How RRG Helps Us Find Pair Trading Opportunities



  • DJ Industrials closing in on overhead resistance
  • Weekly RRG showing some strong opposite rotations
  • Identifying two potential pair trading setups (MSFT-MRK & NKE-CAT)

The Dow Jones Industrial Index ($INDU) is reaching overhead resistance between 35.5k and 35.7k, which means that upside potential is now limited. Even if the market manages to break that area, the next resistance level is already around just 37k.

However, the relative rotation graph featuring the rotation for all 30 members of the DJ Industrials Index is showing some potentially very interesting pair trade setups.

DJ Industrials

On the weekly chart above, that overhead resistance area is clearly visible. The previous highs, which define the resistance zone, date back to late 2021 and early 2022, almost two years ago. This makes it a very important resistance zone.

An upward break of that resistance will obviously be a very bullish signal. But the recent rally, coming out of the late October low, has been very steep, and it would not be strange to see some form of consolidation against the aforementioned resistance zone.

With overhead resistance nearby, the near-term risk is now to the downside. Looking at the chart, a setback after a peak against resistance could take the Dow as low as 32.3k. This would still keep $INDU within the boundaries of this year’s trading range.

Opposite Tails on Weekly RRG

The weekly relative rotation graph above shows the rotations for all thirty stocks inside the Dow Jones Industrial Index. With the benchmark index still inside a trading range, some of the opposite rotations that are visible on the graph suggest that a few interesting pair trading opportunities are present.

In order to clean up the RRG and put emphasis on the more interesting rotations, I have taken out the tails with less favorable characteristics.

In order to see if I could get confirmation, I have run the same RRG on the daily time frame.

Given the current rotational patterns, many different pair trading opportunities can be found. I encourage you to do your own research and find out whether you have a particularly strong view of specific stocks or combinations of stocks, positive or negative. Here, I will pick two examples of potential pair trades from the RRGs above and look at the individual charts.


On the weekly RRG, Nike and Caterpillar’s tails are rotating in opposite directions. NKE is inside the improving quadrant and rapidly heading toward leading. CAT is inside the weakening quadrant and rapidly heading toward lagging. Both tails are at the extremes of the RRG and far away from the benchmark. This indicates a big potential for alpha.


NKE is nearing resistance between 110 and 115, suggesting that there is limited upside potential left, unless NKE can clear this barrier in the coming weeks. However, as we are looking for pair trades, we need to focus more on the relative strength conditions. And these are clearly picking up for NKE.

The JdK RS-Momentum line is already well above 100 and is dragging the JdK RS-Ratio line higher. When both RRG-lines are moving up at the same time, this causes an RRG heading between 0-90 degrees, which we know is an indication of strength.


On the price chart, CAT has just bounced off its rising support line. The relative performance, however, is not looking that good. The JDK RS-momentum line already dropped below 100 a few weeks ago and is now rapidly dragging the RS-Ratio line lower. This rapid decline in relative strength suggests a further underperformance for CAT in the next few weeks.

Off-setting the relative strength of NKE against the relative weakness of CAT makes for a potentially interesting pair-trading opportunity.


The weekly RRG details for Microsoft and Merck show opposite rotational patterns. MSFT has just completed a rotation from leading through weakening and is now back into leading, making it one of the strongest stocks, if not the strongest, in this universe. The opposite goes for MRK, which rotated from lagging into improving and is now crossing back into the lagging quadrant.

We know that rotations that complete on one side of the graph indicate a new up- or down-leg in an already established up or downtrend.


The recent break to new all-time highs is holding up well. It has also caused the raw RS-line to push to new highs where it is also holding. This is a strong combination of facts.

After a brief dip below 100, the JdK RS-Momentum line has now crossed back above that level again, dragging the RS-ratio out of its low just above 100. This causes the tail on the RRG to push back into the leading quadrant at a strong RRG-heading.

The combination of strong relative strength and a break to new highs on the price chart makes Microsoft the best chart in this universe for the time being.


MRK reached its all-time high in May of this year, but has been in a steady downtrend since then. The price of Merck reached support just above 100 a few weeks ago and is still hovering slightly above that area at the moment. A break lower will very likely accelerate the decline, very likely, toward the next level of support, between 92.50 and 95.

The raw RS line is breaking an important horizontal support level, completing a toppish formation. The RRG lines already picked up on the new downtrend in July. The recent hiccup of the RS-Momentum line above 100 is the result of the sideways consolidation of relative strength above support.

With raw RS breaking support and the RS momentum line dropping below 100, both RRG-Lines are now once again moving lower while below 100. This is causing the tail on the RRG to move deeper into the lagging quadrant while traveling at a negative heading.

Both tails completing a rotation at the same side of the RRG suggests a continuation of the ongoing outperformance of MSFT over MRK.

Enjoy your Thanksgiving weekend, but #StayAlert, –Julius

Julius de Kempenaer
Senior Technical Analyst,
CreatorRelative Rotation Graphs
FounderRRG Research
Host ofSector Spotlight

Please find my handles for social media channels under the Bio below.

Feedback, comments or questions are welcome at [email protected]. I cannot promise to respond to each and every message, but I will certainly read them and, where reasonably possible, use the feedback and comments or answer questions.

To discuss RRG with me on S.C.A.N., tag me using the handle Julius_RRG.

RRG, Relative Rotation Graphs, JdK RS-Ratio, and JdK RS-Momentum are registered trademarks of RRG Research.

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EB Weekly Market Report – Monday, November 20, 2023

Sample Report

Below is our latest Weekly Market Report (WMR), which is published on Sunday/Monday of every trading week. It’s unlike our Daily Market Report (DMR) as the WMR focuses almost exclusively on the Big Picture and is more designed for those with longer-term investing/trading horizons. Our DMR looks much more closely at current action, designed more for active traders.

I thank all of you that have followed my work here at over the past 16 years and this sample report is just a small Thank You for your support! If you like the report below and would like to subscribe to our full service, we do offer a 30-day FREE trial and signing up now makes a lot of sense. Our Fall Special, which offers the absolute best price for our service, begins tomorrow and will last roughly through the end of November. If you take us up on our Trial Offer and enjoy our service, you can then subscribe using our BEST DEAL of the year.

Either way, ENJOY and Happy Thanksgiving!

Weekly Market Recap

Major Indices

We finally saw some relative strength out of small caps (IWM) and mid caps (MDY) last week. All of our major indices gained ground, but the IWM nearly tripled the NASDAQ 100 and simply acted much more bullishly after the tame October CPI report was released on Tuesday morning before the opening bell. That triggered a tsunami of buying on Tuesday. After a brief pullback, the small cap bulls were back out on Friday. I would treat the IWM as an uptrending ETF – until proven otherwise. Check out the chart, with two key support levels identified:

There’s still much work to do, but the IWM is at least beginning to show significant improvement, especially on the absolute price chart. The huge gap up on Tuesday now provides us excellent gap support at 174.23 and the rising 20-day EMA is currently at 172.17. Those are the two support levels to watch closely.


Two sectors that had really struggled in 2023 due to higher interest rates were real estate (XLRE) and utilities (XLU). It made sense for these two to perform well when investors poured into bonds last week, sending the 10-year treasury yield ($TNX) plummeting. Consumer discretionary (XLY) had an excellent week as well. You’ll see below that 4 of the top 6 industry groups last week were in the consumer discretionary sector.

I generally define a daily uptrend as “price above the 20-day EMA and the 20-day EMA above the 50-day SMA”. Of our 11 sectors, XLB is on the verge of meeting this definition as it prepares for a golden cross (20-day EMA crossing above 50-day SMA). The only other two sectors not meeting this definition and still showing more work left on their charts are energy (XLE) and health care (XLV). Here are the two charts:


The XLE printed a tail beneath recent price support on Thursday, then recovered to test its nemesis, the 20-day EMA. Currently, the XLE is caught between those two – price support near 82.50 and the 20-day EMA at 85.26. Let’s see which one breaks first. In a bull market, I give the edge to the XLE breaking back above the 20-day EMA.


The XLV seems to be a bit further along in its recovery attempt. It currently resides right at key price and trendline resistance. A breakout would be a solid piece of technical evidence that the “correction bottom” is in for the XLV.

Top 10 Industries Last Week

Renewable energy ($DWCREE) jumped about 13% on Tuesday alone after the October CPI report was released. The 290-300 area has proven to be difficult short-term resistance, so let’s see if the group can power through that area this week:

In that resistance zone is gap resistance and multiple price attempts at a breakout, so clearing it would definitely improve the technical picture here, perhaps even switching the overall trend from downtrend to uptrend. Before you get too excited, however, please keep in mind that renewables have been lagging badly vs. the benchmark S&P 500. We’ve seen some improvement, but there’s little leadership. In other words, much of the current rebound can be attributed to very oversold conditions and a bounce, plus a very strong overall market. It’s the old Wall Street adage, “a rising tide lifts all boats”. In that bottom panel, breaking the relative downtrend is truly what this group needs.

