Stocks analyzed: Microsoft Point and Figure chart (MSFT), Advanced Micro Devices, Fortuna Silver Mines (FSM), Iamgold (IAG), Seabridge Gold (SA), Ctrip.com (CTRP) and the Volatility Index (VIX).
The past 3 sessions saw a large expansion in P&F sell signals across the market. P&F sell to buy signal ratios were 2.5 to 1 on Thursday, almost 6 to 1 on Friday and then yesterday a whopping 22 to 1. Yesterday, Monday, also saw some seriously heavy downside volume, 92% of it! That session has the hallmarks of a washout, coupled to bad-news sparking the drop, a snap-back here would not surprise us. Headlines yesterday were dire. The pattern to watch for on the harder hit charts, such as technology, would be Low Poles. We have just explored that signal in a YouTube video.
We start with the Volatility Index Point and Figure chart, a huge jump over recent sessions, higher by 91.7% over the past week! The Point & Figure chart shows an overextended column of Xs, so the dust could be about to settle. The VIX is also into its 2019 resistance ceiling.
The S&P 500 printed a 3 box reversal down yesterday. A sell signal is 145 points away. Even if a sell signal were to print, given the prevailing trend, it could prove to be a Bear Trap. Therefore, as it stands, the uptrend should be respected, and one should not knee-jerk to the present headlines. There have been two bullish breakouts since the Low Pole at the start of the year and no confirmed bearish patterns.
The NYSE Composite also printed a 3 box reversal down but here too, the move is perceived as a natural retreat of the up trend until proven otherwise. The index also exhibits a Low Pole and two Double Tops since the start of the year. A sell signal would print at 12200, some 300 points away from Monday’s close.
Medium-term breadth, the NYSE Bullish %, now has P&F direction pointing south. The move is insufficient to print a sell signal; a sell would register at 38%. The pull-back extends the sideways consolidation that has been underway since April. This chart too has not provided a reason (yet) to reduce exposure to the market.
Short-term breadth, the NYSE % 10-week moving average indicator, has dropped like a lead-balloon. The move over the past week has been swift, resulting in an overextended column of Os. The indicator is now in the oversold region of sub-30%. It may either snap-back from here as per June 2019 or base as per the two periods in 2018. The remainder of the week should provide clues as to which path is followed.
The S&P 500 Information Technology sector has been the worst performing industry over the past week, -8.2%. Despite the weakness, the Point & Figure chart is in reasonable shape. A sell signal is a safe distance away. The drop so far is six boxes deep, looking similar to the retreat in June of seven boxes. Current weakness has also carried down to a potential support level drawn across from the 2018 range ceiling. The primary uptrend is far from dead.
The relative ratio, Information Technology versus the S&P 500, remains in its long-term uptrend, sitting at a record high. The chart has not even reversed down, offering some confidence to the broader market.
FSM [PRICE DOUBLE TOP | INDEX RELATIVE LOW POLE - expected] | Target = $7.5, Stop = $3.5
The Fortuna Silver Mines Point & Figure chart is one of five precious metal miners to print a buy signal on Monday. A Double Top follows a Low Pole that bottomed across a 7 year support band. Ideally the Bearish Trendline drawn off the April 2018 peak needs to be defeated to bury the 3 year downtrend. Earnings due August 7th.
The FSM P&F relative ratio, against the NASDAQ 100, has just printed a 3 box reversal up. The turn occurred from a floor dating back to 2009.
IAG [PRICE 3SR| INDEX RELATIVE DOUBLE BOTTOM] | Target = $7, Stop = $3
The Iamgold Point & Figure chart also generated a P&F buy signal yesterday. The move, a Triple Top breakout, simultaneously activates a 3SR signal, a confirmed recovery back above the 2016 floor. That set-up implies a short-squeeze from here, back towards the range ceiling ($7). Results also due August 7th.
The IAG P&F relative ratio, again versus the NASDAQ 100, printed a 3 box reversal up yesterday from a 5 year floor. A relative buy signal is needed next.
SA [PRICE TRIPLE TOP | INDEX RELATIVE DOUBLE TOP - nearing] | Target = $24, Stop = $13.5 ($10.5 is too deep)
Seabridge Gold rallied to a new 52-week high on Monday, registering a Triple Top breakout. We researched momentum and that is fine, price action is not overbought. The price is now testing the peaks from 2016 and an extension beyond appears likely.
The relative ratio, against the NYSE Composite, is one box away from a Double Top breakout.
MSFT [PRICE TRIPLE TOP | INDEX RELATIVE DOUBLE TOP] | Target = $180, Stop = $118
The Microsoft Point and Figure chart hit a record high, just over a week ago, and the stock remains the top performer on the Dow Industrials this year, +30%. As with much of the market, it has pulled back, likely creating opportunity to join the long-term trend. A sell signal is a safe distance away. MSFT results two weeks ago were a tepid beat.
The MSFT P&F relative ratio, versus the NASDAQ 100, illustrates the determined uptrend since 2015. A test of the relative high from 2002 is the target.
AMD [PRICE DOUBLE BOTTOM | INDEX RELATIVE DOUBLE TOP] | Target = $35, Stop = $24
Although Advanced Micro Devices printed a sell signal yesterday, we are highlighting the chart as a buy-on-weakness candidate. The uptrend still stands and the first sell signal off a long-term high is not a reason alone to turn bearish. The 30-week moving average is at hand and that could offer a spring-board. News-flow from a contrarian perspective is supportive since results were a disappointment.
The P&F relative ratio, against the S&P 500, maintains a buy signal. Current relative weakness is of the same depth as per prior healthy retreats this year.
CTRP [PRICE DOUBLE BOTTOM | INDEX RELATIVE HIGH POLE] | Target = $26, Stop = $41
Chinese ADR Ctrip.com printed a sell signal on Monday, reasserting its correction of the past two years. Trading is dropping away from 10-week and 30-week moving average resistance. Price and relative charts both confirmed High Poles in April. Earnings not due until September 9th.
P&F relative ratio, versus the S&P 500, illustrates the underperformance over the past 3.5 years. Fresh Double Bottom imminent.