Even though trading based on chart analysis involves some discretionary decisions, chartists can improve the odds of success by systematizing their process. This report will show four prerequisite filters based on a top-down approach. We will start with the broader market, look at the sector, and then apply two qualifying filters to the stock.

First, I would make sure we are in a bull market. The chart below shows SPY hitting a new high in early November and trading well above its rising 200-day. This is clearly bullish for the market as a whole.

Second, I would ensure the sector is also in a long-term uptrend. TJX Cos (TJX) is part of the Consumer Staples SPDR (XLP) and this sector recorded a new high in September. It fell back into November, but remains above its rising 200-day SMA, and in a long-term uptrend. Note that TJX featured in our report and video on Friday. Click here to join and get two bonus reports.  

Also notice that XLP is breaking out this week. The ETF formed a falling wedge and retraced 50-62.18% of the July-September advance. Both the pattern and the retracement are normal for corrections within bigger uptrends. XLP is breaking out of the wedge to signal a continuation of the bigger uptrend.

Turning to the stock filters, I want the stock to be in a long-term uptrend and to show upside leadership. On the TJX chart below, prices are moving from the lower left to the upper right, and the stock recorded a new high this month. Stocks hitting new highs are in strong uptrends and show upside leadership. Also notice that the 10-day EMA is 9.8% above the 200-day EMA. The bottom indicator shows the PPO (10,200,0), capturing the percentage difference between these two EMAs.

TJX meets all the prerequisites and also sports a bullish breakout on the price chart. After surging to a new high in mid August, the stock consolidated with a triangle. A consolidation within an uptrend is a bullish continuation pattern. TJX broke out with a strong move in November and this signals a continuation of the uptrend. Re-evaluation support is set at 112. 

Highlights from Recent Reports/Videos:

• S&P SmallCap 600 SPDR surges after throwback to breakout zone.
• A Short-term setup could lead to a long-term breakout for DataDog (DDOG).
• Medical Devices stand out in an underperforming healthcare sector.
• Robotics & AI ETF triggers big breakout and holds above breakout zone.
• Gold and Uranium break out as Lithium sets up.

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The last full trading week before the Thanksgiving holiday has ended on a positive note. Following up on yesterday’s blog post, the S&P 500 Equal Weighted Index ($SPXEW) has continued to outperform the S&P 500’s price action and hit a new all-time high. Similarly, the Nasdaq 100 Equal Weighted Index ($NDXE) is close to its all-time high (0.10% away from it according to the Distance to 52-Week High indicator).

The mid and small-cap indexes, $MID and $SML, remained market index leaders on Friday. From the daily chart of the S&P 600 Small Cap Index ($SML) below, note how the index broke out of a sideways trading range, climbed to a high on November 11, and then pulled back and bounced off the previous October high resistance level. It’s now on its way back to its all-time high.

FIGURE 1. DAILY CHART OF S&P 600 SMALL CAP INDEX ($SML). A breakout followed by a pullback and then a bounce of a support level looks promising for small-cap stocks.Chart source: StockCharts.com. For educational purposes.

The percentage of stocks trading above their 50-day moving average is rising, and advances outperform decliners. With market breadth supporting bullish price action, it’s safe to say that investors are piling into small caps.

So, in a nutshell, Friday’s price action was a continuation of Thursday’s action. The S&P 500 ($SPX) and Dow Jones Industrial Average ($INDU) are approaching their all-time highs, but the Nasdaq Composite ($COMPQ) still has to break through 19,080 to make its way to its all-time high.

In addition to equities, precious metals, especially gold, have also been climbing higher. The daily chart of the SPDR Gold Shares ETF (GLD) below shows that after hitting a high on October 30, GLD fell approximately 8.30%. It has now bounced back, rising around 5.80% from the November 14 low. GLD faces resistance that sits slightly above $250 (red horizontal dashed line) and support from its 25-day simple moving average.

FIGURE 2. DAILY CHART OF SPDR GOLD SHARES (GLD). Gold’s rise, pullback, and rebound make it a chart worth adding to your ChartLists.Chart source: StockCharts.com. For educational purposes.

If GLD overcomes that resistance next week, it indicates that investors’ concerns about slower rate cuts and geopolitical tensions remain front and center. 

The Greenback Keeps On Growing 

The US dollar has also been rising, hurting other currencies, especially the euro. The weekly chart of $EURUSD below shows it hitting levels it last saw at the end of 2022.

