In this exclusive StockCharts TV video, Joe shares four MACD patterns that he focuses on – Pinch, Reverse Divergence, Divergence, and Zero Line Reversal. These signals will help to improve the timing of your trades. He then shares which sectors are showing relative improvement vs the S&P 500, analyzes Bitcoin, QQQ, and IWM, and finishes up with symbol requests from viewers, including PYPL and more.

This video was originally published on August 28, 2024. Click this link to watch on StockCharts TV.

Archived videos from Joe are available at this link. Send symbol requests to stocktalk@stockcharts.com; you can also submit a request in the comments section below the video on YouTube. Symbol Requests can be sent in throughout the week prior to the next show.

In this video from StockCharts TV, Julius addresses the expected sector rotation for the upcoming month of September which is traditionally the weakest month of the year. But what does it mean for sectors and how are current sector rotations shaping up on the Relative Rotation Graphs? Breaking down the sectors in offensive, defensive, and sensitive, Julius analyzes relative strength and price movements for all of them, then wraps things up with the charts of SPY.

This video was originally broadcast on August 27, 2024. Click anywhere on the icon above to view on our dedicated page for Julius.

Past episodes of Julius’ shows can be found here.

#StayAlert, -Julius

In this edition of StockCharts TV‘s The Final Bar, Dave focuses in on three key charts to watch in the technology sector as investors anxiously await NVDA earnings and Friday’s inflation data. He also shares two important charts for tracking improving market breadth conditions and highlights the continued weakness in retail and entertainment stocks.

See Dave’s chart of the “Newer Dow Theory” here!

This video originally premiered on August 27, 2024. Watch on our dedicated Final Bar page on StockCharts TV!

New episodes of The Final Bar premiere every weekday afternoon. You can view all previously recorded episodes at this link.

Have you ever been in a plane that keeps circling around, waiting to land? That’s what the stock market feels like right now. Investors are rotating from one sector to another, waiting for direction from the control tower.

How Does an Investor Get Direction? 

There are many tools out there, but one tool that gives you a quick aerial view of the entire stock market is the MarketCarpets from StockCharts.

FIGURE 1. THE STOCKCHARTS MARKETCARPETS. In one glance you can identify the strongest and weakest sectors.Image source: StockCharts.com. For educational purposes.

Looking at the one-day change performance of the S&P 500, there’s mixed activity in equity trading. Technology is the leading sector, followed by Financials. Energy, and Utilities are the laggards.

One factor you can see right away is the mixed activity in the Mag 7 stocks. Nvidia (NVDA) is in the spotlight, since it could provide direction this week—it’s reporting quarterly earnings on Wednesday after the close. The stock was up 1.46% on Tuesday. Apple (AAPL) increased slightly, and Microsoft (MSFT) even less. Amazon.com (AMZN), Tesla (TSLA), Alphabet (GOOGL), and Meta Platforms (META) closed lower.

It’ll be interesting to see how much NVDA’s stock price moves after it reports earnings. Will it still have the impact it did before the stock price pulled back? We’ll have to wait until Wednesday’s after-hours market activity and see how much higher the stock price moves if the earnings report is positive, or how much lower it goes if earnings miss expectations.

With Fed rate cuts on the horizon, investors may rotate out of tech and into financial stocks or other small-cap stocks, especially if NVDA misses. Lower interest rates help financial stocks, so it’s not surprising that Financials took the number two spot.

The weekly chart of the Financial Select Sector SPDR Fund (XLF), the StockCharts proxy for the Financial sector, displays a solid upward trend since mid-November. The ETF closed at a new all-time high today (August 27, 2024).

FIGURE 2. XLF HITS ALL-TIME HIGH. The Financial sector has been trending higher, finding support at its 21-week exponential moving average (EMA). The relative strength index (RSI) is just at the overbought level.Chart source: StockChartsACP. For educational purposes.

XLF is trading above its 21-week exponential moving average (EMA), which can be the first support level to watch. With the relative strength index (RSI) at around 70, there’s still room for XLF to go higher. Look at how much the ETF moved the last time it was above 70!

Closing Position

The stock market is dynamic, and one day doesn’t make a trend. Tomorrow could reflect a different story. Tools such as the MarketCarpet can help you become engaged with stock market activity without scrolling through several charts.

