The weekly charts for the major indexs

[uncleharley]

Daily and intraday charts are very useful for buy/sell decisions after one has decided what to trade.  The weekly charts, however, can give one some incite into what may occur over the intermediate term.  Those signals may not produce results immediately, but are a guide as to what is probably going to develop over the intermediate term.  The reason I am bringing all of this up is because all or most of the major weekly domestic stock charts have closed the week with bearish engulfing candles.  This means that there is a high probability that todays break below 3900 on the S&P marks the beginning of a drop to the next support level which is 3600 or lower.   I am not suggesting that anyone should bail out of equities or go short the broader market.  What I am suggesting is that if there is something you have been thinking of selling or a sector that think you are overweight in, monday might be a great day to do it.  FWIW the transport index appears to be the most vulnerable.  

[yogibearbull]

Good points. It is useful to often switch between Daily and Weekly views. At the most basic level, it involves higher level of smoothing.

My only issue is in carrying over chart parameters without any adjustments. So, for example, 50-dMA becomes 50-wMA (0.96 yrs) and 200-dMA becomes 200-wMA (3.85 yrs). So what were supposed to be fast-and-slow MAs become slow-and-slower MAs. Similar for other parameters for RSI (14), MACD (12,26,9), ROC (default 12, but I like to use 200). There is a Twitter debate going on these aspects too.

[richardsok]

As you probably know, Yahoo charts lets you choose between 1-Day and 1-Week chart intervals. To my mind, any 1-week interval chart is almost illusionary for all purposes except for stepping FAR back enough to sense general market trends; certainly not to make any actual trades.

For a more practical compromise between accuracy and perspective, I prefer thinkorswim's nine-month chart with a three-day interval.

You can mimic a two- or three-day interval chart on Yahoo by calling up a TWO- or THREE DAY MOVING AVERAGE signal, then bleaching out the color of the actual price line so only the moving average line is visible.

[uncleharley]

A great example of the usefullness of a daily chart is fridays chart of the S&P 500. It clearly shows a 3rd consecutive day of declining value and is on blow-out trading volume. I much prefer to make projections rather than predictions, but I think Santa is hauling a lot of coal this season.


stockcharts.com/h-sc/ui?s=$SPX&p=D&b=3&g=0&id=p57322566862&a=412512122&listNum=86

[yogibearbull]

Friday was options expiry and volume was expected to be high.

[retiredat48]

Sept 17, 2022 12:06:44 GMT yogibearbull said:

Good points. It is useful to often switch between Daily and Weekly views. At the most basic level, it involves higher level of smoothing.

My only issue is in carrying over chart parameters without any adjustments. So, for example, 50-dMA becomes 50-wMA (0.96 yrs) and 200-dMA becomes 200-wMA (3.85 yrs). So what were supposed to be fast-and-slow MAs become slow-and-slower MAs. Similar for other parameters for RSI (14), MACD (12,26,9), ROC (default 12, but I like to use 200). There is a Twitter debate going on these aspects too.

Great points...Beware of using the longer period MAs. I only use the six month data for MAs...otherwise distorted and much less useful.

For a real shortcut...I do whatever uncleharley tells me to do re charts!!

R48

[bb2]

I caught Art Cashin on CNBC last week sayong the same thing about 3900. I think he said a 10% chance of a tanking market on Monday and Tuesday.

I've tried to read TA books, Pring, Edwards and Magee and found them impossible to get through, as I just couldn't see what they were talking about, for the most part. (I did post a while back in response to an unclecharley post about a particular stock's pattern, suggesting a different view outlined by Pring.)

www.npr.org/2022/12/16/1143330610/the-planet-money-team-deciphers-whether-chart-reading-will-predict-stock-winners

" Now, the odd study has found evidence in favor of the chart readers some of the time, but most academics are very skeptical, and so is Katie Martin, the markets editor for the Financial Times, who popularized the vomiting camel shape."

en.wikipedia.org/wiki/Technical_analysis#:~:text=The%20principles%20of%20technical%20analysis,markets%20in%20the%2017th%20century.