FIGURE 3. WEEKLY CHART OF $EURUSD. The steep fall in the euro could be due to a weakening European economy and concerns about geopolitical tensions.Chart source: StockCharts.com. For educational purposes.

The rise in the greenback is due to a strong US economy, but the move in the $EURUSD is significant. Europe is experiencing slower economic growth, but geopolitical concerns have also risen. The two may be the reason for the intensity of the fall in the euro.

Usually, a stronger dollar puts pressure on commodities such as precious metals, but that’s not happening right now. Besides potential geopolitical tensions, there’s also the concern that the Fed may have fewer interest rate cuts next year. According to the CME FedWatch Tool, the probability of a 25 basis point in the December FOMC meeting has dropped to 56.20%.

Bitcoin’s Bold Move

You can’t help but notice Bitcoin’s rise this week. The cryptocurrency crossed its psychological $100,000 level, but closed slightly lower at $99,210 (see chart below).

FIGURE 4. DAILY CHART OF BITCOIN. The explosive rally in Bitcoin has caught everyone’s attention. $BTCUSD hit the psychological $10K level but couldn’t hold on to it.Chart source: StockCharts.com. For educational purposes.

After bouncing off its 21-day exponential moving average (EMA) in early November, $BTCUSD rocketed higher, consolidated for about seven days, and then continued its journey higher. The moving average convergence/divergence indicator in the bottom panel shows no signs of slowing down.

Looking Ahead 

There’s been a lot of excitement this week. Next week is a short trading week, but there are some key economic data to watch, the more important ones being the PCE, durable goods orders, and FOMC minutes. This would bring the focus on what the Fed is likely to do when it meets next. If there’s an indication of no rate cuts in the December meeting, we could see more of the same price action spill into next week.

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End-of-Week Wrap-Up

• S&P 500 up 1.68% for the week, at 5969.34, Dow Jones Industrial Average up 1.96% for the week at 44,296.51; Nasdaq Composite up 1.73% for the week at 19,003.65
• $VIX down 5.20% for the week, closing at 15.30
• Best performing sector for the week: Materials
• Worst performing sector for the week: Health Care
• Top 5 Large Cap SCTR stocks: Summit Therapeutics (SMMT); Applovin Corp. (APP); MicroStrategy Inc. (MSTR); Texas Pacific Land (TPL); Palantir Technologies (PLTR)

On the Radar Next Week

• October New Home Sales
• FOMC Minutes
• October Durable Goods Orders
• October PCE Price Index
• November Chicago PMI

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.

I’ve always found technical analysis to be a fantastic history lesson for the markets. If you want to consider how the current conditions relate to previous market cycles, just compare the charts; you’ll usually have a pretty good starting point for the discussion.

As we near the end of an incredibly bullish year for the S&P 500 and Nasdaq, I’m seeing plenty of signals that suggest the strength of 2024 may lead to a much weaker following year. Today we’ll compare 2024 to 2021, talk about the many conditions which are highly similar, and also review an initial signal from one of the most bearish indicators in our arsenal, the Hindenburg Omen.

Market Trend Model Shows Striking Similarities

2024 has been a strong market year by any standard, from the continuous upward slope of moving averages, to the relatively low volatility compared to previous years, to the minimal drawdowns along the way. My Market Trend Model is what I often use to make an initial comparison between two historical periods, and it certainly backs up this particular conjecture.

Note our long-term model (purple histogram) has been bullish for all of 2024, exactly as we logged in 2021. We can see the same pattern of consistent bullishness from the medium-term mode (green histogram) for both years. Even the short-term model appears to identify pullbacks of a similar timeframe and depth for both years.

2021 Finished Strong, But 2022 Brought a Whole New Trend

2021 ended in a position of strength, with the S&P 500 making a new high going into year-end. However, the moment the calendar was flipped to 2022, everything quickly changed to a bearish phase. The short-term model turned almost immediately, and instead of quickly turning back higher, it remained bearish for weeks at a time.

The medium-term model, which I consider my main risk on/risk off indicator, turned bearish in mid-January and remains so until the end of Q1. So what differentiated early 2022 from the garden variety and very buyable pullbacks of 2021 was that the medium-term model behaved quite differently.

As we head into year-end 2024, this is perhaps the most important chart in my Market Misbehavior LIVE ChartList, as it would help confirm whether an impending selloff is different from the relatively painless and short-lived pullbacks in 2024.