Explore the different ways to use the StockCharts MarketCarpets.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Buying the dip is a something of go-to strategy for many traders and investors. The trick here is to buy strength on the way down and to avoid a “falling knife” scenario (or at least plan for it in case it does happen).

The catch: With so many stocks to choose from, it’s impossible to monitor every stock you’re interested in. You’re bound to miss something.

So, here’s a quick and simple morning routine to help you spot potential buy-the-dip opportunities when an index takes a significant hit.

Step 1: Monitor the Pulse of the Broader Market

Last Monday, the Dow ($INDU) was on its way to making a record high while the S&P 500 ($SPX) and Nasdaq Composite ($COMPQ) were falling. The Nasdaq was hit the hardest.

To dive deeper, you should check the Market Summary tool, which can be found in the StockCharts Member Tools section. Here’s a snapshot of what it looked like.

The Nasdaq Composite was down 0.85% at the time. It was a clear laggard, so I focused there to spot a few potential buy-the-dip picks. After looking at the broader market, it helps to narrow the search by then looking at the Sector Summary, also in the StockCharts Member Tools.

Step 2: Check Sector Performance

The Technology Select SPDR ETF, XLK, the StockCharts sector proxy, was the biggest underperformer of the bunch (see below).

Given the Nasdaq’s tech-heavy nature, this summary confirms what you might have already expected. So, you narrow down even more, looking at the Industry Summary (also in Member Tools) to see which industry group is underperforming in the sector.

Step 3: Check Industry Performance

While tech is the biggest laggard overall, not every industry within the sector is struggling. Right now, let’s focus on stronger stocks that are getting sold (see below).

Under the chart on the left, click the MarketCarpet icon (second from left) to pinpoint stocks that match your investment objective.

Step 4: Using the Market Carpet to Identify Tradable Stocks

Broadcom (AVGO) took the biggest hit on Monday (see below). Nvidia (NVDA) didn’t take as big a plunge, but with its AI applications, it’s practically the world’s most important stock right now. Let’s zero in on these two.

Take a look at a daily six-month chart of Broadcom (AVGO).

CHART 1. DAILY CHART OF BROADCOM. Note the dueling Fib templates between bulls and bears.Chart source: StockCharts.com. For educational purposes.

The longer-term uptrend is still holding strong (we’re not showing it here to focus on the recent price moves). Even with the dip since June, the StockChartsTechnical Rank (SCTR) score only slightly dropped below 90, which still signals technical bullishness.

The orange Fibonacci Retracement, drawn from the June high to the August low, is likely the template bears are eyeing. The 61.8% retracement at $163 would have signaled an opportunity for short sellers to enter or add to their position. But because the price pushed past that level, it likely caused some hesitation. Plus, momentum, as shown by the Chaikin Money Flow (CMF), favors the bulls.

Now, check out the blue Fibonacci Retracement drawn from the August low to high. Bulls jumped in at the 38.2% level ($157). However, AVGO could still drop between the 50% and 61.8% levels ($151 to $145) and remain bullish, marking an ideal entry point for those looking to go long.

From here, let’s shift to a daily nine-month chart of NVDA.

CHART 2. DAILY CHART OF NVIDIA. You can see the threshold levels determining both uptrend and downtrend.

With an SCTR line above 90, NVDA is technically bullish across multiple indicators and timeframes.  Despite the 200-, 100-, and 50-day simple moving averages (SMAs) in “full sail” position, NVDA’s price action is softening a bit.

Over the last eight sessions, NVDA’s price action has been hovering in tight consolidation mode. For NVDA’s uptrend to remain intact, it has to do two things:

Stay above the August swing low of $91 (you might also get a bounce at the $97.50 range as it coincides with March highs (resistance-turned-support). The blue dotted lines below the current price marks both of these levels.Break above the three consecutive resistance levels at roughly $130, $136, and $140 (see blue dotted lines above the current price).

Closing Thoughts

The goal here is to show you one of many morning routines to uncover market opportunities. In this case, we used StockCharts’ market, sector, and industry summary tools to find trades. It could have been other stocks, but the key takeaway is learning how to do it yourself.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your personal and financial situation, or without consulting a financial professional.

It is a big week for earnings and NVIDIA (NVDA) is at the top of the list! Erin gives you her view on whether to hold into earnings based on the technicals of the chart. She also reviewed other stocks reporting on Wednesday: CRM, CRWD, HPQ and OKTA.