Bottom 10 Industries Last Week

I find about half of the above industry groups to be bullish on their charts. Apparel retail ($DJUSRA) has been very strong since its early-June low and the recent selling appears to be a handle off of a cup:

The huge spike in volume likely was the result of Gap’s (GPS) massive volume, which accompanied a much-stronger-than-expected quarterly earnings report. The DJUSIB, DJUSRD, DJUSMF, and DJUSHN all were among the 10 biggest losers last week, but still show technical promise, in my opinion. The DJUSIB, in particular, looks solid, having broken to a 52-week high earlier this month and still trading well above its rising 20-day EMA.

Top 10 Stocks – S&P 500/NASDAQ 100

Bottom 10 Stocks – S&P 500/NASDAQ 100

Big Picture

We cleared yet another hurdle on the S&P 500 as we cleared the 4500 level. After reaching a high of just over 4600 in July and pulling back to 4103.78 on October 27th, the bulls are back in charge. The S&P 500 is now nearing its 2023 high, just 2% away. The recent recovery is just one more reason why I like to take a step back and view the “Big Picture”, much more easily recognizing the current secular bull market:

The bottom panel highlights the 240-month (20 year) rate of change (ROC). I like to look at this for perspective. While many bearish analysts believe we’ve run too far to the upside and have lots of downside ahead, this 240-month ROC tells me a completely different story. This ROC has come nowhere close to the highs we saw in the previous two secular bull markets. If anything, this suggests we could have much more upside ahead than any of us can imagine right now. It’s one reason why I believe the S&P 500 could triple over the next 8-10 years, before we hit the next secular bear market.


I look at two key sentiment readings – the Volatility Index ($VIX) and the equity-only put-call ratio ($CPCE). Others use surveys, but I don’t trust those. After all, wouldn’t you rather see what traders are doing with their money rather than their lips? Yeah, me too.

Volatility Index ($VIX)

The first thing to understand is that the VIX is a calculation of “expected volatility” ahead. The calculation is based on the pricing of short-term S&P options. I like to view this as my “market maker sentiment reading”. Market makers set the premiums that they require option holders to pay. If market makers are looking to protect themselves against volatile market action, they’ll put higher premiums on options. If we’re in a boring market environment (nearly always occurs in bullish market environments), premiums are much lower and indicative of little volatility ahead. Market makers are giving us a GREAT BIG CLUE as to where they see the market heading.

Typically, a VIX over 20 suggests a fairly high expectation of trouble ahead as when the VIX rises above 20, you really want to avoid taking any unnecessary risks on the long side. Instead, you want to hunker down. The higher the VIX level goes, the more volatile and scary the action can get. VIX readings above 30 usually require market capitulation before we get a more tradable market on the long side.

If the VIX is in the 17-20 range, I’m usually on high alert. If it’s falling in this range, it can a very bullish signal. If it’s rising in this range, however, and approaching 20, caution would be suggested as selling could escalate quickly. At this point, if I was long and wanted to stay long, I might consider a covered call strategy, if you’re familiar with options. You’ll get a nice premium and it’s a way to at least hedge a little against your long positions.

The most bullish environment is when the VIX is below 17 and declining. We’ve seen that recently. Here’s where the VIX currently stands:

Check out that first big spike in the VIX back in March. That should be ingrained in your mind. That’s what can happen when the VIX moves through 20 resistance and accelerates. The stock market took a tumble of roughly 250 points in one week. The October scare saw the VIX jump 50% in a couple weeks, clearing 20 and reaching a high just above 23. That coincided with another significant selloff as the S&P 500 again lost about 250 points.

Look at those thick red/blue directional lines in November, though. As the VIX came tumbling down, we had a massive market rally as fear began to dwindle. All of this occurred during what we already knew was THE most bullish period historically of the entire year. This is how we can put puzzle pieces together in the short-term to increase our probability of making great market calls.

Equity-Only Put-Call Ratio ($CPCE)

While the VIX is a market-maker-related sentiment signal, the CPCE tells us what the retail trader is doing with their money. Just keep in mind that when retail option traders all start to pile in on the same side of the trade, it usually ends in very ugly fashion for them. We’re looking for the “rubber band to stretch” significantly in either bullish or bearish fashion and we position ourselves on the opposite side, waiting for the “snap back”. In my experience, any time the 5-day SMA of the CPCE hits .75, extreme fear is building and we should begin looking for a market bottom. Sometimes this 5-day SMA reading can reach as high as .85-.90 before a bottom is reached, so this isn’t an exact science. The main point I’m making is that, if you’re shorting or trading equity puts, you need to understand that your profits could swiftly disintegrate once the 5-day SMA of the CPCE moves past .75.

Here’s a historical chart of the CPCE (5-day SMA) to illustrate how this works:

The low 5-day SMA readings below .54-.56 have been solid signals in marking short-term tops, while high 5-day readings above .75 have been excellent in providing us clues of market bottoms. The last reading was circled in red, because it occurred while the market was accelerating to the upside. This tells me that we still have PLENTY of doubters as we rally. I believe that’s a very bullish signal.


On Tuesday morning, the October CPI report was released, followed by the October PPI report on Wednesday morning. Both reports continue to stress that inflation is FALLING and it has been consistently for over a year. The stock market LOVES this news and is now rising to be priced accordingly. Do you believe inflation remains a big problem? Keep in mind that the Fed is most interested in Core CPI, so below you’ll find a chart of the absolute monthly Core CPI numbers with two panels below. The first shows the annual Core CPI (12-month rate of change) and the second panel shows the 1-month rate of change (ROC) of Core CPI:

The annual rate is dropping every single month and is now back to 4%. We’re not at the Fed’s target rate of 2%, but the last four monthly CPI increases have been in the “normal range” for the past 30-40 years, between 0.5% and 0.3%. If inflation remains in this area, we’ll be approaching the Fed’s target inflation level by June 2023, which is when many analysts believe the Fed will start lowering interest rates to spark a slowing economy. It’s interesting how this inflation data lines up almost perfectly with that narrative.

Intermarket Analysis

In addition to following technical price action on our major indices, just like most technical analysts, I believe it’s extremely important to monitor key intermarket relationships as well. The two primary relationships for me are (1) XLY:XLP to watch the rotation between the more aggressive discretionary sector (XLY) and the more defensive staples sector (XLP), and (2) QQQ:SPY to observe the rotation between the more growth-oriented NASDAQ 100 and the more value-oriented S&P 500. The former is extremely important, because our GDP is comprised roughly of two-thirds consumer spending. Watching to see where these consumer dollars are going helps us determine whether investors are in a “risk on” or “risk off” mode. The former is bullish, while the latter is bearish.

So where do these two relationships stand today?


My analysis features this relationship “ignoring gaps” and “including gaps”. I believe the stock market is highly manipulated, especially at the opening bell. A gap down is a great way to “encourage” unsuspecting traders to sell and a gap up is a great way to “encourage” those same unsuspecting traders to buy. The top panel ignores that opening bell activity and focuses ONLY on the rotation during the trading day. You can’t plot this on a chart with regular data. In order get this intraday rotation, you must keep a User-Defined Index at StockCharts, which is exactly what I do. What we saw during much of the correction was a weak S&P 500, but a strengthening XLY:XLP. It was a rather important signal that the S&P 500 selling would not last. Now we see the result as our major indices scream higher once again.


While the S&P 500 has yet to break above its July high near 4600, this ratio has broken out whether we include or ignore gaps. Again, it’s a bullish signal as the big Wall Street firms buy into the more aggressive growth index, while simultaneously appearing on CNBC to spread indecision, fear, and sometimes, outright doom and gloom. Follow the charts, not the lips on CNBC.

Trade Setup

I discuss potential trade setups here from a LONG-TERM perspective. These are not trades where you’re hoping to jump in, make 10-15%, then sell and move on to something else. Instead, I focus here on stocks that generally have solid long-term track records. Entering at the current level might make sense due to various factors.

Today, I want to highlight Seagate Technology Holdings (STX) as it has performed better than the S&P 500 over time and it also has performed much better than one of its primary competitors, Western Digital Corp (WDC). I also like the recent technical breakout on STX after languishing mostly during the 2022 cyclical bear market and the recent market correction from July to October:

Another positive with STX is that it pays a healthy $2.80 dividend ($.70 per quarter), which results in a 3.69% dividend yield, not a bad addition to the solid long-term capital appreciation.

