rally there could be a pullback coming in this group. 

More positive news for the market is that the financials are maintaining above 50%.  The group is retaining its strength and maybe the stocks aren't just in an oversold bouce. 

The wall street Brokers are also starting to respond with a shift to a bullish column of X's.  The market usually needs this group to participate. 

I'm still working on the commodity bullish percent indicator, but isn't ready just yet.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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The surveys of the individuals and bloggers are starting to show a lot of volatility.  Two weeks ago they were in the blue, then back to the green, and now in the blue again.  This is a sign of uncertainty about what is happening in the market.  No doubt they are inspired by the gradual base-building in the market, but scared by the gloomy newspaper headlines.  Or maybe they are just scared by the newsletters they receive.   The writers are still a pessimistic bunch, and this works in favor of stocks.  These writers still have their readers in cash on the sidelines waiting for the next opportunity to buy.  Although the individual and bloggers sentiment isn't as favorable as it was, the newsletters are still quite gloomy and this works in favor of higher stock prices in the weeks ahead.

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Thanks to Market Harmonics for these free charts.  The percent of bulls is just now starting to cross above the percent of bears.  This is a bullish event as money starts to flow into stocks while stock prices are still at very favorable levels.

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Brent is reporting that the insiders have stepped up their selling to a level that is no longer as favorable for stocks.  Is the highly favorable window starting to close for buying stocks at depressed prices?  I'm new to insider sentiment so I will leave it up to Brent and Investor's Intelligence to interpret.  II tends to looks at the 8-week trend of insider activity to smooth out the extremes.  Here is what they say.

     "The 2008 insider data remains positive with only a slight slow down in their recent buying in reaction to the market advance. That is to be expected but if it continues it will end the positive signals we have taken from their action this year. In general the insiders remain optimistic for more market gains and the slight increase in their sales is not close to the heavy selling that marked the last quarter of 2007." [April-25-2008]

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This chart continues to favor stocks.  A break above 1400 for the SPX would be quite favorable.  The SPX would then join the industrials and transports in breakouts above important technical levels adding important evidence that the market is regaining its health.

While this Bob Brinker 60-day moving is moving down from such a high level, you would generally expect stock prices to be moving higher.  In the past, this indicator has worked really well as an intermediate term indicator, but it did fail us miserably in the fall of 2007.  Brinker prefers to use it as a longer term indicator, showing that the market remains in a primary uptrend despite the gigantic selloff since last summer.  Bottom line: this indicator is quite favorable for higher stock prices in the weeks ahead.

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