Carl talks about the relationship between Gold and Gold Miners as he reviews his prior article from last week: “Gold Miners’ Performance vs. Gold — Does It Say Sell Gold?” (Link: https://www.decisionpoint.com/articles/decisionpoint/2024/08/gold-miners-performance-versus-266.html“)

Carl also gives us insight on the relationship between the SPY and equal-weight RSP. He discusses how they have performed over time and what to look for.

As always Carl gives us his insight into the market trend and condition as well as a targeted look at Bitcoin, the Dollar, Crude Oil, Yields and Bonds. He also discusses his thoughts on Gold moving forward.

Erin covers the earnings charts and then gets right into sector rotation. One sector is clearly topping and you need to know which it is!

Erin finishes the program with a look at the daily and weekly charts for symbol requests.

01:25 DecisionPoint Signal Tables

04:04 Market Analysis and Overview

09:30 Magnificent Seven

16:42 Gold v. Gold Miners

25:05 Earnings with spotlight on NVDA

31:05 Sector Rotation

33:42 Symbol Requests

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Technical Analysis is a windsock, not a crystal ball. –Carl Swenlin

(c) Copyright 2024 DecisionPoint.com

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.

Helpful DecisionPoint Links:

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking

Bear Market Rules

Earlier this year, in April and June, I laid out a bullish thesis for PayPal Holdings, Inc. (PYPL)—the stock price was bottoming and had the potential to break out. Since then, PYPL has improved. Earlier this week, it finally broke out from its two-year consolidation, triggering a new bullish signal for investors to seek further exposure in PYPL.

 On the weekly chart below, you can see PayPal’s stock price has decisively broken through a major resistance at $68, a level it struggled with during its two-year consolidation phase. This breakout, coupled with improving momentum and outperformance relative to the market (see Relative Strength Index in the lower panel) suggests that PYPL is poised for a continuation higher. The next upside target for this bullish trend is around the $90 level.

5-YEAR WEEKLY CHART OF PYPL. The resistance level is displayed as a horizontal line drawn @ $68. The lower panel displays the Relative Strength Index (RSI), which is rising.Chart source: StockCharts.com. For educational purposes.

Despite past challenges, PYPL remains fundamentally undervalued. PYPL trades at only 15X forward earnings, which is attractive given its future EPS growth rate, 14% revenue growth rate of 8%, and competitive net margins of 14%. These metrics indicate that PYPL is not only undervalued relative to its growth potential, but well on its way for its turnaround.

The Call Vertical Strategy for PYPL

To capitalize on the breakout higher, I suggest buying the October 18, 2024, $70/$80 Call Vertical for a $3.63 debit. This entails the following:

Buying the Oct 18 $70 callsSelling the Oct 18 $80 calls

PYPL CALL VERTICAL STRATEGY RISK GRAPH. You’re risking $363 for a maximum reward of $637 for this position.Image source: OptionsPlay.

This call vertical spread allows you to benefit from the bullish trend while limiting risk. The total potential profit on this trade is $637 per contract if PYPL is above $80 at expiration, with a maximum risk of $363 per contract if PYPL is below $70 at expiration.

The strategy aligns with our bullish technical and fundamental thesis for PYPL. Explore the options chain for PYPL to view real-time prices.

Good morning and welcome to this week’s Flight Path. Equities continue their path out of the “NoGo” correction. The “Go” trend has returned for U.S. equities as we see first an aqua and then a blue “Go” bar. This came after a string of uncertain amber “Go Fish” bars. Treasury bond prices remained in a “Go” trend albeit painting weaker aqua bars at the end of the week. U.S. commodities stayed in a “NoGo” painting weaker pink bars and the dollar showed strong purple “NoGo” bars.

$SPY Continues to Rally and Flags “Go” Trend

The week finished strongly as we saw GoNoGo Trend paint a bright blue “Go” bar as prices rallied after a challenging Thursday. We now see that momentum is in positive territory but not yet overbought and we will watch to see if price can mount an attack on a new high over the coming days and weeks.

The longer time frame chart shows that the trend is strong. At the last high we saw a Go Countertrend Correction Icon (red arrow) that indicated prices may struggle to go higher in the short term. Indeed, we then saw consecutive lower weekly closes on pale aqua bars. During this time, GoNoGo Oscillator fell to test the zero line from above and it became important to see if it could find support at that level. It did, and as it bounced back into positive territory we saw a Go Trend Continuation Icon (green circle) under the price bar.