"In a paper published in the Journal of Finance, Dr. Andrew W. Lo, director MIT Laboratory for Financial Engineering, working with Harry Mamaysky and Jiang Wang found that:

Technical analysis, also known as "charting", has been a part of financial practice for many decades, but this discipline has not received the same level of academic scrutiny and acceptance as more traditional approaches such as fundamental analysis. One of the main obstacles is the highly subjective nature of technical analysis – the presence of geometric shapes in historical price charts is often in the eyes of the beholder. In this paper, we propose a systematic and automatic approach to technical pattern recognition using nonparametric kernel regression, and apply this method to a large number of U.S. stocks from 1962 to 1996 to evaluate the effectiveness of technical analysis. By comparing the unconditional empirical distribution of daily stock returns to the conditional distribution – conditioned on specific technical indicators such as head-and-shoulders or double-bottoms – we find that over the 31-year sample period, several technical indicators do provide incremental information and may have some practical value.[8]"

Personally, if I just run across something and think, "Hey that's cheap." I'll buy it.

[uncleharley]

A way of using charting and perhaps anything else is to first become famaliar with the simple stuff. In charting that would be to simply use the price direction for a guide and then possibly try using moving averages to filter out some of the noise and make the daily or weekly moves smoother. A popular set of moving averages is the 50 and 200 day moving averages. A technique that seems to work is to watch when they cross. A 50 dma crossing above the 200 dma is referred to a golden cross and is considered to be bullish for the intermediate term. A 50 dema crossing below the 200 is called the death cross and is considered to be bearish. The reason I mention all of this because both gold and silver made a golden cross this past week. The USD index made a death cross at about the same time. Those are a couple of easy to use, proven techniques that indicate the USD is in at least an intermediate term decline and gold or silver should have significant returns for the next few months. The tough part is recognizing the fact that the value of the USD is declining while interest rates continue to go up.

[marpro]

“S&P marks the beginning of a drop to the next support level, which is 3600 or lower. “

+1. Amen. Good point. S&P500 volume was only 2.6 million yesterday (Friday), while the average volume is 4.3 million.

S&P Global CEO: Companies 'cautiously slowing down' amid uncertainty.

big-bang-investors.proboards.com/thread/2194/companies-cautiously-slowing-amid-uncertainty

[uncleharley]

Dec 20, 2022 20:43:51 GMT bb2 said:

I caught Art Cashin on CNBC last week sayong the same thing about 3900. I think he said a 10% chance of a tanking market on Monday and Tuesday.

I've tried to read TA books, Pring, Edwards and Magee and found them impossible to get through, as I just couldn't see what they were talking about, for the most part. (I did post a while back in response to an unclecharley post about a particular stock's pattern, suggesting a different view outlined by Pring.)

www.npr.org/2022/12/16/1143330610/the-planet-money-team-deciphers-whether-chart-reading-will-predict-stock-winners

" Now, the odd study has found evidence in favor of the chart readers some of the time, but most academics are very skeptical, and so is Katie Martin, the markets editor for the Financial Times, who popularized the vomiting camel shape."

en.wikipedia.org/wiki/Technical_analysis#:~:text=The%20principles%20of%20technical%20analysis,markets%20in%20the%2017th%20century.

"In a paper published in the Journal of Finance, Dr. Andrew W. Lo, director MIT Laboratory for Financial Engineering, working with Harry Mamaysky and Jiang Wang found that:

Technical analysis, also known as "charting", has been a part of financial practice for many decades, but this discipline has not received the same level of academic scrutiny and acceptance as more traditional approaches such as fundamental analysis. One of the main obstacles is the highly subjective nature of technical analysis – the presence of geometric shapes in historical price charts is often in the eyes of the beholder. In this paper, we propose a systematic and automatic approach to technical pattern recognition using nonparametric kernel regression, and apply this method to a large number of U.S. stocks from 1962 to 1996 to evaluate the effectiveness of technical analysis. By comparing the unconditional empirical distribution of daily stock returns to the conditional distribution – conditioned on specific technical indicators such as head-and-shoulders or double-bottoms – we find that over the 31-year sample period, several technical indicators do provide incremental information and may have some practical value.[8]"

Personally, if I just run across something and think, "Hey that's cheap." I'll buy it.

If you are interested in learning how to use moving averages, John Murphy has an informative article this week on reading the S&P.  
stockcharts.com/members/analysis/20230120-1.html

[Deleted]

The charts can be used to confirm what we suspect. Predicting what will happen next is more complicated unless there is a belief that past circumstances of a similar nature turned out a particular way, perhaps assigning a probability to the predicted outcome.

[uncleharley]

Jan 22, 2023 12:58:29 GMT @haven said:

The charts can be used to confirm what we suspect. Predicting what will happen next is more complicated unless there is a belief that past circumstances of a similar nature turned out a particular way, perhaps assigning a probability to the predicted outcome.

