Our President’s Comments

12/15/17

  • US equities fluctuated and then closed 0.3%-0.4% lower, partly due to increased uncertainty on tax reforms. Yesterday afternoon, Republican Senator Rubio noted he intends to oppose the tax bill as written unless there was a larger child tax credit (currently $1,100). He said GOP leaders “found the money to lower the top (individual tax) rate”, but “can’t find a little bit” more to help working class parents raising children. Although later on, President Trump said he is “very sure” Rubio will vote yes.

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  • Asian markets have followed the negative US lead trading lower. The Nikkei (-0.10%),China’s CSI (-0.73%) and Hang Seng (-0.98%) were all down while the Kospi is up 0.62%. The S&P fell 0.41%, with consumer discretionary the only sector in the green following the retail sales beat, while losses were led by materials and health care stocks. European markets were all lower, with the Stoxx 600 down 0.46%, impacted by utilities, financials stocks post the marginally dovish ECB meeting. Across the region, the DAX (-0.44%), FTSE (-0.65%) and CAC (-0.78%) all fell modestly.
  • Government bond yields were little changed (UST 10y +0.7bp; Bunds -0.2bp) but Gilts outperformed with yields down 4.2bp to the lowest since mid-September after the BOE retained a cautious economic outlook. The US dollar index and Sterling firmed 0.21% and 0.08% respectively, while Euro fell 0.41% post the ECB meeting. In commodities, WTI oil was up 1.01% despite IEA forecasts that new supply may grow faster than demand next year. Precious metals weakened and broadly reversed the prior day’s gains (Gold -0.20%; Silver -1.11%) while other base metals modestly increased (Copper +0.53%; Zinc +0.60%; Aluminum +0.95%).
  • In Switzerland, the SNB made no change to cash rates but did lift its inflation forecast and now expects it to reach its target in late 2020 mainly due to the Franc’s depreciation. However, the SNB President Jordan said “it’s still early, very early, to talk about (rate) normalization……there’s no risk of inflation, also inflation expectations are very well anchored at a much lower level.” Over in Norway, Norges Bank also left its rates unchanged, but the improved growth and inflation forecasts allowed the bank to bring forward its projected first rate hike, which is now expected to be in late 2018. The Krone rose 0.69% versus Euro yesterday.
  • Over in France, the central bank now projects GDP growth of 1.8% this year and 1.7% in 2018. The ECB’s Villeroy noted the French economic recovery is “significant and sustainable” but the problem is we’re hitting up against “structural limits” and need reforms to materially increase growth. He also added to the Bitcoin debate, noting it is “clearly not a currency, even a virtual one” and that it’s a “speculative asset” and those who invest in it do it at their own risks.
  • Ahead of the Catalonia elections on 21 December, the latest Metroscopia polls shows the anti-independence groups leading with a combined 44.9% support versus the separatists at 43.8. Elsewhere, Spain’s Supreme Court refused a request from Catalan separatist Jordi Sanchez that he be freed from jail to participate in the election.
  • In the US, the November retail sales ex-auto number was above market at 1% mom (vs. 0.6% expected) even with favorable revisions to the prior month. Following this solid report, the Atlanta Fed’s GDPNow estimate of 4Q GDP growth has increased to 3.3% saar versus 2.9% previously. The weekly initial jobless claims (225k vs. 236k expected) and continuing claims (1,886k vs. 1,900k) were slightly lower than expectations. Elsewhere, the December manufacturing US PMI was above market (55 vs. 53.9 expected), but services (52.4 vs. 54.7 expected) and the composite PMIs were both below (53 vs. 54.5 previous). Finally, headline import prices rose 3.1% yoy, but excluding fuel, growth was 1.4% yoy.
  • The UK’s November retail sales (ex-fuel) was well above expectations and rose 1.2% mom (vs. 0.4% expected) to the highest in seven months – with the strength partly due to the Black Friday discounts. Elsewhere, France’s final reading of the November CPI was revised lower to 1.2% yoy (vs. 1.3% expected), while Italy’s final CPI reading was in line at 1.1% yoy.
  • The conclusion of the EU Council summit will be the main focus for markets on Friday with leaders expected to endorse Brexit talks moving to the next stage. Away from that it should be fairly quiet with October trade data for the Euro area, along with the December empire manufacturing and November industrial production prints in the US the only data due.