Treasury Prices Remain in Strong “NoGo”

Treasury bond prices remained in a “NoGo” trend this week with the indicator painting strong purple bars. We see that although we haven’t seen a new low we have seen consecutive lower highs in the last few weeks. GoNoGo Oscillator is testing the zero line from below once again and we will watch to see if gets rejected here or if it is able to break through into positive territory.

The Dollar’s “NoGo” Shows Renewed Strength

A strong message sent this week for the U.S. dollar. A string of purple “NoGo” bars took prices to new lows. GoNoGo Oscillator is back in oversold territory after briefly trying to move back toward neutral territory. Volume is heavy, showing strong market participation in this most recent move lower.

USO Stays in “NoGo” Trend

Price moved lower all week on strong purple bars. We didn’t see a new low though and on Friday price gapped higher and GoNoGo Trend painted a weaker pink bar. GoNoGo Oscillator is back testing the zero level from below where we will watch to see if it finds resistance. If it does, we can expect further downside pressure on price. If it is able to regain positive territory we may well see price try to rally out of the “NoGo”.

A review by Dr. Mark Holder.

“History repeats itself.” Never was a phrase (oft cited as Churchill quote) more apt in describing a text. The book, Investing with the Trend by Gregory L. Morris, is now more in tune with today than ever. As a trainer for new hires at investment banks and hedge funds, I have found one of the main purposes to this training is to relate past market scenarios to these new hires so they “don’t reinvent the wheel.” One story I relate is a passbook savings account I had that paid 14% annual interest! The events of 2007-08 are among many of the market situations that I relay to these groups to get them ready for their upcoming careers in finance. I also try to give them content and readings that they can use to continue their learning journeys. One of my highest recommended readings for these groups is Greg’s book, “Investing with the Trend.” It provides insight and reasoning behind the mathematics that is often used to explain how markets work. Every group I have trained has valued this text and I often receive feedback on how it helped them to get a better idea of markets, investing, and trading.

The first section on Market Fictions, Flaws, and Facts is a common sense look at the “rules of thumb” and outright fictions that permeate many texts in finance. I especially like Greg’s chart showing performance with and without the ten best return days in a year. This often shocks people the first time they see this. Another fallacy is that of standard deviation and the measures for risk. Perhaps part of this continued belief is that using skew and kurtosis makes the math intractable. But that shouldn’t be an excuse to simply use standard deviation as a risk measure (or its evil twin, volatility). Greg clearly dispels many myths that exist in finance. Mind you, he doesn’t throw them out entirely but puts them in context in terms what is useful and when to be much more careful in their use. While the mathematical concept of volatility has a place, what investors are truly concerned about, especially in today’s markets, is whether their portfolio at a gain or loss – drawdown. Greg carefully delineates these concepts and gives the math its due but provides readers with better insight on what really matters regarding investing and portfolio management.

Greg also provides readers with a quite complete coverage of the behavioral biases that inevitably creep into decision making regarding investing. The presentation is clear and straight forward without any of the typical circular reasoning I have often seen, particular with respect how to deal with these logic errors. He distills down prospect theory into just a few paragraphs that provide the reader with everything they need to know without any of the academic hypothesis testing. I found these sections to be very insightful and self-explanatory.

Chapter 11 on drawdown analysis can be extremely useful for readers in terms of really understanding what risk is. He covers not just depth, but breadth of drawdowns. There are countless charts and tables illustrating how to understand and measure drawdown. It is important to note that good readers will likely review Greg’s prior performance as a professional investor and his actual drawdown numbers. On seeing this, the reader will know that they are listening to the “Master’s Voice” (sorry RCA Victor records for that quote).

Chapter 16 is short and sweet. It uses interviews with solid professionals to ensure that readers really understand what it takes to put the contents of this book into practice. The book is especially useful in today’s investing world. History does seem to be repeating itself with 40-year highs in inflation, turmoil on the world stage, and forecasts (at least as of this writing) of a recession. The techniques and content provided by Greg are timeless, but especially important in the difficult investing environment today. Throughout the 2000’s investing and trading looked easy. But “never mistake a bull market for brains” is never truer than it is now. Investing today and earning solid returns requires more than luck now. Chapter 15 provides readers with practical knowledge on putting your investing on the right track in today’s marketplace. His advice on developing objective rules and discipline will be key to building your own system that works. The text has great advice and guidance on measuring risk and setting sell criteria to avoid large drawdowns. This chapter is replete with charts and tables that demonstrate these key tools.