Looking Ahead

Upcoming Earnings:

Earnings season is slowing down now and most big companies with calendar quarter ends (March, June, September, and December) have already reported their quarterly results. There are a few, however, that do report in other months and you’ll see below that NVIDIA Corp (NVDA) is one of those. The following earnings reports (market cap in parenthesis) are, in my opinion, at least relatively significant and worth watching. This is NOT a list of ALL companies reporting this week, so please be sure to check for earnings of any companies that you own or add:

  • Monday: A ($33 billion), KEYS ($24 billion), ZM ($19 billion)
  • Tuesday: NVDA ($1.2 trillion), LOW ($117 million), ADI ($90 billion)
  • Wednesday: DE ($109 billion)
  • Thursday: None – Market Closed for Thanksgiving Day Holiday
  • Friday: None – Market Closes Early at 1pm ET

Key Economic Reports:

  • Monday: Leading indicators
  • Tuesday: Existing home sales, FOMC minutes
  • Wednesday: Initial jobless claims, durable goods, consumer sentiment
  • Thursday: None – Market Closed for Thanksgiving Day Holiday
  • Friday: None – Market Closes Early at 1pm ET

Historical Data

I’m a true stock market historian. I am absolutely PASSIONATE about studying stock market history to provide us more clues about likely stock market direction. While I don’t use history as a primary indicator, I’m always very aware of it as a secondary indicator. I love it when history lines up with all my other signals, providing me much more confidence to make particular trades.

Each week, I’ll provide you the average annualized returns for each calendar day and by index. Here are the historical numbers for this week:

S&P 500

  • November 20: -32.39%
  • November 21: +55.64%
  • November 22: -1.21%
  • November 23: +49.61%
  • November 24: +127.98%


  • November 20: -90.10%
  • November 21: +74.67%
  • November 22: -17.21%
  • November 23: +34.13%
  • November 24: +230.95%

Russell 2000

  • November 20: -72.94%
  • November 21: +71.46%
  • November 22: -9.82%
  • November 23: +63.10%
  • November 24: +255.15%

The S&P 500 data dates back to 1950, while the NASDAQ and Russell 2000 information date back to 1971 and 1987, respectively.

We are now in the most bullish period of the calendar year. The close on October 27th through the close on January 18th is THE ABSOLUTE BEST TIME OF THE YEAR FOR U.S. EQUITIES – HISTORICALLY SPEAKING. Last week was an “ok” period for equities, but the upcoming week typically sees much more historically-bullish action and this bullishness extends through the first week of December.

Final Thoughts

As we move into the Thanksgiving holiday season, let’s keep a few things in mind:

  1. Historical bullishness should not be ignored. 73 years of data on the S&P 500 tell us that NOW is the best time of the calendar year to be bullish and to be long. Fight this historical bullishness at your own risk.
  2. The 10-year treasury yield ($TNX) has lost neckline support in a topping head & shoulders pattern, with its initial measurement pegged near the 4.10% level
  3. Key intermarket relationships point to the sustainability of the current S&P 500 rally; 4600 is the next significant test, with a breakout likely sending us higher to test the all-time high near 4820
  4. NVIDIA Corp (NVDA) reports its earnings on Tuesday after the bell; this will be significant not only for NVDA, but also for the entire semiconductor group ($DJUSSC). I expect big numbers from NVDA, but it has run a lot in November, now testing critical price resistance at 500.
  5. Small caps (IWM) have shown improvement, but continue to watch the KRE (regional banking ETF) and XBI (widely-diversified biotech ETF) for clues about future relative strength; these are the two industry groups that most heavily influence IWM performance.
  6. As I pointed out last week, TG Therapeutics (TGTX) is a strong short squeeze candidate, with over 27% of its float short. The closing breakout level of 11.88 provided was cleared on Friday’s close and we now see the result as TGTX is up more than 5.5% at my last look. Volume is picking up and there’s little overhead price resistance. Shorts could be covering big time later today. Wildly accelerating volume will be the major clue that a significant short squeeze is, in fact, underway. Short squeeze trades are ALWAYS extremely risky, but this one has the potential to fly this week.
  7. I want to wish everyone a very happy Thanksgiving holiday weekend. If you’re traveling to be with friends and family, please be safe!


If you’d like to share your thoughts on our Weekly Market Report, positive or negative, you can reach us at “[email protected]”.

Happy trading!


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In Bullish Trends, Seek Value and Momentum; Three Sectors to Watch as Year-End Rally Progresses

The combination of a pause in the Fed’s rate hikes and strong year-end seasonal tendencies have created an opportunity for investors to end the year on a positive note. The fly in the ointment, in the short term, could be a bad set of readings on the upcoming Consumer (CPI) and Producer (PPI) price gauges. Aside from that, the negative sentiment on Wall Street is still thick enough to push prices higher.

As I noted last week, “The stock market seems to have bottomed, as short sellers panicked and recently frightened buyers rushed back into the markets. It’s about time, as the signs of a pending reversal have been in place for the past two months, namely a slowing economy and fears about the Fed’s rate hike cycle, which have been mounting as investor’s pessimism rose to a fever pitch.”

On the other hand, Fed Chairman Powell proved once again that a few words can kill any rally, when he noted the central bank was “not confident” that inflation was fully vanquished on 11/9/23 and stocks sank. Whether that was just tough talk or a sign that he knows what the CPI and PPI numbers will show is anyone’s guess. Thankfully, the market recovered, although, as I discuss below, breadth remains weaker than one would hope for.

That said, there is no substitute for being prepared for any eventuality. For now, the trend is bullish, so here are three groups that should move higher, barring any unpleasant surprises.

It’s What’s Inside That Matters; Three Sectors Worth Watching as the Year End Rally Develops

Most investors focus on areas of the market which are exhibiting strength. That’s because, in bull markets, strength usually leads to further strength. This, of course, is the essence of momentum investing.

At the same time, it’s also useful to review the action in weak sectors, as underperformers are often future areas of value. Moreover, it’s important to know what you’re buying. Here is what I mean.

The software sector encompasses a wide swath of companies ranging from security companies to app developers, along with those in the increasingly popular AI sector. With so many companies, it’s often more practical to buy into a diversified portfolio, such as an ETF.

One such ETF is the Invesco Dynamic Software ETF (IGPT), recently renamed Invesco AI and Next Gen Software ETF, which is closing in on what could be a major breakout. But don’t let the title fool you; this ETF holds the usual large-cap tech stocks that typically rally when the tech sector moves into a rising trend, such as what is currently developing and is evident in the price chart for the Invesco QQQ Trust ETF (QQQ). QQQ holds many of the same companies, but currently trades at ten times the price of IGPT.

So, you can pay ten times more for QQQ, or get the same general market exposure via IGPT for a fraction of the price. Consider that IGPT is currently trading below $40 per share, which means you can own shares in Meta (META), Alphabet (GOOGL), Adobe (ADBE), and even NVDIA (NVDA) for a fraction of the price of each of these blue chips.

And here’s what the price chart is telling us regarding IGPT:

  • The ETF is back in bullish territory, as it just crossed above its 200-day moving average;
  • Accumulation/Distribution (ADI) is moving higher after a recent consolidation as short sellers leave the scene;
  • On Balance Volume (OBV) is in an established uptrend, as buyers come in; and
  • A move above $36 will likely take this ETF higher, as long as the bullish trend in the technology sector remains in place.

Another bullish sector which remains undervalued is the uranium mining sector, as in the Global X Uranium ETF (URA), in which I own shares and which is a core holding at Joe Duarte in the Money Nuclear power is slowly becoming an option for areas of the world which are trying to find a compromise between clean fuels and reliable power generation.

URA’s appeal has been boosted by the demise of the renewable power sector over the last few months, due to the expense burden and supply chain challenges required to build wind turbines. Note the difference in the performance of URA versus the First Trust ISE Global Wind Energy ETF (FAN).

For one, URA is in a bullish consolidation pattern after its recent breakout. Note the excellent support at $26, where the 50-day moving average and a large Volume-by-Price (VBP) bar continue to attract buyers. Moreover, note the bullish uptrend in OBV as buyers sneak into the shares.

Certainly, FAN is in a consolidation pattern of its own after its recent collapse. Note, however, that neither ADI or OBV have turned up yet, which means that there is currently little interest in these shares from bullish investors. On the other hand, from a contrarian standpoint, it’s not a bad idea to keep an eye on this ETF as the cycle works itself out. All it would take for this sector to bottom out would be something like a large infusion of government cash, such as what may be materializing in Europe, according to reports.

