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High-Yield Bond A-D Line

weekly Chart In Focus

Junk bonds are the canaries in the stock market’s coal mine. 

If you want to know ahead of time that trouble is coming for the stock market, then one of the best places to look is the high-yield (or junk) bond market.  The movements of prices among these bonds correlates much more closely to the stock market than to T-Bonds.  More importantly, when liquidity gets tight, the junk bonds are the first to be sold by traders wanting to lessen their portfolio risk. 

We can see the importance of... Read More

Is Iron Ore Weighing Down Stock Market?

weekly Chart In Focus

Some U.S. stock market investors are getting worried about the price of iron ore in China.  This week’s chart helps to show why.

One analyst who noticed this relationship was Alastair Williamson of Stock Board Asset, who published this Tweet on April 18, 2017:

It is definitely an intriguing chart, and a relationship I had not explored before.  I have come across a large number of interesting intermarket relationships like this one, and it is always fun to find (or be shown) a new one. ... Read More

Gold Resolves Some Bearish Divergences

weekly Chart In Focus

A week ago, it was not looking good for the gold bulls.  The dollar price of gold had not yet made a higher high, even though the Japanese yen had already pushed to a higher high.  When divergences like that happen, it is typically bearish news for both gold and the yen.

But what looked like a bearish divergence then has now been resolved in favor of the bullish case.  The price of gold has now joined the yen in making higher highs. 

This is an important point for all chartists to... Read More

AAII Survey Readings Nearing A Bottom Indication

weekly Chart In Focus

The bullish percentage in the AAII survey has been falling during 2017, and is getting close to a low enough reading to mark a good bottoming indication for prices.  That fits well with my expectation from other sources for a low this month.  But before you go interpreting the AAII numbers, it is best to understand some of their quirkiness. 

The raw data come from responses by AAII members on that organization’s web site, and the data are published weekly at... Read More

Lumber and Eurodollars: A Curious Intermarket Relationship

weekly Chart In Focus

Intermarket relationships are fun.  They often reveal surprising relationships, and those relationships are all the more fun when they offer us insights from which we can make money.

This week, we look at the important data from the Commitment of Traders (COT) Report, which I have previously shown have importance for the stock market.  See this, and this, and also this

You might wonder, who cares about COT data for eurodollar futures.  Well, you would, if you knew the great leading... Read More

Why Don’t We Use Just Common-Only A-D Numbers?

weekly Chart In Focus

For as long as there have been Advance-Decline (A-D) data that people have been interested in following, there have been criticisms of that very A-D data for including “the wrong sorts” of issues.  Back in 1962, Joe Granville and Richard Russell both pointed to the big divergence between the NYSE A-D Line and the major averages like the DJIA.  That divergence preceded a 27% decline in the DJIA, so in that moment the A-D Line suddenly became much more interesting to a lot of people.

But... Read More

DJI Oscillator Positive Index

weekly Chart In Focus

The DJIA itself might be hanging around all-time highs, but its components are telling a different story.  When a higher index high is made on declining participation, that’s a problem.

The indicator in this week’s chart is one I thought up about 20 years ago, one of a set of indicators that look at the 30 Dow stocks to see what they are doing.  This is a type of “diffusion index”, which describes an indicator that looks at the behaviors of each member of a group in order to generalize... Read More