In summary, you would be hard pressed to find a more well-written text that thoroughly explains why markets work the way they do. It provides readers with a solid understanding of the fallacies that exist about markets and instead provides a commonsense approach to truly understand, in an intuitive way, what is going on in the world of investing, markets and trading. The coverage of technical analysis avoids the faddish models often promoted by charlatans and instead gives readers a useful understanding of the real purposes of technical analysis. The last section of the book gives a practical and useful guide for building a rules-based trading system culminating in trend analysis and how to build your own successful system for investing. This book is full of great anecdotes, useful tips and is an easy read. It is a highly valuable read for everyone from part-time investors to highly experienced money managers. I am certain everyone will find practical and effective content that will change your thinking about markets and trading and enhance your performance. 

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Dr. Mark Holder is a consultant in financial markets, providing services to leading global Investment Banks, Exchanges, and Commodity Firms. He is also a lead partner for a proprietary trading firm located in Hong Kong. He has prior experience as the Director of Research and Product Development at two Exchanges, as well as Managing Director for a leading financial training company. His background also includes 14 years of teaching experience at the masters and PhD levels. While at the university he was the Chairman of the Department of Finance and Program Director of the Master Science in Financial Engineering program.

Dr. Holder has designed and conducted training programs for a wide range of clients including Goldman Sachs, Merrill Lynch, Barclays, Reuters, Dubai Financial Services Authority, CSRC, Guotai Junan, Aberdeen Asset Management and many other leading financial institutions for the past 15 years. These programs have covered a wide variety of topics, including Derivatives, Risk Management and Financial Modeling, for audiences such as Analysts and Associates to Managing Directors and Vice Chairs. He has also offered courses for Practical Training requirements and client-based courses as well.

Dr. Holder is also an accomplished author. His publication record includes more than 50 articles in leading journals. He was the Editor of the journal Review of Futures Markets, a leading academic journal covering the field of derivatives and markets for over 10 years. Mark has significant prior experience working in fixed incomes and derivatives from the CBOT and as a trader. He has firsthand knowledge of market practices and operations. His evaluations show he can convey this information is an intuitive way to participants to maximize their understanding and knowledge.

The Home Construction ETF (ITB) is leading the market as it surged to a new closing high this week. While this high is certainly bullish and points to upside leadership, the real signal triggered back in early July as the Trend Composite turned bullish with an outsized move. Let’s review this signal and then look at a recent signal in Home Depot.

The chart below shows ITB with the Trend Composite and Normalized ROC. The Trend Composite aggregates signals in five trend-following indicators. Normalized ROC is the 5 period point change divided by ATR(5), which shows price moves in ATR terms. Values greater than +3 indicate that price advanced more than 3 ATR(5) values in five days. This is an outsized move that can kick start an extended uptrend. Note that these indicators are part of the TIP Indicator Edge for StockCharts ACP (here).

The chart above shows three signals coming together in mid November 2023 and mid July 2024. Notice how ITB broke resistance with an outsized move in early November and the Trend Composite followed with a bullish signal in mid November. ITB corrected into early July and another bullish trio triggered in mid July. This most recent signal was highlighted in the ChartTrader reports at TrendInvestorPro.

The next chart shows Home Depot with the signal trio occurring in November-December and June-July. Rarely do we get all three signals at the same time. Usually the price breakout and outsized move occur first. The Trend Composite is a trend-following indicator that triggers when there is upside follow through.

All trend-following indicators lag and produce some whipsaws. The Trend Composite is no different as it whipsawed with by turning negative twice in August. This is normal given the broad market volatility we saw over the last six weeks. The Trend Composite surged to +5 on Friday and this means all five indicators are on bullish signals. The blue lines show support levels from July and now August.

ChartTrader recently introduced two new market timing models in our weekly report and video. One model covers the broad market and the other focuses on timing the Nasdaq 100. Our weekly report/video also covers the charts, setups and signals for SPY, QQQ, MAGS, TLT, GLD, key tech names and more. Click here to take your analysis process to the next level.

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