I recently recommended an ETF which is now breaking out in a big way. Join the smart money at Joe Duarte in the Money, where you can have access to this ETF and a wide variety of bullish stock picks FREE with a two-week trial subscription.

Bonds Retain Bullish Tone Ahead of Inflation Numbers

As I noted last week, bond yields have made at least a short-term top. In fact, just three weeks ago, the U.S. Ten Year note yield (TNX) hit the 5% point, an event that unhinged both stock and bond traders.

Since then, things have quieted down and TNX has settled into a trading range, with 4.5% and the 50-day moving average as the floor.

If the inflation numbers are bullish, and TNX breaks below 4.5%, expect a big move up in stocks.

Keep an eye on the SPDR S&P Homebuilders ETF (XHB), specially the $78-$80 area. If CPI and PPI are bullish and bond yields fall, XHB should rise as short sellers get squeezed. Note the improvement in ADI, as the shorts cover their bets, while OBV is still holding steady, as buyers remain patient.

I’ve recently posted several detailed articles on mortgage rates, bonds, and homebuilders at my Buy Me a Coffee page. You can access them here. For the perfect price chart set up, check out my latest Your Daily Five video here.

Market Breadth Lags Rally as Indexes Outperform

The NYSE Advance Decline line (NYAD) has bottomed out, but has yet to cross above its 50- or 200-day moving averages. So, for now, NYAD is neutral to slightly positive. If it doesn’t show a bit more pop in the next few weeks, it may signal that the rally will have short legs.

In contrast, the Nasdaq 100 Index (NDX) is nearing a breakout after rallying above its 50-day moving average. Both ADI and OBV turned higher as short sellers cover (ADI) and buyers move in (OBV). A move above 15,800-16,000 would likely extend the rally further.

The S&P 500 (SPX) is also lagging NDX, but has delivered a minor breakout above 4400. SPX is well above its 200-day moving average, returning to bullish territory after its recent dip below 4150. Moreover, it has now survived a test of the 4350 support area.

VIX is Back Below 20

The CBOE Volatility Index (VIX) is well below 20. This is bullish.

A rising VIX means traders are buying large volumes of put options. Rising put option volume from leads market makers to sell stock index futures, hedging their risk. A fall in VIX is bullish, as it means less put option buying, and it eventually leads to call buying. This causes market makers to hedge by buying stock index futures, raising the odds of higher stock prices.

To get the latest information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

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Good news! I’ve made my NYAD-Complexity – Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options

Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe’s exclusive stock, option and ETF recommendations, in your mailbox every week visit

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#Bullish #Trends #Seek #Momentum #Sectors #Watch #YearEnd #Rally #Progresses

Santa May Be Warming Up His Sled; What’s Next? Watch the Fed and the Bond Market

The traditional year-end rally may have started with last week’s liftoff on Wall Street, as the Fed’s rate hikes start to bite and the economy shows signs of slowing. Investors hope the economy slows just enough to reduce inflation.

The stock market seems to have bottomed, as short sellers panicked and recently frightened buyers rushed back into the markets. It’s about time, as the signs of a pending reversal have been in place for the past two months, namely a slowing economy and fears about the Fed’s rate hike cycle, which have been mounting as investor’s pessimism rose to a fever pitch. Moreover, the self-perpetuating talk of doom loops led to a bout of panic selling, which reversed as the Fed held rates steady and Friday’s employment report showed a cooling in the labor market.

Of course, there are no certainties in any market. And this rally could easily fizzle. But the longer stocks hold up and bond yields remain subdued, the higher the odds of the rally intensifying.

Buckle up! Santa may be warming up his sled.

The Signs Were There

I’ve been expecting a major reversal in both bonds and stocks since September when the selling in the U.S. Treasury market, and the subsequent rise in yields entered an absurd trading pattern. I chronicled the entire process, including the likelihood of a pending reversal in bond yields on October 15, 2023, when I wrote:

“The slightly-hotter-than-predicted PPI and CPI numbers certainly put a temporary damper on the recent short-covering rally in stocks and bonds, raising investor fears about further interest rate increases. But, as I’ve noted recently, fear is often the prelude to a buying opportunity. Such an opportunity may be developing in the U.S. Treasury Bond market and related interest-sensitive sectors of the stock market, such as homebuilders, real estate investment trusts, and select technology stocks.”

Prior to that, I had suggested that a historic buying opportunity in homebuilder stocks was approaching, while providing an actionable trading plan for such a development here.

Last week, in this space, I wrote: “The stock market is increasingly oversold, so investors should prepare for a potential bounce before the end of the year, especially given the usual bullish seasonality which begins in November and can run through January.”

Bond Yields Crash and Burn and Stocks Respond with Bullish Reversal and Broad Rally

What a difference a week makes, especially in the strange world of the U.S. Treasury bond market. Just two weeks ago, the U.S. Ten Year note yield (TNX) tagged 5%, a chart point which triggered heavy selling in stocks from the mechanical trading crowd, also known as commodity trading advisors (CTAs) and their hedge fund brethren. The selling was further enhanced by headlines about mortgage rates moving above 8%.

But as I noted here, the selling spree had the smell of panic, especially given the lack of a new low in the RSI indicator, when the New York Stock Exchange Advance Decline line (NYAD), as I describe below, made a lower low. The key was whether NYAD broke below its March lows, which it didn’t. This provided the perfect setup for a massive short squeeze, which is currently unfolding.

Here are some details. The U.S. Ten Year Note yield has rolled over, with two significant technical developments occurring:

  • TNX is now trading inside the upper Bollinger Band, which is two standard deviations above its 200-day moving average. This marks a return to a “normal” trading pattern;
  • It is also testing its 50-day moving average and the 4.5% yield area. Normal trading action suggests that a consolidation in this area should occur before TNX makes a move toward 4.3%; and
  • Bullishly for the homebuilder and housing-related real estate stocks, as well as the rest of the market, mortgage rates seem to have topped out as well.

Moreover, as I discuss below, the rally seems be quite broad, as measured by the New York Stock Exchange Advance Decline line. In addition, money is moving back into large-cap technology stocks, as in the Invesco QQQ Trust (QQQ), which also rebounded above its 50-day moving average. Especially encouraging on this price chart is the rally in On Balance Volume (OBV), which signals that the rally is being fueled by real buying along with short-covering, as evidenced by a rising ADI line.

Big tech certainly got a boost, as Microsoft (MSFT) continued its recent climb and is approaching a potential breakout which, if left unhindered, could well take the stock to the $400 area in the next few weeks.

But it’s not just big tech that’s rising. A less obvious member of the QQQ stable, food producer and packager Mondelez (MDLZ), has been quietly moving higher and is now approaching its 200-day moving average. MDLZ’s On Balance Volume (OBV) line is rising nicely as money piles into the shares.

Huge Potential Gains Lurk in Homebuilders

Even better is the unfolding rebound above the 200-day moving average in the SPDR S&P Homebuilders ETF (XHB), where OBV is exhibiting an equally bullish trading pattern. As I noted above, I issued a Buy alert on the homebuilders a few weeks ago, and thus subscribers to my service have been well-positioned for this move in the sector.

Consequently, the rally in the homebuilders may just be starting, especially if interest rates don’t rise dramatically from current levels. As the price chart above shows, mortgage rates may have topped out, along with bond yields. This reversal is already being reflected in the bullish action visible in the homebuilder stocks. Note the following:

  • Rates are still trading above normal long term trends.
  • The upper purple line on the chart is two standard deviations above the 200-day moving average.
  • Since mortgage rates follow the trend in TNX (above), the odds favor a further decline in mortgage rates, with the first downside target being 6.5%.

Note the nearly perfect correlation between falling bond yields (TNX), falling mortgage rates, and rising homebuilder stocks (SPHB).

Join the smart money at Joe Duarte in the Money You can have a look at my latest recommendations FREE with a two-week trial subscription. And for frequent updates on real estate and housing, click here.

Incidentally, if you’re looking for the perfect price chart set up, check out my latest YD5 video, where I detail one of my favorite bullish setups. This video will prepare you for the next phase in the market. 

Market Breadth Reverses Bearish Trend

The NYSE Advance Decline line (NYAD) did not remain below is March lows for long, and has now nearly fully reversed its bearish trend as it approaches its 200-day moving average. The price chart below shows the similarity between the unfolding market bottom and that which occurred in October 2022. The circled areas highlight this super cool technical phenomenon where the lack of a new low in the RSI, when NYAD made a new low, marked the bottom. Also note the double top in VIX, which is also repeated.

