So, I just reviewed this past weeks charts and it appears that based on my TA the market had lower volume as expected for a Holiday but that some of the recent decisions in Europe are apparently effecting how people are allocating money and a shift appears to be taking place. Much of the past week appears to have been selling to raise CASH and the latter portion of the week it appears that the CASH is being put to work in some new sectors. I suspect this may continue this coming week and may result in S&P and US Markets in general to churn more sideways and possibly increase volatility but overall be flat or up for the week.
The reason I say this is that money appears to be moving out of Utilities and Bonds and other safe havens including the $USD into Financials, Emerging markets, and commodities in general EXCEPT precious metals. The Emerging market charts that are heating up are Latin America, India, much of Europe, some Asian countries except Japan & China. But money appears to be exiting many US based stocks and entering commodity based stocks especially international companies like CAT, HUN. Most all oil stocks and oil services stocks also had a good week as did most all metals EXCEPT precious metals. Most all precious metals stocks fell and nearly all copper, tin, nickel, aluminum, and steel stocks had a good week.
Despite the week that suggests a bit of a market top with significant losses in the S&P on a couple of days the S&P ended down only 0.55%, but Nasdaq was down 2% and Dow was down only 0.21% (Dow is made up of more US based International Large Cap Stocks). Interestingly, the DOW TRANSPORTS were SIGNIFICANTLY HIGHER last week. Anyone familiar with Dow Transportation average knows that the transportation average most commonly precedes the Market Indices and that the Rail Roads comprise a significant portion of the Transportation Average. The rails carry,.....COMMODITIES! Now, its all coming together to paint a TA based picture that money is moving to all commodities and metals except precious metals and moving into more international stocks. People appear to be fleeing growth and seeking VALUE so under represented sectors and countries are starting to outperform our US Markets. I expect this rotation to continue next week and the first part of July. This is the advantage of being small and nimble. I can move much faster than the big money can.
Below I have several charts showing TA evidence of how I came to my conclusions.
Charts:
1) DAILY Chart of Dow Transportation Average as a RATIO compared to S&P. Shows relative performance of it to the S&P and I like to see that MACD is again curling UP and ABOVE ZERO suggesting that Transports since Dec 2016 were underperforming the S&P and just last several days started to breakout of the underperformance to now out perform. NOT an argument for a market top. In fact this is evidence the market will continue higher.
2) The next 2 charts are Weekly & Daily Charts of Transportation Index itself. Notice on WEEKLY that it has been on an uptrend just as the market in general has since Jan. 2016 but has been in mostly a sideways trading range since late Nov. 2016 to now. Weekly MACD is curling up and above ZERO just in last couple weeks and this coincides EXACTLY with the Daily MACD curling up and above ZERO (pink ovals). Also bounce occured around EMA 39 and why I tend to like EMA 39. On the Daily you can see the MACD is also useful to draw trend lines on because when there is a trendline break on MACD this often coincides with a new trend forming and seems to often coincide with a break above the EMA 39 and price REMAINS above EMA 39 showing strength in the move. This ALSO happened simultaneously on the Daily chart during end of May and early June as it BOUNCED off the EMA 39 on the Weekly chart. This suggests the longerterm weekly trend is INTACT and starting to pick up steam to the upside.
3) Weekly/Daily/Hourly charts of BAC but this chart are similar to most all International bank charts like JPM and C. Recent dropping $USD and rising Interest Rates as well favor big International Bank stocks. This chart shows a weekly Uptrend since July 2016 and the huge POP that occured after the US Election. Since that time BAC and Finnacials have been mostly in a trading range. This charts suggests that BAC is breaking out to start another major leg UP in the Up trend. Notice the Pennant (Blue lines) that formed on weekly charts since Dec 2016 to now. MACD also curling UP and above ZERO. Notice the since the peak of BAC in late Feb 2017 that the weekly MACD curled down but was STILL above ZERO. Price just mostly went sideways. This is one form of price and MACD "divergence".....price remains relatively high but MACD is falling. Because the MACD is above ZERO the trend is still intact but not as strong when MACD is falling (pennant price action), but NOW MACD is bouncing and price bounced off of trend line support and close to EMA 39. Pennants are BULLISH formations and the "pole" of the pennant helps determine the target of the next major move. The pole extends from $11.87 to $25.72. We will call this about $14 move. So the TARGET price for BAC based on this TA is the recent pennant low + $14 = $22.07 + $14 = ~$36!!!!. Thats a 50% return projected based on this TA. Now you know why I placed a BUY order on BAC on Friday. Not yet filled but we are close. I could buy at the current price but the closer I can buy to support the more shares I can buy based on my rules and the more profit I can make. Daily chart looks similar to weekly with MACD Curling UP and above ZERO at the EXACT same moment WEEKLY is and last is the HOURLY Chart. Notice the Hourly chart also shows a MACD rise above ZERO at nearly the EXACT SAME TIME as the daily and weekly charts. Hourly charts change more rapidy than daily obviously so MACD is falling and I helps me look for a better price to get in the trade. Notice EMA 39 is $23.87 which is also close to a recent breakout on the hourly chart and why I chose $23.83 as my BUY price. We will see how this trade works out.
I know this is a lot to go thorough. But anyone willing to put in the time and effort into looking at hundreds of charts a day can see what I see. In my opinion TA allows a MUCH faster analysis of a stock than any Fundamental analysis and it takes what people in the market think about the fundamentals RIGHT NOW into account. Fundamentals never worked well for me because the analysis is based off of Quarterly earning and you are trading baswed on 3 month old info. We will see if I am correct. So, now just time to try and maximize profit from this analysis.
Trade what you see,
Eganon
