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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I haven't left for vacation yet.  One more post before I go.



Ken Tower decided that today looked like the beginning of the end for this sell off, and so he went from sell to neutral on the market.  I covered my short positions, bought back some of my favorite stock, and am sitting mostly in cash waiting for the bottom to be in for the market.

Tower's statement said basically that today looked like capitulation and that sentiment was so bad that it was time to start looking ahead for the next short-term rally.  Before buying anymore stock I'll wait for his signal to buy, along with the IBD buy signal.

Some bad news though, Ken Tower also downgraded the intermediate term saying that the unwinding of debt and the hangover from the bull market party is going to take longer than people think.

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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'll be on vacation until after the July-4 weekend.  I'll have access to a computer, so I may be able to find time to post a few entries.



Tower stated yesterday that new lows had reached above the 10% level, and that is such a high percentage that it could be an indication that a bottom is near for the market.  Supporting that view is the price level of the dow industrials which is finding some support near its prior lows, and the financials which look really washed out. 

Then again, some other indexes look like they are just starting to roll over, and Tower notes that the small companies are now beginning to sell off in favor of the grossly oversold large caps.

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Yesterday the SML broke below important support after forming a topping pattern the last few weeks, and it was stopped today by broken support turned into resistance.

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Tower has been recommending for weeks that investors stick with these three leading groups, and it has been excellent advice.  Recently he expressed some concern that oil may be topping, so that means to me that these groups will likely be the next to fall.  I still believe that this down cycle won't be over until these groups participate to the downside, but since Ken Tower is reading this market so well right now, I will probably let his advice trump any of my own views.

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It has been quite a while since this index has traded below the 80-week average.  An excellent test of the market will be whether prices can hold above this long term trend.  The lower high of the recent rally is not a good sign that the uptrend will hold.

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This chart is a favorite of Investor's Intelligence along with their Newsletter Writer's Sentiment Survey.  Looks like this chart is suggesting that the bottom won't be in until the percent above the 30-week reaches the blue uptrend line, which also looks like decent horizontal support.  If correct, the chart suggests some pain still ahead, but perhaps with light starting to appear at the end of the tunnel.

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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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Inflation seems to be all over the globe, and US Treasury rates have steadily climbed this year as a result.   Commodity related stocks also climbed as a result of the inflation despite the global slowdown.

Now there seems to be a change brewing.  These two charts may be revealing the early signs that rates have peaked and commodities stocks are finally ready to correct lower reflecting a peak in commodity prices and the world wide economic slow down.

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I'm really getting into this new chart style.  This is a pretty bullish looking chart of the US Dollar.  The only thing is, if rates are headed back down, how much longer will the US Dollar rally?  While the media is focused on inflation, maybe the real story is the economic slow down.  Perhaps the dollar is headed higher because foreign rates are finally getting ready to head lower in sync with US rates.

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Yesterday I mentioned that this chart was looking like it was going to break out.  Today, that's what it did on high volume.  It is really late to be shorting though, so caution is called for.

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The pieces are fitting together.  Rates may have peaked, materials stocks may be headed lower, and oil may have topped out. 

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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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Aren't you glad you listened to Goldman Sachs and bought financials?  If you listened to Ken Tower you didn't buy the financials.  Instead of financials, you kept your money in materials and energy.  Or maybe you listened to IBD and avoided deep value, and instead focused on growth stocks and made a bundle... then sold and raised cash when they warned the market was rolling over.

It's a bit late to be shorting, but its still fun to watch the best looking chart patterns and maybe make a few well considered but aggresive short-term purchases to take advantage of a weak market.  A break out in this ETF could be interesting with a tight stop out below the break out point.

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This is only for the adventuresome... its another nice looking pattern, but only if you are willing to stop out under the uptrend line.  The mid caps and the Naz 100 have been strong, so there is considerable risk that these indexes could be ready to turn against buyers, so best to be cautious.

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It might be a bit late to participate here unless there is a pullback to the break out point.

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There has been no let up in the selling pressure on stocks based on the new lows.  Higher and higher levels of new lows indicating gradual crumbling of the remaining strength in the market.  Is it only a matter of time before the leaders follow the weakest indexes lower in capitulation?  The gold / crb ratio looks like it is indicating that oil is living on borrowed time.  What will happen if oil finally tumbles? Will stocks celebrate with a big rally, or will the collapse of leading stocks bring the whole market down? 

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Gotta go.  I'd feel a lot better about this market reaching a bottom if the total put /call ratio were at a more favorable 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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Tell me you aren't impressed by this.  Above is a chart showing the market timing signals issued by Ken Tower.  If you are interested in his comments, he is often interviewed by MarketWatch. 