The Hindenburg Omen Suggests a Potential Topping Pattern

Strategist Jim Miekka created the Hindenburg Omen by reviewing a series of previous major market tops and looking for similarities. He honed in on three particular factors:

1. The market is in a confirmed uptrend as measured by the 50-day ROC of the NYSE Composite Index ($NYA).
2. At least 2.5% of the NYSE stocks make a new 52-week high AND a new 52-week low on the same day.
3. The McClellan Oscillator breaks below zero, confirming negative breadth conditions.

One final signal Miekka included was that there should be two independent signals within one month.  

In the bottom panel, I’m showing a composite indicator on StockCharts that tracks the three conditions listed above. You may notice that there have been a number of initial signals so far in 2024, but at no time have we received the confirmation signal within one month of the initial signal!

That’s where we’re at as we look forward to year-end 2024 — weakening breadth conditions and investor indecision. Now it’s all about whether we receive that confirmation by mid-December. If so, that would suggest that early 2025 may look painfully similar to a very bearish early 2022!

RR#6,

Dave

P.S. Ready to upgrade your investment process? Check out my free behavioral investing course!

David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC

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.

The author does not have a position in mentioned securities at the time of publication. 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.

In this StockCharts TV video, Mary Ellen reviews the broad-based rally that pushed the Equal-Weighted SPX to new highs. She also shared base breakouts and downtrend reversal candidates in the now hot Retail space, and takes a close look at 3 old school stocks that are seeing AI-related growth.

This video originally premiered November 22, 2024. You can watch it on our dedicated page for Mary Ellen on StockCharts TV.

New videos from Mary Ellen premiere weekly on Fridays. You can view all previously recorded episodes at this link.

If you’re looking for stocks to invest in, be sure to check out the MEM Edge Report! This report gives you detailed information on the top sectors, industries and stocks so you can make informed investment decisions.

In this exclusive StockCharts video, Joe goes into detail on the S&P 500 ETF (SPY), sharing why using MACD and ADX together can be beneficial — especially in the current environment. He touches on Sentiment, Volatility and Momentum, pointing to reasons why we need to be on alert at this time for signs of a downturn. Joe covers the QQQ and IWM since both are at critical levels right now. Finally, he goes through the symbol requests that came through this week, including AMZN, CVNA, and more.

This video was originally published on November 20, 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.

The afternoon turnaround seems to be more the norm than the exception. Thursday’s stock market action followed the trend. What makes Thursday’s turnaround more pronounced is a possible resumption of the uptrend in equities. But not all stocks are created equal.

A look at the day’s MarketCarpet of the S&P 500 stocks shows an interesting mix. While there was more green than red, some of the heavier-weighted S&P 500 stocks—Microsoft Corp. (MSFT), Apple, Inc. (AAPL), Alphabet, Inc. (GOOGL), Amazon.com, Inc. (AMZN), Meta Platforms, Inc. (META), and Tesla, Inc. (TSLA)—were trading lower. NVIDIA Corp. (NVDA) managed to eke out a slightly higher close despite its sharp drop after reporting earnings after Wednesday’s close. Earnings and revenues beat expectations, but the market may have had higher expectations. NVDA’s 0.53% gain didn’t move the needle much in Thursday’s positive move.

FIGURE 1.  MARKETCARPET FOR THURSDAY, NOVEMBER 21. A lot of green, but not from the heavily weighted large-cap stocks.Image source: StockCharts.com. For educational purposes.

An initial glance at the MarketCarpet screams the need to view the chart of the S&P 500 Equal Weighted Index ($SPXEW).

Technical Support Holds

Comparing the chart of $SPX with $SPXEW shows that the latter made a bigger move on Thursday. Regardless, both indexes bounced above their 25-day simple moving averages (SMAs).

FIGURE 2. S&P 500 VS. S&P 500 EQUAL-WEIGHTED INDEX. The S&P 500 rebounded and closed higher toward the top end of the day’s range. Most of the heavily weighted stocks in the index closed lower, so it’s no surprise that the S&P 500 Equal-Weighted Index made a more significant move.Chart source: StockChartsACP. For educational purposes.

The positive slope of both indicates the uptrend is still in play. Both are close to their 52-week highs (see lower panel). The $SPXEW is only 0.54% from its high whereas the $SPX is 0.88% away.