The Nasdaq 100 Index (NDX) rallied above its 50-day moving average, with both ADI and OBV turning higher as short sellers cover (ADI) and buyers move in (OBV).

The S&P 500 (SPX) also rebounded above its 200-day moving average, returning to bullish territory after its recent dip below 4150.

VIX is Back Below 20

The CBOE Volatility Index (VIX) didn’t stay above the 20 level for long, which is a bullish development.

When the VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures to hedge their put sales to the public. A fall in VIX is bullish, as it means less put option buying, and it eventually leads to call buying, which causes market makers to hedge by buying stock index futures. This raises the odds of higher stock prices.

To get the latest information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

#1 New Release on Options Trading!

Good news! I’ve made my NYAD-Complexity – Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options

Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe’s exclusive stock, option and ETF recommendations, in your mailbox every week visit

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#Santa #Warming #Sled #Whats #Watch #Fed #Bond #Market

Holiday Shopping Bonanza: Retail Stocks You Need to Watch



  • Since holiday shopping season is here it could be a good time to add some retail stocks to your portfolio
  • AMZN, WMT, COST, and TGT could be potential stocks to add to your portfolio as holiday shopping begins
  • Set alerts for these stocks so you can enter at opportune levels

The holiday season and discretionary spending can be synonymous, ringing in a boom in retail profits. And with Halloween in the rearview mirror, it’s time to strategize a few killer plays in the retail arena.

Perhaps it’s no coincidence that, upon running a StockCharts Technical Rankings (SCTR) report using the US Industries menu, the Dow Jones US Broadline Retail Index ($DJUSRB) emerged among the top outperformers with an impressive score of 98.9 (see below). The holiday shopping season has started, so it’s worth looking more closely at this industry. Retailers in this industry have diverse products and services that work across several sectors.

CHART 1: US INDUSTRIES SCTR RANKING. $DJUSRB ranked second in the US Industries category.Chart source: For educational purposes.

CHART 2: DAILY CHART OF $DJUSRB. The index is currently pulling back, but shows several support levels should the bounce fail to break above the most recent swing.Chart source: For educational purposes.

The index bounced off the 38.2% Fibonacci retracement level from the December 2022 low to the September 2023 high. It’s outperforming the S&P 500 index ($SPX) by over 6% and looks like it’s on the verge of moving even higher.

So, How Might Inflation Affect Holiday Spending?

According to recent consumer spending reports, cash is flowing out of pockets and into the hands of retailers despite inflation and mounting household debt. “Borrow and spend freely” seems to be the main theme as we head toward the end of 2023.

Still, you must consider the toll that inflation may eventually have on consumers’ spending pockets, especially when it comes time to play Santa Claus. And that makes the Dow Jones US Broadline Retailers Index particularly sturdy this holiday season.

In 2022, AMZN took the largest share of holiday shopping (around 41%). It’s also a large component of the $DJUSRB. Looking at the daily chart of AMZN below, you can see that the stock is outperforming the S&P 500 index ($SPX) by about 29%. It also has a strong SCTR score.

CHART 3: DAILY CHART OF AMZN. The recent slide in AMZN’s stock price suggests that buying momentum may be slowing.Chart source: For educational purposes.

Though AMZN has pulled back, it appears to be clawing to challenge its September high. However, there’s a deceleration in buying pressure, and you can view this more clearly if you look at the Chaikin Money Flow (CMF) in the lower chart panel. AMZN bounced strongly off the 200-day SMA line and broke above its most recent swing high of 134.50. It will have to challenge its 2023 high of 145.85 if its uptrend is to remain valid.

Let’s look at some of the other US large retailers, starting with Walmart (WMT).

CHART 4: DAILY CHART OF WMT. The stock price is about to challenge its all-time high, and the CMF shows that buying pressure is still strong.Chart source: For educational purposes.

WMT, too, is outperforming the S&P 500, and the buying pressure, as exhibited by the CMF, concurs with this reading in momentum. Though WMT’s price appears to be pulling back, it has several levels of support, including its 100-day and 200-day SMAs before its 50% Fib retracement. If WMT breaks above 165.75, it will have reached record highs, and right now, it looks poised to break above that level.

Like WMT, Costco (COST) benefits from a diverse suite of private-label products and economies of scale, allowing it to control costs better and maximize profits.

CHART 5: DAILY CHART OF COST. Investors seem indecisive about accumulating CSCO stock.Chart source: For educational purposes.

Technically, COST is experiencing higher levels of volatility as it approaches its all-time high above 600. It also outperformed the S&P 500, though its relative performance exhibits slight indecision. Its CMF reading is positive, but shows divergence over the last month (see the flat blue line on the CMF and compare it to Costco’s rising trajectory, leading to its pullback and the following fluctuations).

Although COST appears to have bounced off its 100-day SMA, if it falls further, it has plenty of technical support between 510 and 530, where the 38.2% and 50% Fib retracements are clustered along with the 200-day SMA.

The stock price for Target (TGT) presents a different scenario. Amid a high-interest rate environment, mounting theft, and, particularly, a strong consumer backlash against certain products, TGT shows the most epic falling knife scenario (see chart below) among the largest retail giants. Still, it’s an arguably solid company with a diverse portfolio of cost-competitive offerings.

CHART 6: DAILY CHART OF TGT. Ouch! However, the selling pressure looks like it’s drying up. If it breaks out to the upside, its reversal faces many headwinds.Chart source: For educational purposes.

It’s difficult to predict if the stock price has bottomed, but certain levels can help you gauge its advance and momentum once it begins to show signs of recovery. And the holiday season may provide the catalyst for TGT’s upside reversal.

TGT is caught within tight consolidation between roughly 106 and 113.50 after a 42% plunge from its 2023 high of 177.50. Its SCTR score of 13 and -38% underperformance against the S&P 500 underscore the severity of TGT’s drop. Any early signs of a recovery would begin with a close above resistance at 113.50. The CMF indicator paints a slightly optimistic picture of this likely upside break as selling pressure recedes, and buying activity sends the indicator above the zero line for the first time in four months.

But even if TGT bulls attempt to rally the stock, it has multiple resistance levels. Drawing a Fibonacci retracement from its 2023 peak to its lowest point, you can expect resistance between 132.50 (38.2%) and 140 (50%), a range in which the 200-day SMA will likely be met. Also, 125 and 137.50, the bottom and top of a previous rectangle formation, will likely provide additional resistance, adding to TGT’s technical headwinds (not to mention the consumer-driven headwinds that played a significant part in its near-term demise).

Actionable Levels

AMZN, WMT, and COST are all prone to pullbacks, while TGT awaits signs of a potential reversal. Each stock presents different technical scenarios, momentum profiles, and potential support levels. Where you choose to buy (if you’re bullish) depends on your level of aggressiveness and means of (bullish) confirmation. Fibonacci and SMA levels (as well as swing points) also present different stop-loss scenarios that can be trailed should you find yourself on the right side of the market.

The Bottom Line

As we enter the holiday season, retail stocks will likely take center stage. The Dow Jones US Broadline Retail Index ($DJUSRB) shines with a robust SCTR score. Its biggest component, Amazon (AMZN) faces challenges. Other large retailers show different scenarios—Walmart’s gaining ground, Costco is wavering, and Target is eyeing a comeback.

Add these four retail stocks to your StockCharts ChartLists and set alerts at the possible support and resistance levels shown in the above charts.

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.

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#Holiday #Shopping #Bonanza #Retail #Stocks #Watch

Many Reasons to Love and Hate AMZN Stock



  • Amazon stock has been falling ahead of earnings and is close to hitting the support of its 200-day moving average
  • When AMZN announce its Q3 earnings, investors will be interested in the company’s e-commerce and cloud services
  • Keep an eye on AMZN’s price action especially at critical support levels

If you’re feeling a little conflicted on Amazon’s (AMZN) near-term prospects and whether to take a bullish or bearish stance, it’s probably because of the many reasons—technical and fundamental—to consider either perspective.

Technical Reasons to Hate AMZN Stock: The Bearish Case

Despite AMZN’s strong YTD performance, the big picture shows it underperforming the S&P 500 ($SPX) by -29% and the Consumer Discretionary sector (using XLY as a proxy) by -18% (see weekly chart of AMZN below).

CHART 1: WEEKLY CHART OF AMZN. The current price action may be nothing more than a bear rally.Chart source: For educational purposes.

The upside trend break (see blue trendline) marks the stock’s reversal after bottoming at the beginning of 2023. But is this a mere correction? Once the rally hit the 61.8% Fibonacci retracement level, drawn from the 2021 peak to 2023 trough, the bears were jumping (and bulls lost heart).