One can do legitimate projections by using trends and patterns of trading, but that requires more than just an understanding of moving averages.  Given the fact that trends and patterns change, no one should be a slave to the projections but should be able to recognize when the trend has or is going to change.  For unknown reasons adapting to change seems to be a stumbling block for many people.  

[Fearchar]

Schwab has Technical Analysis available; here is what they are currently saying for VOO:

Trend Analysis
VOO appears to be consolidating within a longer-term downtrend. The Average Directional Index, or ADX, is below 20, indicating that shares have traded sideways recently. However, the 200-day is still sloping bearishly lower. Comparative Relative Strength analysis shows that this issue is lagging the S&P 500.
As of 8:00 PM ET Friday, 01/20/2023

Momentum
Momentum for VOO, as measured by a 14-period Slow Stochastic Oscillator, is waning. This means that investors are less aggressive in their recent purchases and may even be taking profits in positions bought at lower prices.
As of 8:00 PM ET Friday, 01/20/2023

Volume
The On Balance Volume indicator (OBV) shows that longer term selling pressure has given way to near term accumulation by traders.
As of 8:00 PM ET Friday, 01/20/2023

Volatility
Bollinger Bands® use standard deviation of closing prices around a moving average to measure volatility. Presently, the Bollinger Bands® for VOO are of a normal width, and signal that volatility has been in-line with the norm for this stock.
As of 8:00 PM ET Friday, 01/20/2023

[Fearchar]

Notice that their analysis states VOO is lagging the S&P 500, which is rather odd....

[Deleted]

Jan 22, 2023 13:33:50 GMT Fearchar said:

Notice that their analysis states VOO is lagging the S&P 500, which is rather odd....

That is called 'tracking error.'  

[yogibearbull]

Volatility is down across the board (BB narrowing, or BBW low) for LC, SC, EM, oil (but still high), gold, bonds (still elevated). There are 2 ways of looking at this - things have calmed down, or is it the calm before the storm?

Index funds differ even when based on the same index. This is due to how they handle inflows/outflows (anticipatory use of futures, etc), dividends (reinvest as they come, or wait for month/quarter-end), security-lending and % sharing that income, full replication or sampling, ERs. Most indexed ETFs should lag their benchmarks by their ERs, but the use of these modern tools may lead to temporary outperformance or underperformance - such deviations are all lumped under the tracking-error. SPY being the first ETF has some older and traditional aspects (e.g. a UIT structure) vs, say IVV, VOO, SPLG (that is why another SPDR SP500 ETF, in case you wondered), etc. Market breadth has been improving (several breadth indicators have triggered recently - 10-day BAM/Deemer, 5-day Whaley, etc), so equal-weight SP500 RSP is outperforming the market-cap based SP500 ETFs; some call equal-weight as the oldest and simplest "factor".

[uncleharley]

When did they last update their current analysis?

[Fearchar]

uncleharley,   


Friday evening.

I think they update after every day the markets are open.

[marpro]

Jan 22, 2023 13:33:50 GMT Fearchar said:

Notice that their analysis states VOO is lagging the S&P 500, which is rather odd....

No, it is not. VOO does not have the whole set of S&P 500, but a subset based on their knowledge of sampling. Similarly, IVV does not follow VOO either. Each company has its own sampling. When some sectors are over sampled or under sampled, it can happen. I see the different long term gain/loss results in FIDO of these different ETFs when you click for “comparison.” In short, the construction of each ETF is different, and therefore, the results can be different.

schrts.co/tGDyqYtp

Add/Edit: I did see the post by yogibearbull .

[retiredat48]

Jan 21, 2023 19:46:54 GMT uncleharley said:

A way of using charting and perhaps anything else is to first become famaliar with the simple stuff. In charting that would be to simply use the price direction for a guide and then possibly try using moving averages to filter out some of the noise and make the daily or weekly moves smoother. A popular set of moving averages is the 50 and 200 day moving averages. A technique that seems to work is to watch when they cross. A 50 dma crossing above the 200 dma is referred to a golden cross and is considered to be bullish for the intermediate term. A 50 dema crossing below the 200 is called the death cross and is considered to be bearish. The reason I mention all of this because both gold and silver made a golden cross this past week. The USD index made a death cross at about the same time. Those are a couple of easy to use, proven techniques that indicate the USD is in at least an intermediate term decline and gold or silver should have significant returns for the next few months. The tough part is recognizing the fact that the value of the USD is declining while interest rates continue to go up.