As for HeadlineCharts, I am now net short the market, but ready to cover the shorts as the market probes for the lows.  As you know, not all indexes have had equal participation to the downside.  Market weakness is in the financials, particularly the regional banks, and the dow industrials.  The NASDAQ, tech and utility indexes have held up well along with commodities and commodity related stocks. 

I will be cautious about shorting the financials because the selling has already been so intense and the bottom for these stocks may be near... and maybe the dow industrials as well as it gets near its prior lows.  Regarding the indexes that remain healthy, the question is will they be drawn down too and test their prior lows, or is their strength a bull divergence where pullbacks are a buying opportunity?  When you figure it out, let me know.

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Well you have to like this chart too, if you are a bull.  The leading ECRI indicator stopped declining in March and started pushing higher in April.  It continues to look decent. 

In May, it looks like the lagging ECRI indicators started to follow the leaders higher.  Looks like the bullish worldwide growth, healthy businesses, low US interest rates and stimulus checks are offsetting the bearish impact of oil, housing and tapped out consumers. 

Also, the ECRI leading inflation indicator remains contained.

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There has been a lot of buzz about these Hindenburg signals via Robert McHugh, who is an excellent analyst but unfortunately has a very negative bias.  Some people don't think these signals are worthy, and I honestly have no idea.  I just think they are worth noting and adding to the pool of technical evidence.

I think there is some mis-communication in analyzing the signals because there are different ways to calculate them, but I think McHugh is fairly rigorous in applying strict rules.  Also, he admits that one Hindenburg doesn't mean much, but thinks a cluster of them is significant.

I do know for sure that a spike in new lows, particularly on the NYSE is important technical evidence.  I also know that getting these spikes at the top of rally is a lot more bearish then getting them after the market has been declining for some time... like now.  Sometimes getting this number of new NYSE new lows indicates a degree of capitulation building up in the decline, and that points to a bottom forming.  So you have to take the context of the spike in new lows into account when you studying them. 

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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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All eyes are on how high oil can climb and how low financials can drop.   Oil may have reached its peak, so now we look for a low in the financials.  I don't think we are there yet but we could be getting close.  I am also expecting the materials and energy stocks to correct before this downtrend is over.

The sentiment surveys are looking favorable.  The current levels certainly work in favor of higher prices, but I would think they need to stay at these levels for a number of weeks before another bottom is in for the market. 

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These charts are starting to look really good.  These are favorable levels from a contrarian point of view.  Let's assume they need a few more weeks to find their lows and show the signs of bottoming out along with the market.

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Insiders are giving good signs as well.  The surveys should be viewed as a contrarian signal, but the insiders are not.  When insiders are buyers we should be buyers too.  Looks like the insiders are favoring their stocks, particularly the financials, but are sellers of energy stocks.

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Now the analysis gets a little more difficult.  The total put /call ratio is giving its first signs of concern about the market.  That's a good indication, but if a bottom were close we would have seen this spike in the ratio a number of days (or weeks) ago.

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This is really frustrating.  The newsletter writers are gloomy and have been for a few weeks, but the put /call ratio is out of sync with that gloomy sentiment.  The 10-week average of the total put /call raio is at the sell level, not approaching the buy zone as we'd like.  So before getting too excited about finding lows in the market, let's keep this chart in mind.

My take on things is that the financials and discretionary stocks are going to remain weak as long as energy and the related stocks remain strong.  My guess is that the market won't find a low until materials and energy follow the market lower...

I'm reading Ken Tower and IBD carefully to get their feel for the market status.  Here is what Ken said today, "We’re getting closer to a bottom, but there was nothing climactic in today’s decline, so I don’t think we’re there 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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Oil looks like it is topping out to me, but that has been the case for a while.  Last week it looked like higher US rates were pulling the US Dollar higher.  And a higher dollar would probably break the back of the oil uptrend, but the dollar is stubbornly resisting attempts to move.

To make up for the lack of cooperation from the dollar, governments around the world are making their best efforts to reduce demand and increase output.  Combine these efforts with the natural reduction in demand from slower economies and sky high prices, and I suspect in the short run they will be successful.  So I still think there is a significant pull back in the price of oil coming in the weeks ahead.

I'd be cautious regarding oil and material stocks at this point.  Plus, there seem to be very few skeptics towards energy prices and shares at the moment which often marks a top.

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In addition, there is this bearish divergence in momentum to consider.  Some profit taking is likely, and we are entering the weak time of the year for natural gas.