What fundamentals support this bearish technical outlook? There are many…

Fundamental Reasons to Hate AMZN Stock: The Bearish Case

AMZN may have a diverse startup portfolio, but startups are going extinct, at least for now. With over 543 startup shutdowns recorded this year, the drop in cloud service demand will sting.

Also, AMZN’s stock price is down 25% from where it was in early January 2021. Macroeconomic challenges, such as high oil prices and interest rates, could hurt the company’s performance.

Lastly, Amazon is in an antitrust battle with the FTC over price manipulation and merchant lock-in. This could hurt the company and lead investors to sell.

Technical Reasons to Love AMZN Stock: The Bullish Case

CHART 2: DAILY CHART OF AMZN. The year-to-date picture shows a different situation, with price declining into potential critical support. Plus, buying pressure, as shown by the Chaikin Money Flow (CMF), appears to reveal a sharp surge.Chart source: For educational purposes.

Here’s a question: Are the bulls failing to see the big picture (long-term), or are they right in taking a more “current view of AMZN’s performance?

AMZN may be declining against the S&P 500, but it’s still outperforming it in the near term by 21%. As for XLY, AMZN’s year-to-date outperformance is quite pronounced and rising, up 22%. AMZN’s price action shows a sharp decline that began in September; however, by drawing a Fib retracement from the March bottom to the September top, representing the stock’s YTD surge, we can see that the stock’s price touched the 50% Fib level, which happens to coincide with the 200-day simple moving average (SMA).

Adding to the technical bull case, look at the Chaikin Money Flow (CMF) in the lowest panel. The CMF shows a sharp divergence between AMZN’s decline and the rise in buying pressure, indicating that more investors are buying than selling the stock (possibly). This bullish technical perspective is not without fundamental merit either.

Fundamental Reasons to Love AMZN Stock: The Bullish Case

Amazon has a diverse portfolio of startups. AWS has supported around 250,000 startups, including 83% of the world’s unicorns. Startups are slowing right now, but there’s the generative AI boom, which can increase demand for AI cloud services.

AMZN stock has had a strong year-to-date performance, up 50%, with the company’s revenue having grown across all of its business segments. Its diverse revenue streams also show signs of strength.

Overall, its dominance in e-commerce and cloud services, plus its strengthening digital ad revenue, all provide a strong case for its growth prospects.

Earnings Will Be a Critical Driver for AMZN’s Stock Directionality

Today’s earnings drop has everyone on edge. If today’s numbers show a hint of weakness or Amazon’s grip slipping, the bears will be ready to pounce, potentially sending the stock deeper into negative territory.

A couple of things to consider:

  • Bulls might find AMZN in “buy” territory down to $110, its 61.8% Fib level. Granted, there’s a reason to bet on a reversal in momentum and price (versus taking a riskier pre-emptive approach). A stop loss at around $107 would be reasonable, as it would invalidate the near-term technical bull case.
  • Bears are likely in position already, with many shorting the stock since September. Hopefully, they placed a stop loss right above $135, the most recent swing high point, to prevent from getting “squeezed” just in case AMZN reveals a blockbuster beat.

The Bottom Line

The conflicting forces of boom and doom are clashing fiercely as AMZN’s earnings report looms. The outcome dictates the stock’s immediate trajectory—surge or plunge. With a long-term technical landscape that paints a grim picture of potential bear rallies and a 25% nosedive since January 2021, the bears seem to be standing their ground. However, the bulls have a robust case, too, with a 50% spike in YTD performance, dominance in e-commerce, and a potential AI cloud services boom. Either way, today’s earnings are poised to tip the scales, a financial showdown and make-or-break moment for AMZN’s near-term fate.

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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.

Karl Montevirgen

About the author:
Karl Montevirgen is a professional freelance writer who specializes in finance, crypto markets, content strategy, and the arts. Karl works with several organizations in the equities, futures, physical metals, and blockchain industries. He holds FINRA Series 3 and Series 34 licenses in addition to a dual MFA in critical studies/writing and music composition from the California Institute of the Arts.
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#Reasons #Love #Hate #AMZN #Stock

It’s All About Risk and the Long Bonds

Monday, after a lot of spooky headlines, the SPDR S&P 500 ETF (SPY) touched its 23-month moving average (MA) or the two-year biz cycle breakout point right around 417.

Plus, the iShares 20+ Year Treasury Bond ETF (TLT) flashed green as did IWM, the small caps.

The big question is, can IWM close out October above 170?

If not, any rally will be short-lived.

Today was an interesting day.

SPY also cleared back over the 200-day MA, which if held, could mean more relief rally.

But, TLT is reversing as well, so what we don’t want is for the long bonds to outperform SPY.


  1. That would be risk-off and recessionary.
  2. It would embolden the already bold commodities to run, especially with the dollar falling.

Which we see as #stagflation.

From a technical standpoint, yes, this is a mean reversion.

However, if you look back to July, it is the 5th oversold rally in TLT.


The biggest fundamental dynamic is that inflation can go hyperbolic (it already is in certain soft commodities because of the geopolitical soup).

And, if the Fed relaxes now, one must wonder if they will be caught from behind again.

Nonetheless, for us, the most important aspect of this is how TLT performs against the SPY and how HYG (junk bonds) perform against the TLT.

Bulls want TLT to underperform both.

Note the ellipses and text on the chart of TLT or the 20+ Year long bonds.

Back in March, when we had the bank crisis flash crash, bonds signaled a flight to safety by outperforming the SPY starting March 7.

At the same time, the price was around 101.

Real Motion showed a bullish momentum divergence as TLT crossed over the 50-DMA long before the price did.

SPY crashed, and TLTs rallied to 109.10 in a matter of days.

Fast forward to today, TLT remains slightly underperforming the SPY.

The momentum indicator shows a mean reversion but not a bullish divergence.

Should TLT do what it did in March, that is, outperform the SPY, take that as a warning.

That is a sign of risk-off, and perhaps a harbinger of an oncoming recession; or worse, stagflation.

Let’s not freak out yet though.

It is always good to plan ahead yet act on price accordingly.

This is for educational purposes only. Trading comes with risk.

If you find it difficult to execute the MarketGauge strategies or would like to explore how we can do it for you, please email Ben Scheibe at [email protected], our Head of Institutional Sales. Cell: 612-518-2482.

For more detailed trading information about our blended models, tools and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.

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“I grew my money tree and so can you!” – Mish Schneider

Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

Hear Mish’s thoughts on earnings, the macro environment, and her three stock picks on Bloomberg BNN.

Ever thought of owning commodities? Hear what Mish says about the key commodities you should consider in this video.

Mish participates in Crypto Town Hall X Space. You can sign in to your X account and watch it here.

In this video, Mish talks about trading Garmin Ltd. (GRMN) on Business First AM.

Mish and Dale Pinkert discuss the disconnect between news and markets-and how to best invest right now in this video from ForexAnalytix’s pre-market show.

In this video from CMC Markets, Mish shares her short-term forecast for USD/JPY and popular commodity instruments ahead of the US PPI announcement and September’s Fed meeting minutes, with recent dovish comments from Fed officials suggesting a potential shift in the committee’s policies.

Mish joins Business First AM to discuss the market reaction to the war in Gaza in this video.

Mish discusses what’s needed for a market bottom on the Financial Sense Newshour podcast with Jim Puplava.

Mish takes over as guest host for David Keller, CMT on the Monday, October 9 edition of StockCharts TV’s The Final Bar, where she shares her thoughts in the daily Market Recap during a day of uncertain news.

To quote Al Mendez, “The smartest woman in Business Analysis @marketminute [Mish] impresses Charles with her “deep dive” to interpret the present Market direction.” See Mish’s appearance on Fox Business’ Making Money with Charles Payne here!

Mish covers bonds, small caps, transports and commodities-dues for the next moves in this video from Yahoo! Finance.

In this video from Real Vision, Mish joins Maggie Lake to share what her framework suggests about junk bonds and investment-grade bonds, what she’s watching in commodity markets, and how to structure a portfolio to navigate both bull and bear markets.

Mish was interviewed by Kitco News for the article “This Could Be the Last Gasp of the Bond Market Selloff, Which Will be Bullish for Gold Prices”, available to read here.

Mish presents a warning in this appearance on BNN Bloomberg’s Opening Bell — before loading up seasonality trades or growth stocks, watch the “inside” sectors of the US economy.

Watch Mish and Nicole Petallides discuss how pros and cons working in tandem, plus why commodities are still a thing, in this video from Schwab.

Coming Up:

October 24: Benzinga Pre Show

October 26: Cheddar TV on the NYSE

October 27: Live in-studio with Charles Payne, Fox Business

October 27: Live in-studio with Yahoo Finance!