It’s a similar scenario with the Nasdaq Composite ($COMPQ) and Nasdaq 100 Equal-Weighted Index ($NDXE), although Thursday’s upside move was much smaller than that of the S&P 500 (see chart below).

FIGURE 3: NASDAQ COMPOSITE VS. NASDAQ 100 EQUAL-WEIGHTED INDEX. Both indexes are above their 25-day SMAs, which have a positive slope. Both are also close to their all-time highs.Chart source: StockChartsACP. For educational purposes.

$COMPQ and $NDXE are trending higher (their 25-day SMAs are trending higher), but the last bar in $NDXE shows more upside movement. Both indexes are approaching their 52-week highs—$COMPQ is 1.72% away, while $NDXE is 0.99% away.

The Nasdaq Composite chart shows some selling pressure, but it’s trading above its July high. If it maintains that position, going forward, it will be bullish for the index.

Even though the Dow Jones Industrial Average ($INDU) may not be as popular as it once was, it, out of the three major equity indexes, rose the most, closing up by 1.06%. It, too, had a turnaround day, bouncing off its 25-day SMA on Tuesday, and is also approaching an all-time high.

The biggest winners were small and mid-caps. The S&P 400 Mid Cap Index ($MID) and S&P 600 Small Cap Index ($SML) are both above their November lows and approaching their all-time highs (see chart below).

FIGURE 4. MID CAPS VS. SMALL CAPS. Both indexes had significant moves on Thursday. The trend continues to be bullish and both are approaching their all-time highs.Chart source: StockChartsACP. For educational purposes.

The Extended Factors Dashboard panel shows the mid-cap revenue and momentum ETFs were Thursday’s top percentage movers.

FIGURE 5. EXTENDED FACTORS DASHBOARD PANEL. Mid-cap revenue and momentum were the largest percentage winners on Thursday.Image source: StockCharts.com. For educational purposes.

The big-picture view of the equity markets: After the post-election pullback, equities seem to be making a comeback. The big question is whether they will have the momentum to break above their all-time highs.

The Bond Market’s Narrative

While equities are rising, you can’t ignore what’s happening in the bond market. Treasury yields are climbing in tandem with equities. This is mainly due to strong economic growth and concerns of possible inflation with the new administration’s implementation of tariffs and tax cuts. We’ve already heard the CEO of Walmart chime in with his concerns about consumers having to pay more due to tariffs.

As yields rise, bond prices fall. The daily chart of the iShares 20+ Year Treasury Bond ETF (TLT) below shows that since September 17, TLT has fallen over 12%. That was around the time the Federal Reserve announced a 50 basis point interest rate cut.

FIGURE 6. DAILY CHART OF TLT. TLT fell over 12% since September 17, which is around the time the Fed cut interest rates by 50 basis points.Image source: StockCharts.com. For educational purposes.

Closing Bell

While the macroeconomic picture is positive, investors are concerned about the possibility of reinflation, especially if tariffs are implemented. We’re still a few months away from January 20, so it wouldn’t be surprising to see more choppiness in the stock and bond market from now until the end of the year.

Geopolitical tensions could also rise. If the trend in equities continues to be bullish, just stay your course and hold on to your positions. But if there’s any change, such as a negative slope in your preferred moving average or a decline in market breadth, it may be time to unload some of your positions and have some cash sitting on the sidelines.

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.

Today the 20-Year Bond ETF (TLT) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. This was the result of a down trend lasting over two months. We note that the PMO has been running flat below the zero line for a month, which tells us that steady downward pressure has been applied to price.

On the weekly chart we observe a bullish reverse head and shoulders pattern, which executed when price broke above the neckline and rallied for a couple of weeks. Next it performed a technical pullback to the support line. If the support fails, the pattern will abort, and we will assume a bearish outlook in this time frame.

We have been watching this 46-year monthly chart of the 30-Year Bond for a few years now. An extremely long-term (40-year) rising trend line was violated in 2022. At the time we asserted that bonds had turned bearish and that condition would most likely persist for many years. We have not changed our outlook. There may be encouraging rallies from time to time, but we believe they will fail.

Conclusion: The LT Trend Model SELL Signal was triggered by a persistent two-month decline. In the longer-term, bonds appear to be attempting a rally. Our outlook is bearish, but we need to see how far the rally can go. In any case, we believe the ultimate outcome will be bearish.

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

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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.

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