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No one thought home prices would ever decline either.  I'm not sure this Elliott Wave labeling is correct.  I do think we are near the end of a significant wave up, but usually such a strong increase is a wave 3 of 3, rather than wave 5 of 3.  Either way, a pullback towards the lower channel is likely at this point.  Plus the momentum indicator is very overbought.

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Gold is strongly suggesting a pullback is coming for oil and other commodities.  I'm keeping an eye on gold.  This week it bounced, but it had started getting close to the accumulation range.  Late summer is the weakest seasonal period for gold.

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The Chinese economy is slowing and the stock market continues to fall from the sky.  Combined with the increase in the subsidized gasoline prices this week, and oil and commodity demand should start to diminish soon. 

The week the China stock market broke below the 62% retrace and the next target is close below... where it faces an important test because the next support is way below.

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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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Cash is king right now.  The bullish percents are fading for the two major averages.  They don't look too bad yet, but this is a good chart to keep an eye on.  The NASDAQ advance was on the back of a small percentage of stocks with buy signals, which means the rally could only last as long as those few stocks held up.  The NYSE bullish percent turned lower right at the upper range in a counter trend rally, and then failed the test at the 50% level, adding to the confirming downtrend signals.  The bullish percents are important indicators, and if there is underlying strength in this market they will register higher lows when this sell off finally finds its price lows.

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Just like the bullish percent (and the RSI indicator) the 60 to 65 level is usually the upper range for a counter trend rally for breadth indicators.  The 30-week is one of the favorites for Investor's Intelligence and it worked well to indicate when the market had reached its short-term peak.  II remains optimistic about the longer term prospects for the market but also acknowledge that there are no indications yet that the short term decline is over.

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The summation indexes gave a very nice bullish divergence in March that really helped signal an excellent buying opportunity.  Rarely have so many technical indicators lined up to provide a buy signal like the one late in March.  Unfortunately, the rally only lasted until the end of the traditional seasonal strong period for stocks.  These indicators all look like they could fall quite a bit before bottoming out, so it may be that cash is king until the traditional seasonal weak period of stocks is over around mid October or so.  Collecting interest on cash balances is not such a bad thing.

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On the bright side, the OBV for the SPX really does not look bad at all, and this has been one of the weaker price indexes.  Perhaps there is some underlying strength in this market afterall?

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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 raised a lot of cash today, but I still don't own any inverse funds... but I probably should.  I sold because the market internals are not good with energy and agriculture commodities hitting new highs while the related stocks look tired. 

Ken Tower remains very negative on the market, and I figure it is time to pay closer attention to his market messages.  He sees today's action as the beginning of another leg down.

IBD remains negative also, seeing the Friday and Monday strength as a weak, temporary counter rally with no volume behind it.

In addition to watching the indexes and listening to my favorite market timers, I'm also watching the bell weathers GE and BAC as proxies for the overall market, and the charts are not good.  I'm getting concerned.

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The chart above captures the notes published by Robert McHugh.  I follows his comments because he has excellent charts even though he is a Chistrian, doomsday market timer.  Nothing against Christians, or even doomsdayers, I just don't want these views confused with honest market analysis.

McHugh is big fan of Hindenburg Omens and is constantly watching for them.  As the name implies, they aren't good, and therefore fit in perfectly with his view of the world.

Unfortunately, there have been three since June-6.  Apparently, one Omen is a warning, but two or several close together is a confirmed Omen with very negative implications. 

Once again, cash is king.

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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 newsletter writer's sentiment survey hasn't changed much so I decided not to show it today.  It's a bit too high to expect it to do much to support prices, but not so high to expect sharply lower lows in the market.

The moving average of the total put/call ratio shown above is at the wrong end of the spectrum for higher prices.  This is bad positioning leading into the summer for the market.  I forgot to remove the comment about 'approaching' the sell zone.  It has now crossed well into the area to expect downward pressure on prices.

Bottom line... the market is in a base building process where the top has been tested, and prices are now likely to stair step lower and then bounce off the lower end of the range in the coming weeks.

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I created the above chart from some notes written by Mike Burk of Alpha Investment Management who sends out free newsletters.  I've been following his comments on the market for some time and he knows what he is talking about.  Of course, I take an extra interest in his comments because he likes to use the new highs /new lows indicator in his analysis.

Some of the labels in red are a bit questionable, but I like the general point he is making.  The net new high/lows are trending favorably even though prices have not yet given the solid signal that they've broken the downtrend.  This is a bull divergence in the market and indicates to Mike that the next test of the market price lows may result in forming a significant bottom.

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