October 27: Recorded in-studio with Investor’s Business Daily

October 29-31: The Money Show

Weekly: Business First AM, CMC Markets

November 1–13 VACATION

  • S&P 500 (SPY): 417–420 support
  • Russell 2000 (IWM): 170 now in the rearview mirror
  • Dow (DIA): 332 support pivotal
  • Nasdaq (QQQ): 351 recent low and support
  • Regional Banks (KRE): 35 next support
  • Semiconductors (SMH): 140 support.
  • Transportation (IYT): 225 pivotal
  • Biotechnology (IBB): Under 120 so 110 area next support
  • Retail (XRT): 57 key support still

Mish Schneider

Director of Trading Research and Education

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#Risk #Long #Bonds

Tesla Stock Has High Expectations: A Strong Pop or Plunge



  • Tesla’s stock formed a symmetrical triangle pattern leading up to Q3 earnings, indicating potential volatility amid indecision
  • TSLA stock broke below the symmetrical triangle after missing earnings
  • You can figure out the price target based on a measured move or average statistics

Sometimes, a stock’s price can tip the market’s hand leading up to an earnings report. You’ll see a strong rally or decline anywhere from days to months before a company lays bare its books. But when you see a chart pattern that hints at indecision, such as a symmetrical triangle, you’re likely in for a volatile move and a great upset, which can go either bullish or bearish.

Such is the case of Tesla (TSLA) over the last quarter. And as you can see, the market’s judgment favored the bears.

CHART 1: TSLA STOCK BREAKS BELOW SYMMETRICAL TRIANGLE. TSLA missed earnings expectations, which sent the stock price below the symmetrical triangle. Chart source: StockChartsACP. For educational purposes.

Let’s back up, look at the bull and bear case, and take a closer look at the pattern itself, its statistical performance, and, most importantly, how you might have traded it.

The Bull Case

Leading up to Q3 earnings, TSLA appeared to be on a roll. It outperformed its sector, Consumer Discretionary, and the S&P 500 index ($SPX) year-to-date.

TSLA was roughly 37% from its all-time high of $414.50, giving it room for growth. It’s the most profitable manufacturer in the EV space, and a lot of hope was riding on the company’s emerging Cybertruck production. So was the planned launch of its robo-taxi service in late 2024.

Much was riding on TSLA’s guidance as much as its earnings and revenue numbers.

The Bear Case

The bears’ case against TSLA’s Q3 performance was simple. Demand for big-ticket items slowed in Q3 amid a high inflation environment. Input cost compressed the company’s margins, especially in the midst of its expansion plans. Plus, TSLA is facing increased competition in the EV space. Most importantly, TSLA’s stock price, some argued, was still trading at a premium relative to other automakers. Overbought? Not technically, but fundamentally so, apparently.

TSLA’s Symmetrical Triangle Formation: A 34% Rise or 12% Fall?

TSLA may have outperformed its sector and the broader market before its earnings report, but that changed quickly after the stock price fell (see relative strength against Consumer Discretionary Select Sector SPDR (XLY) and $SPX in the chart below). The Death Cross further muddied the waters. This is where you have to look more closely at the pattern itself.

CHART 2: TSLA PERFORMANCE AGAINST S&P 500 AND XLY. Falling relative strength and the death cross are bearish signals. Chart source: StockChartsACP. For educational purposes.Symmetrical triangles or “coil” patterns are poor performers (according to Thomas Bulkowski’s Encyclopedia of Chart Patterns). They indicate a consolidation phase. They can go either direction despite being considered “continuation patterns.” (Toss a coin, anyone?).

Their value, however, is that they provide a clear setup for bulls and bears. According to Bulkowski, symmetrical triangles result in the following:

  • On average, symmetrical triangles rise 34% when they break upward and fall 12% when they break downward.
  • Their success rate in reaching an upward target (using the formation height) is 58% on the upside but only 36% on the downside.
  • BUT, symmetrical triangles also tend to reverse after a breakout 62% to 65% of the time, meaning you have to be flexible when trading this pattern.

How To Trade TSLA’s Symmetrical Triangle

Depending on whether you were leaning bullish or bearish, you could use Bulkowski’s historical average performance to set your targets: 34% to the upside or 12% to the downside.

CHART 3: CALCULATING TSLA’S PRICE TARGET BASED ON MEASURED MOVE. According to the measured move of the symmetrical triangle, TSLA stock can fall as low as $163. Chart source: StockChartsACP. For educational purposes.

Using statistical averages:

  • A bullish trader might have calculated 34% of the breakout price, projecting it above the current level. Obviously, that did not pan out, as TSLA broke down.
  • On the bear side, the breakdown took place at $250. The target, 12% below that price, would have given you a target of $220. It’s a good idea to place a stop loss just above the breakdown level.

Using a measured approach:

  • To find the measure, first calculate the pattern’s height by subtracting the lowest point from the highest point of the triangle (299.30 – 212.35). This gives you a height of 86.95.
  • If the price breakout is upward, then you would add the height (86.95) to the price level of the breakout. Since no upward breakout took place, there’s no target. However, the above graph includes where the upside target range might have been if TSLA had broken out toward the upside (red dashed line).
  • Since TSLA broke downward at $250, you subtract $86.95 to project a downside target of $163.05 (rounded to $163.00). As you can see, it greatly differs from using the average decline target of 12% (which was reached).

The Bottom Line

Tesla (TSLA) showcased an uncertain path leading up to its Q3 earnings. While the bullish outlook centered on its year-to-date performance, potential growth space, and dominance in the EV industry, the bearish perspective flagged concerns about the slowing demand in the face of inflation, compressed margins amidst expansion, and increasing competition.

The symmetrical triangle pattern, known for its unpredictable behavior, further muddied the waters. However, this pattern offers clear setups for optimistic and skeptical investors. The aftermath witnessed a bearish descent for TSLA, reflecting the market’s ultimate judgment and underscoring the importance of flexibility when trading in such patterns.

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.

Karl Montevirgen

About the author:
Karl Montevirgen is a professional freelance writer who specializes in finance, crypto markets, content strategy, and the arts. Karl works with several organizations in the equities, futures, physical metals, and blockchain industries. He holds FINRA Series 3 and Series 34 licenses in addition to a dual MFA in critical studies/writing and music composition from the California Institute of the Arts.
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Lagging Indicators Confirm Bearish Phase For Growth



  • Leading indicators help anticipate price reversals, while lagging indicators validate trend changes you’ve already observed.
  • RSI combines the qualities of leading and lagging indicators, helping investors to prepare for and react to trend reversals.
  • AAPL recently showed a bullish momentum divergence, meaning the leading indicator has triggered and now it’s all about the confirmation.

I have found that novice investors think of technical analysis as fairly homogeneous. At the end of the day, technical indicators are just basically analyzing price patterns, right?

Technical analysis is actually comprised of a fairly diverse set of tools to help investors understand investor sentiment by analyzing price and volume trends. While the common thread for technical analysis is a focus on the markets themselves (through price and volume) as opposed to factors that often influence market activity (for example, fundamental or macroeconomic analysis), it turns out that there are many different ways to quantify investor sentiment through charts.

In this article, we’ll talk about two main categories of technical indicators, how leading and lagging indicators represent different approaches to price analysis, and how we can apply these concepts to the current chart of Apple Inc. (AAPL).

Leading vs. Lagging Indicators

I like to classify technical indicators into general buckets: leading indicators, which are designed to anticipate a change in trend, and lagging indicators, which are more confirmational and tell you when a trend has actually reversed.

These two categories remind me of the broader labels of growth vs. value investing.  Growth investors tend to buy strong companies in the hope that they will continue to grow earnings over time. Value investors, on the other hand, tend to invest in companies trading for less than what they are worth based on some valuation assessment.

There isn’t necessarily a “right” or “wrong” way to invest, but there are different periods where growth or value approaches will tend to be more successful. The same can be said for the different types of technical indicators, and, for many investors, a balance of leading and lagging investors is probably the best approach.

I tend to favor lagging indicators in my own technical work, although I do employ some leading indicators as well. One indicator in particular, the Relative Strength Index (RSI), combines both leading and lagging capabilities to help define the trend and recognize trend shifts.

RSI as a Leading and Lagging Indicator

Toward the end of a bullish phase, the price will often continue higher, while a momentum indicator like RSI actually rotates lower. This indicates a lack of upside momentum and indicates that the uptrend may be nearing its end. This is where RSI can help anticipate potential turning points, as the signal occurs while the current trend is still in place.

Let’s review the chart of Apple going into its July high.

