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The Supposed Superiority of Common Only A-D Data

weekly Chart In Focus

I get asked a lot about the supposed problems with the NYSE’s Advance-Decline data, which some analysts claim is “contaminated” by the inclusion of NYSE-listed issues that are not “real stocks”.  If one is going to look for meaning about the stock market, some analysts say that one should really only look at the Advance-Decline data for the real stocks, or so goes the thinking.  As with a lot of widely held beliefs, this is one that struggles when confronted with the actual data.

The reason... Read More

Friday Reveals Event Risk Complacency

weekly Chart In Focus

The SP500’s higher close on Friday was one of several up Fridays we have seen recently.  Moving up or down on a Friday can convey a message about investor sentiment, especially when multiple Fridays see the market go in the same direction.

To be a buyer on a Friday, one has to accept that you cannot get out again until Monday.  So it takes some degree of confidence that “event risk” won’t be a problem over the weekend.  When people are feeling fearful, Fridays are more likely to see a lower... Read More

Japanese Yen Disagrees With Gold

weekly Chart In Focus

The price of gold carries on an interesting relationship with the exchange rate of the Japanese yen versus the dollar.  Most of the time, the two move together, but they occasionally disagree.  When that happens, it is usually the chart plot of the yen which ends up being “right” about where both are headed.

That is relevant at the moment because the dollar price of gold is making lower highs and lower lows, but the yen is showing a bullish divergence.  The yen is not yet making higher... Read More

Bumpiness Signals Weakness

weekly Chart In Focus

After bottoming on April 3, the DJIA’s Price Oscillator has been making a bumpy up move. That is important because bumpiness or smoothness of a move carries important information. 

Our Price Oscillator is calculated using the same math as the McClellan A-D Oscillator, by finding a difference between two exponential moving averages (EMAs).  The difference for the Price Oscillator is that it uses closing prices rather than daily A-D differences.  See this link for details on the calculations.... Read More

Treasury-Bund Spread Just Gave Stocks New Life

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Since the early 1990s, there has been a pretty good correlation between the movements of the DJIA and the spread between the 10-year U.S. Treasury yield and the equivalent yield for German sovereign debt.  The German bonds are commonly referred to as “bunds”, shorthand for the German word “bundes”, meaning federal. 

This Treasury-Bund spread also has the interesting property of giving us an early warning of major secular tops in the U.S. stock market.  When it rises up to a very high level,... Read More

Too Much Love for QQQ

weekly Chart In Focus

The FANG stocks have been leading the market higher in 2018, and a lot of traders are choosing to tag along on that trade by buying into QQQ, the ETF which tracks the Nasdaq 100 Index (NDX).  As more traders buy into QQQ, the sponsoring firm (Powershares, part of Invesco) issues more shares in order to keep the share price as close as possible to the net asset value.

This week’s chart shows how the number of QQQ shares outstanding varies over time.  Not surprisingly, it goes up and down in... Read More