A Discounted View

Over the past year, investors have been lulled into a complacent state by the exceptional returns in the market accompanied by low volatility in price action. However, as of Tuesday the S&P 500 (SPX) experienced its largest recent one-day drop of -1.09%. Daily Perspective On the daily chart today’s drop in SPX is clearly defined as it deviates from the uptrend that has formed since the beginning of 2018. While we navigate through earnings season, the gap-down in SPX represents a meaningful difference in sentiment among market participants relative to the rest of January. As constituents of SPX continue reporting earnings, expectations are being repriced into the index. In the meantime, there are some noticeable developments on the daily chart . For example, the gap lower was so pronounced that the daily Relative Strength Index (RSI) finally closed below its overbought level which SPX had maintained throughout all of January 2018. At the very least this sign...

The price of ResMed Inc. (RMD) recently broke out of a resistance barrier on multiple timeframes. First, the monthly chart shows a clear break of resistance near the $60 level. Historically, this behavior in RMD and other stocks is constructive for a long set up . You can see from the past 10 years of monthly price data that RMD has a tendency to trend, consolidate for a while, and then trend again . At the point of breakout, a long position was unconfirmed by MACD, a trend indicator , but with further price improvement it exhibited a bullish crossover. Additionally, comparing RMD’s lows in its most recent range bound consolidation with MACD-H confirms its advance leading up to its breakout. Second, after zooming in one order of magnitude  shorter to the weekly time frame you can see a more granular view of the breakout from the monthly chart. From a trend perspective  we now see the price above its 40-week moving average ( 200SMA ) and a fairly consistent bottom ...

After the August 2015 sell-off the broad-based indexes found support and pivoted higher before month-end. However, by the latter half of September 2015 more selling pressure came into the market pushing the price of the S&P 500 Index (SPX) down to a near retest of its August 2015 lows while moving the value of the Russell 2000 Index (RUT) to new lows.  Even though the price action of these two indexes differed, the behavior of each respective Moving Average Convergence Divergence (MACD) Indicator was the same. Specifically, both MACD’s formed a higher low in late September 2015 after the August 2015 low was formed. Given the aforementioned similarities, MACD conveyed a powerful underlying message. In the case of RUT we observe that divergence formed between the lows of the price and the lows of the MACD lines. That is, as RUT formed a lower-low by the end of September 2015 its MACD was making a higher-low which is indicative of future price strength. MACD is categorized as a ...