 

Economic Calendar Releases

  • Market Focus: Industrial production, specifically the manufacturing component, has been the elusive indication for a factory sector where all other data are pointing to a very strong 2017 finish. Forecasters see only a moderate 0.3 percent gain for this component in today’s November report.
  • 3-Yr Note Settlement, 10-Yr Note Settlement, 30-Yr Bond Settlement
  • Empire State Mfg Survey: There’s only a slight hint of slack appearing in the Empire State index which hit Econoday’s consensus with a very strong 18.0 and the first indication on this month’s factory conditions. New orders remain robust at 19.5 with shipments even more robust at 22.4. But unfilled orders are in the negative column for a second month in row, at minus 8.7 following November’s minus 4.6, and labor expansion is slowing, to 5.1 for a 6.4 point decline. Another hint of slowing comes from 6-month expectations for new orders which are down a sizable 12.6 points to what is still however a very solid 41.1 for this reading. Delivery times, after contracting in November, are once again lengthening while input costs and selling prices are both on the rise, all signals of possible capacity constraints and potential overheating. Signs of easing in unfilled orders and employment aside, this report suggests that December’s factory activity will be near maximum strength. Watch later this morning for the manufacturing component of the industrial production report for the first hard economic data on November’s factory activity.
  • Industrial Production: A rise for mining offsets a dip for utilities making a modest 0.2 percent gain for manufacturing the story for November’s industrial economy. This report’s manufacturing component has been the only uneven indicator on the factory sector all year which limits the surprise of November’s results. Forecasters weren’t calling for much strength in the first place with Econoday’s consensus at only 0.3 percent for manufacturing. Vehicle production, after a run of strength, understandably eased in November to only a 0.1 percent increase with selected hi-tech also slowing but to a still useful 0.3 percent gain. And production of business equipment was even more positive at 0.5 percent and with construction supplies at 0.6 percent. Weakness on the manufacturing side is once again in consumer goods where volumes fell 0.4 percent to underscore the nation’s lack of competitiveness in this important category. Outside of manufacturing, mining volumes rose 2.0 percent in November to extend its leading performance to year-on-year growth of 9.4 percent. Utility output fell 1.9 percent with this year-on-year rate at 2.3 percent. Turning back for a comparison with manufacturing, this year-on-year rate is a very modest 2.4 percent. Overall industrial production rose 0.2 percent while capacity utilization rose 1 tenth to a 77.1 percent rate that, in contrast to the slew of anecdotal readings on the factory sector, points to plenty of spare capacity remaining. One notable positive in today’s report is an upward revision to October’s manufacturing production which now stands at a very outsized 1.4 percent, an isolated gain however that reflects hurricane effects. Given the strength of October manufacturing and despite November’s modest showing, most signals are pointing to an accelerating factory contribution to the fourth-quarter economy. Note that traditional non-NAICS numbers for industrial production may differ marginally from NAICS basis figures.
  • Atlanta Fed Business Inflation Expectations: The Atlanta Fed is reporting technical issues this morning. December’s business inflation expectations report should be released shortly.
  • Baker-Hughes Rig Count: The Baker Hughes North American rig count tracks weekly changes in the number of active operating oil & gas rigs. Used for drilling wellbores for wells that may eventually produce oil or gas, active rigs are essential for the exploration and development of oil and gas fields. Rigs that are not active are not counted. Components in the data are the United States and Canada with a separate count for the Gulf of Mexico (which is a subset of the U.S. total). The count includes only rigs that are significant users of oilfield services and supplies.
  • Treasury International Capital: These Treasury data track the flows of financial instruments into and out of the United States. Instruments tracked include Treasury securities, agency securities, corporate bonds, and corporate equities.

 

 

Our Technical Analysts’ Commentary

SPX Daily Chart

  • Another day of profit taking saw the S&P 500 fall 0.41% to end the day at 2652.01. The total intraday range was 16.08 points. The index is now likely to decline to the 20-day EMA, which is a critical support.
  • The RSI16 continues to show a negative divergence, which is a “pessimistic” sign.
  • The broader market also turned negative and the number of stocks at new 52-week highs has again dropped to double digits. This shows that the market participants are nervous at higher levels and are quick to take profits.
  • We continue to remain cautiously optimistic for the month of December. Nonetheless, we are actively taking profits or tightening the stops wherever possible.

 

Market Data

  • 1044 stocks advanced on the NYSE; 1935 stocks declined. 81 stocks made new 52-week highs; 50 stocks made new 52-week lows.
  • 904 stocks advanced on the Nasdaq; 2036 stocks declined. 92 stocks made new 52-week highs; 69 stocks made new 52-week lows.

 

Intraday Chart

  • The index could not recover after breaking down of the 2663 levels. An attempt by to pullback in the second half of the trading day was sold aggressively. As a result, the index closed near its lowest point of the day.
  • Today, a break below 2651 will sink the index to the next support of 2644. Rallies will face selling at 2664 and at 2672 levels.