I have for decades used the 200 day MA as a key trend signal.  I want a "strong price cross" to be a buy point.  Some use a number such as a 1% cross.  I consider my assessment part, the "art part of investing."...when to pull the trigger.

The 50/200 crossover has been highly touted.  So many moons ago I did my own study of comparing my actual trades for a couple years, and how I would have fared using a 50/200 trigger.  My results were that I gained more using the 200 day MA cross point.  The 50/200 came later...often about a month later.  And higher price point in the uptrend.  So I decided against its use for me.  However it is a good confirming point.

BTW many academic studies show the actual "best" time (gains versus whipsaws) is to use a 209 day MA.  Thus data providers long ago settled on a round number of 200 as "close enough."  

In bear markets (usually quicker downturns) I switch to 100 and 150 day MAs to eliminate the long drag in prices catching up to declining MAs.  And I keep well aware of 50 day MAs for more volatile funds.

I also use the (positive) SLOPE of the 200 dMA line as confirming an uptrend, and another buy point in pyramid up investing in buckets.  That data point is usually after a price cross of the 200 day MA.

R48

[anitya]

Not to side track the productive discussion in this thread, I recently read an article that has said for tax tax loss purposes S&P 500 funds from different firms are not identical and can be used to keep one's portfolio practically unchanged. I did not save the article, even though it made sense to me, because I do not know the view of brokerages issuing forms 1099, not to mention IRS’ aggressiveness. I am waiting for this to become an accepted view. The article used information similar to that in yogibearbull and marpro posts. I think there is also the legal theory from Cottage Savings (S Ct case), though not mentioned in the article.

[yogibearbull]

I have seen different views on using different index funds using the same benchmark (e.g SPY, IVV, VOO, SPLG, all using SP500) for TLH. My view is why cut it too close with the IRS when there are so many different index funds. So, going from SP500 index fund, one can switch into a total market index (VTI, ITOT, IWV, SCHB, SCHX) or R1000/another 1000 index (IWB, VONE, SCHK); these would more clearly meet the requirement of being similar-but-not-identical.

[Deleted]

Jan 22, 2023 21:58:57 GMT yogibearbull said:

I have seen different views on using different index funds using the same benchmark (e.g SPY, IVV, VOO, SPLG, all using SP500) for TLH. My view is why cut it too close with the IRS when there are so many different index funds. So, going from SP500 index fund, one can switch into a total market index (VTI, ITOT, IWV, SCHB, SCHX) or R1000/another 1000 index (IWB, VONE, SCHK); these would more clearly meet the requirement of being similar-but-not-identical.

That is an interesting point. I remember back to discussions on M* about selecting TLH substitutes, but not doing that myself because when selling I either want a different asset class or cash as in 2022. Key words in the titles like 'S&P 500' would be a problem to defend as having sufficiently different portfolios.

[archer]

THe market gapped up Feb 2. I've observed in the past that gap ups well into a rally are the beginning of consolidation or reversal. Gap downs have usually be followed by further declines, at least in this past year. Anyone agree or disagree this recent one is an exhaustion gap? I suppose we will know by mid week.

[uncleharley]

Feb 5, 2023 5:46:59 GMT archer said:

THe market gapped up Feb 2. I've observed in the past that gap ups well into a rally are the beginning of consolidation or reversal. Gap downs have usually be followed by further declines, at least in this past year. Anyone agree or disagree this recent one is an exhaustion gap? I suppose we will know by mid week.

Good call.   We are well into a consolidation pattern.  Time will tell if it is a reversal.  Fwiw, I see some rather strong support about 50 points down on the S&P so I am leaning toward a continuation of the rally.

[uncleharley]

The consolidation appears to be over with the S&P 500 back on trend. Resistance may show up at 4325, then 4600.

EDIT;  And today the lunch crowd is/was selling.

[uncleharley]

OOPS!!! We are in a volatile market with the weekly S&P below trend once again.

[uncleharley]

It's Sunday and my charts have not changed since Friday eve. The weekly S&P 500 indicates that it should continue to consolidate with a bullish bias. The Financial sector as represented by XLF is poised for a 20% loss and could drop by 30% over the longer term. The USD is poised for a loss of 10% but could drop further to test the lows of'21. XAU, the Philly index for gold & silver is poised for a 10% gain over the near term. Gold is poised for a bullish breakout within a few trading days and should double in price over a period of a few years.

For monday I am poised to go for the gold with a purchase of GDXU and I intend to maintain my position in TQQQ. A declining dollar will support higher prices for many common stocks and commodities. Oil should consolidate with a bearish bias.