Note the consistent uptrend that began in January, providing a sudden reversal from a bearish Q4 2022. When AAPL made another new high in late June, the RSI spiked up to almost 80. During subsequent price highs in mid- and late-July, the RSI peaked around 70 and 65, respectively.

This “bearish momentum divergence” suggested that while the price of Apple was still going higher, the bullish momentum propelling the price action was beginning to dissipate. Sure enough, AAPL gapped down below its 50-day moving average soon after, beginning a bearish phase that may still be in place today.

RSI can also be used as a lagging or trend-following indicator, designed more to validate a potential price reversal you’ve already observed. Notice how, during the first half of 2023, the RSI remained in the 40 to 80 range? This range is more characteristic of a bullish trend than a bearish trend.

Now look at how the entire range of the RSI pushed lower starting in August, with the RSI now rotating between 20 and 60. This shift to a more bearish range could have helped a savvy investor rotate to more defensive positioning.

Outlook for AAPL

Since the July peak, Apple has now entered a downtrend comprised of lower highs and lower lows. The RSI became oversold during the August low, but was not oversold at the September low. Now we are observing a bullish momentum divergence, providing a leading indicator of a potential change in trend.

Considering the weight of the evidence, I’m seeing the price in a clearly defined downtrend channel. The low in September came at a confluence of support, just above the 200-day moving average and right around the 38.2% Fibonacci level. Now the stock is giving a second attempt at pushing above the 50-day moving average, after an unsuccessful attempt in late August.

While the RSI divergence tells me to be ready for a reversal, the clearly defined downtrend in price on weak momentum compels me to remain on the sidelines. A break below that confluence of support around $168-170 would validate the bearish thesis and suggest further downside into year-end 2023.

As a trend-follower, I have always felt that my main goals are threefold:

  1. Define the trend
  2. Follow that trend
  3. Anticipate when the trend is exhausted

By combining both leading and lagging technical indicators into your toolkit, you will be best prepared for changing market environments and trend reversals!



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

David Keller, CMT

Chief Market Strategist

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.

David Keller

About the author:
David Keller, CMT is Chief Market Strategist at, where he helps investors minimize behavioral biases through technical analysis. He is a frequent host on StockCharts TV, and he relates mindfulness techniques to investor decision making in his blog, The Mindful Investor.

David is also President and Chief Strategist at Sierra Alpha Research LLC, a boutique investment research firm focused on managing risk through market awareness. He combines the strengths of technical analysis, behavioral finance, and data visualization to identify investment opportunities and enrich relationships between advisors and clients.
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Follow the Smart Money; Technology and Homebuilder Stocks Loved Last Week’s Reversal in Bond Yields

The fear on Wall Street is rising to a fever pitch, as put option buyers recently accelerated their bets against the market while sentiment surveys reached levels of bearishness not seen since last October. As I’ve noted recently, fear is often the prelude to a tradable bounce. When fear runs high, it pays to follow the smart money, which is starting to flow back into stocks.

Fear is Reaching Extreme Levels

With so much fear among investors, stocks have now entered a familiar type of uncomfortable period; specifically, the type where even though the market is oversold, investors continue to fret and sell stocks in panic, as worries of higher interest rates continue to rise. The CBOE Put/Call ratio reading of 1.60 on 10/4/23 and the recent reading of 17 on the CNN Greed-Fear index are both bullish from a contrarian standpoint.

Of course, oversold markets can stay oversold for longer than anyone expects. Yet as long as the market does not make new lows, the odds of a tradable bottom building continue to rise. On the other hand, there is a light at the end of the proverbial tunnel, and that light is not an oncoming train. A sustained top and a subsequent retracement in bond yields will likely trigger a rebound in stocks.

Here’s the laundry list of worries:

  • The Fed continues to push for higher interest rates;
  • The market’s breadth has broken down; and
  • Bond yields remain near multi-year highs.

Yet that may all change rather quickly, as the market’s breadth is showing signs of recovery and bond yields are looking a bit top-heavy. Moreover, it looks as if bargain hunters are moving into two key areas of the market.

Smart Money Sneaks into Tech Stocks

It wasn’t long ago that Wall Street realized that AI stocks had risen too far too fast, and we saw a breakdown in the entire technology sector. Yet, money is quietly moving back into many of the same stocks that broke down when the so-called “AI bubble” burst in August.

The Invesco QQQ Trust (QQQ) is heavily weighted toward a handful of large-cap tech stocks, including Microsoft (MSFT) and Alphabet (GOOGL). And while it’s still early in what could be a bumpy recovery for the market, given the Fed’s continuing talk of “higher for longer” interest rates, QQQ, which often bottoms out before the rest of the market, may have already made its lows for the current pullback. At this point, the $350 area seems to be decent support, while $370 is the key short-term resistance level. Accumulation/Distribution (ADI) and On Balance Volume (OBV) are both improving as short sellers leave (ADI) and buyers start moving in (OBV).

A perfect example of the quiet flow of smart money can be seen in shares of Alphabet, which has remained in an uptrend throughout the recent market decline and is now within reach of breaking out.

Bond Yields Are Now Totally Crazy

Much to the chagrin of regular readers, I remain fixated on the action in the bond market. That’s because, if you haven’t noticed, stocks are trading in a direct inverse lock step to bond yields. In other words, rising bond yields lead to falling stock prices and vice-versa. You can thank the robot trader farms for that.

Recently, I’ve noted the U.S. Ten Year Treasury Note (TNX) yield has been trading well above its normal trading range. Specifically, TNX has been above the upper Bollinger Band corresponding to its 200-day moving average since August 11, 2022, except for a small dip back inside the band. As I noted in my recent video on Bollinger Bands, this is a very abnormal trading pattern, which usually precedes a meaningful reversal.

Indeed, something may be happening, and we may be in the early stages of the reversal I’ve been expecting. On 10/6/23, we saw an intraday downturn in TNX after what was initially seen as a bearish jobs report delivered an early rise in yields which took TNX to 4.9%.

The above chart shows that bond yields reached a greater extreme reading recently, as TNX closed three standard deviations above its 200-day moving average on 10/2/23 and 10/6/23 (red line at top of chart), expanding the distortion in the market and likely raising the odds of bond yields reversing their recent climb. Rising bond yields have led to rising mortgage rates and weakness the homebuilder stocks, which as I recently noted to subscribers of and members of my Buy Me a Coffee page here, may be poised for a rebound.

As the chart below shows, rates (MORTGAGE) have skyrocketed in what looks to be an unsustainable move.

Such a move would be expected to trip a major selloff in the homebuilder stocks. But what we saw was the opposite, as the SPDR S&P Homebuilders ETF (XHB) is starting to put in a bottom as bond yields look set to roll over.

The take-home message is that homebuilder stocks are now marching in lockstep to the tune of the bond market. Once bond yields fully reverse, the odds favor a nice move up in homebuilder stocks.

Prepare for the next phase in the market. Join the smart money at where I have just added five homebuilder stocks to the model portfolios. You can have a look at my latest recommendations FREE with a two week trial subscription. For frequent updates on real estate and housing, click here.

The Market’s Breadth Shows Signs of Stabilizing

The NYSE Advance Decline line (NYAD) fell below its 200-day moving average last week, but cemented its oversold status based on its most recent RSI reading near 30. Of some comfort is that the fledgling bottom in NYAD is developing near its recent March and May bottoms.

The Nasdaq 100 Index (NDX) has survived multiple tests of the 14500-15000 support area. ADI and OBV are both bouncing, which means short covering (ADI) and buying (OBV) are occurring simultaneously.

The S&P 500 (SPX) found support just below 4250 and looks set to test the resistance levels near the 20 and 50-day moving averages in the near future. ADI is rising as short sellers cover their positions. If OBV turns up, it will be even more bullish.

VIX Remains Below 20

As it has done for the past few weeks during which the market has corrected, VIX has remained stubbornly below the 20 area. A move above 20 would be very negative.

When the VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures to hedge their put sales to the public. A fall in VIX is bullish, as it means less put option buying, and it eventually leads to call buying, which causes market makers to hedge by buying stock index futures. This raises the odds of higher stock prices.

Liquidity Continues to Tighten

Liquidity is tightening. The Secured Overnight Financing Rate (SOFR), is an approximate sign of the market’s liquidity. It remains near its recent high in response to the Fed’s move and the rise in bond yields. A move below 5.0 would be bullish. A move above 5.5% would signal that monetary conditions are tightening beyond the Fed’s intentions, which would be very bearish.

To get the latest information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

#1 New Release on Options Trading!

Good news! I’ve made my NYAD-Complexity – Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options

Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe’s exclusive stock, option and ETF recommendations, in your mailbox every week visit

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