 

 

Glossary:

  1. Ascending Channel – An ascending channel is the price action contained between upward sloping parallel lines. Higher pivot highs and higher pivot lows are technical signals of an uptrend. Trendlines frame out the price channel by drawing the lower line on pivot lows, and the upper line is the channel line drawn on pivot highs. Price is not always perfectly contained but the channel lines show areas of support and resistance for price targets. A higher high above an ascending channel can signal continuation. A lower low below the low of an ascending channel can signal trend change.
  2. Ascending triangle pattern– is a bullish formation that usually forms during an uptrend as a continuation pattern.
  3. Bearish Engulfing pattern – chart pattern that consists of a small white candlestick with short shadows or tails followed by a large black candlestick that eclipses or “engulfs” the small white one.
  4. Break– a rapid and sharp price decline
  5. Breakdown– price movement through an identified level of support, which is usually followed by heavy volume and sharp declines
  6. Breakout– a price movement of a security through an identified level of resistance, which is usually followed by heavy volume and an increased amount of volatility.
  7. Candlestick– a chart that displays the high, low, opening and closing prices of a security for a specific period. The wide part of the candlestick is called the “real body” and tells investors whether the closing price was higher or lower than the opening price.
  8. Correction – a reverse movement, usually negative, of at least 10% in a stock, bond, commodity or index to adjust for an overvaluation; generally temporary price declines interrupting an uptrend in the market or an asset; shorter duration than a bear market or a recession, but it can be a precursor to either.
  9. Descending Triangle pattern– A bearish chart pattern that is created by drawing one trendline that connects a series of lower highs and a second trendline that has historically proven to be a strong level of support.
  10. Doji – candlesticks that look like a cross, inverted cross or plus sign; forms when a security’s open and close are virtually equal for the given time period and generally signals a reversal pattern for technical analysts
  11. Double top – technical analysis to describe the rise of a stock, a drop, another rise to the same level as the original rise, and finally another drop.
  12. Gravestone doji – a type of candlestick pattern that is formed when the opening and closing price of the underlying asset are equal and occur at the low of the day.
  13. Head and Shoulders pattern – a chart formations that predicts a bullish-to-bearish trend reversal; believed to be one of the most reliable trend reversal appears. It is one of several top patterns that signal, with varying degrees of accuracy, that an upward trend is nearing its end.
  14. Inside Day formation– A candlestick formation that occurs when the entire daily price range for a given security falls within the price range of the previous day. Inside day often refers to all versions of the harami pattern and can be very useful for spotting changes in the direction of a trend.
  15. Long legged doji – a type of candlestick formation where the opening and closing prices are nearly equal despite a lot of price movement throughout the trading day. This candlestick is often used to signal indecision about the future direction of the underlying asset.
  16. Relative Strength Index – (RSI) is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100. Traditionally RSI is considered overbought when above 70 and oversold when below 30.
  17. Resistance – a price point on a bar chart for a security in which upward price movement is impeded by an overwhelming level of supply for the security that accumulates at a particular price level.
  18. Rounding Top pattern– is identified by price movements that, when graphed, form the shape of an upside down “U”; may form at the end of an extended upward trend and indicates a reversal in the long-term price movement; considered a rare occurrence.
  19. Support Level– refers to the price level below which, historically, a stock has had difficulty falling. It is the level at which buyers tend to enter the stock.

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12/14/17

  • The Fed raised rates by 25bp as expected, on a 7-2 vote with both the Fed’s Kashkari and Evans dissenting. The market seems to have taken a slightly dovish take on the FOMC with 10y treasury yields lower and the US dollar index down 0.71% for the day. In the details, the Fed now projects the labor market to remain strong with a lower unemployment rate of 3.9% and stronger GDP growth across the forecast horizon, particularly next year where growth is expected to be 2.5% (vs. 2.1% previous), in part due to the expected tax plans. Despite these positive revisions, the Fed’s forecast for core inflation and the dot plots are unchanged, with median expectations of three more hikes in 2018 and CPI of 1.9% in 2018 and 2.0% in 2019 & 2020.

