October 2013 – Andrew Thrasher

Japan Struggles With Resistance

Posted on October 29, 2013 by Andrew Thrasher, CMT

My article for TraderPlanet this week takes a look at the iShares Japan ETF ($EWJ).

Here’s a piece:

As the chart below shows EWJ has been having some difficulty with resistance at $12 to $12.20. While the Japan ETF has been making higher lows – keeping the uptrend alive, it’s been unable to make higher highs which put it into question whether buyers can keep EWJ from making a trend change. When looking under the hood, so to speak, of EWJ we can see momentum beginning to stall.

Read the rest: ETF Watch: Japanese Resistance (TraderPlanet)

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

The Financial Sector Continues to Slide in Relative Performance

Posted on October 28, 2013 by Andrew Thrasher, CMT

This morning we are seeing financials ($XLF) falling again in relative performance against the S&P 500 ($SPY). I’ve discussed this relationship a couple of times in the last few months and we are seeing a test of a lower low as the financial sector continues to weaken.

First in July we looked at the divergence that was being created in the ratio chart of $XLF:$SPY but I showed the trend lines that would need to be broken to confirm a shift in relative performance. In August we saw those trend lines break as the overall equity market began to outpace the financial sector. After the longer-term trend line gave way we’ve seen a continued decline in $XLF’s relative performance to $SPY over the last two and a half months.

I wanted to bring this chart back up as we test the lower low made in September. I’m watching this lower low to see if financials can regain their footing or if we’re in for more bleeding.

Is A Shift Taking Place to Favor U.S. Equities over International?

Posted on October 25, 2013 by Andrew Thrasher, CMT

Let me start by saying it’s amazing how much complacency there is in the market right now. I tweeted this morning a statistic from SentimenTrader about the large move that’s taken place in Rydex Funds… For every $1 put into the leverage bearish funds there’s been $8.2 put into the leverage bullish funds. Jason from SentimenTrader noted that this is the highest the ratio has been since 2001!

Okay back to the topic at hand. This morning I’ve been looking at the relationship between $EFA and $SPY (i.e. international and domestic equities). Even with the strength in the S&P 500 over the last few months, the market has still favored international stocks since July. Remember, this doesn’t international stocks have gone done, it just means the S&P 500 has gone up more than EAFE. However, it appears we are seeing some signs of this relative performance relationship shifting. While the ratio between $EFA and $SPY has been mostly flat with a slight tilt up since late-September, the Relative Strength Index (RSI) has been deteriorating.

The RSI has created some short-term support at the 50 level so I’ll be watching to see if this breaks for a sign of confirmation that traders are shifting their preference back to domestic equities from EAFE. We also have the 50% retracement level from the 2013 high to the July low that sits just under where the ratio is now. Since the up trend off the Sept and Oct. lows has already been broken, the 50% retracement needs to hold for international stocks to keep the spot light.

S&P 500 Tests Trend Line Going Back to 1983

Posted on October 22, 2013 by Andrew Thrasher, CMT

To truly get a good perspective of what’s going on in a market, no matter if it’s equities, commodities, bonds, or forex, it’s important to view things in multiple times frames. I did this when looking at the important support level in gold ($GC_F) last week of the long-term trend line and I want to take a look at the long-term chart of the S&P 500 today ($SPX) going back to 1983.

The trend line starts from the 1983 bottom and goes up providing support in 1988, 1990 and after the tech bust hit a low in 2003. With the bull market off the 2009 low we are quickly approaching the trend line but this time as resistance.

Here’s a zoomed in version of the chart above so you can better see the approach to the possible resistance.

Don’t Judge an Overbought Stock

Posted on October 22, 2013 by Andrew Thrasher, CMT

One of the themes for 2013 has been the rocket ships that are ‘momentum stocks’. So far this year Netflix ($NFLX) is up 280%, Tesla ($TSLA) is up 416%, Zillow ($Z) is up 200%, and Yelp ($YELP) is up 284%, just to name a few. If you look at each of these stock’s charts you’ll see continued breaks of momentum into ‘overbought’ status – and this isn’t necessarily a bad thing.

This is the topic of my TraderPlanet article for this week.

Here’s a piece:

For many novice traders who begin showing interest in technical analysis they read a lot about oversold and overbought markets. The money signs flash in their eyes at the thought of how simple trading must be as they start penning a letter to Buffet that he should prepare to relinquish his seat to them on the Fortune Magazine’s Billionaire List. Not so fast!

Read the rest: Don’t Judge an Overbought Stock (TraderPlanet)