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  • Yellen’s last press conference as the Fed Chair was fairly positive on a range of topics. On the economy, she said “I feel good about the economic outlook…risks are balanced and there’s less to lose sleep about now…” On US equities, she noted “the fact that those valuations are high doesn’t mean that they are necessarily overvalued” and on broader financial stability risks, no indicators she monitors “are flashing red or possibly even orange”. On the flatter yield curve, she noted “the yield curve is likely to be flatter than it’s been in the past” and that “it could more easily invert if the Fed were to even move to a slightly restrictive policy stance”. This is important as it indicates that the Fed aren’t too concerned about an inverted yield curve and could carry on hiking even if longer end yields stay low. Finally, on tax, she noted FOMC members “generally identified changes in tax policy as a factor supporting modestly stronger (economic) outlook, although many noted much uncertainty remains about the macro-economic effects of the specific measures”. Further, she added that the economic uplift from tax cuts “it’s not a gigantic increase in growth” and could be mostly short term.
  • Talking of tax reform, the plans are tracking well and could still become law by Christmas. President Trump noted the Senate and House negotiators have reached a tentative agreement and he hopes to sign the tax bill “in a very short period of time”. Some of the compromises noted by Bloomberg include: corporate tax rate of 21%, but begins from 2018, mortgage deduction limit of $750k, top individual tax rate of 37%, 20% deduction on pass through business income, and repeal the alternative minimum tax. Earlier yesterday, the Senate Democratic leader Schumer called on Republicans to delay their tax bill vote until Doug Jones (winner of the Alabama election) can vote on the legislation. However, the earliest that Jones can be seated is sometime between 26 December to 3 January, but the Republicans expect a full House and Senate vote on the final bill around next Tuesday (19 December), with the President expected to sign the “Tax Cut and Jobs Act” into law shortly after. Notably, Republican Senator McCain is currently away as he undergoes medical treatment, so things can still change given his crucial vote.
  • In China, the November macro data just released was broadly in line but slightly lower than the prior month. Both the IP and fixed assets investments matched expectations at 6.1% yoy and 7.2% respectively, but were 0.1ppt lower than the prior month. Retail sales were softer than expectations at 10.2% yoy (vs. 10.3%). Elsewhere, China’s central bank has slightly increased the borrowing costs it charges in open market operations following the Fed’s move, lifting the cost of the 7 and 28 day reverse repo agreement by 5bp.
  • US equities were mixed but little changed after bouncing around following the mix of news from the softer CPI, the FOMC meeting and progress on the tax plans. The S&P ended 0.05% lower while the Nasdaq and Dow rose 0.20% and 0.33% respectively. Within the S&P, financials led the losses (-1.27%), partly impacted by the dovish FOMC, while modest gains came from consumer staples and industrials stocks. European markets were all lower, with key bourses down 0.1%-0.4% as losses in utilities offset gains from tech stocks. Across the region, the Stoxx 600 (-0.24%), DAX (-0.44%) and FTSE (-0.05%) all fell modestly while Italy’s FTSE MIB led the losses, ending the day 1.44% lower. The VIX rose for the second consecutive day to 10.18 (+2.6%).
  • The US dollar index dropped 0.71% following the dovish FOMC, while the Euro and Sterling gained 0.72% and 0.73% respectively. In commodities, WTI oil fell 0.82% following a rise in gasoline stockpiles and OPEC raised its outlook for non-OPEC supply in 2018. Elsewhere, precious metals increased modestly (Gold +0.88%; Silver +2.16%) while other base metals also edged higher (Aluminum flat; Zinc +0.08%; Copper +0.67%).
  • November core CPI (ex food and energy) was weaker than expectations at 0.12% mom (vs. 0.2%) and 1.7% yoy (vs. 1.8%), partly impacted by a 1.3% mom decline in the price of apparel (the biggest monthly decline in 19 years). Notably, inflation on a three month and six month annualized basis was a tad firmer at 1.9%, but at this point there is limited evidence that the trend in core CPI is reaching the Fed’s target of 2%.
  • In the UK, the October unemployment print was slightly higher than expectations at 4.3% (vs. 4.2% expected) with the number of people in work down 56k (vs. -40k expected) – the fastest pace in almost 2.5 years. Elsewhere, wage growth rose the most since January but was in line with expectations at 2.5% yoy, while the claimant count rate was steady mom at 2.3%. In Europe, the October Industrial Production was above market at 0.2% mom (vs. 0% expected) and 3.7% yoy (vs. 3.2% expected), but Italy’s IP was below consensus at 3.1% yoy (vs. 3.4%). Finally, the final reading of Germany’s November CPI was unrevised at 0.3% mom and 1.8% yoy.

 

Economic Calendar Releases

  • Market Focus: Retail sales and the opening of the holiday shopping season will be the day’s focus with expectations for core sales clearly positive.
  • Weekly Bill Settlement
  • Jobless Claims: The first indication on the December labor market is very favorable. Initial claims fell 11,000 in the December 9 week to 225,000 which easily beats Econoday’s consensus for 239,000. The drop comes despite still high totals from hurricane-hit Puerto Rico where claims, at 5,740 in the latest week, remain about 4,000 higher than normal though down from earlier weeks including the December 2 week when claims from the territory totaled 7,281. Continuing claims in lagging data for the December 2 week are likewise favorable, down 27,000 to 1.886 million which takes the unemployment rate for insured workers down 1 tenth to a very low 1.3 percent. All the readings in this report outside of Puerto Rico are very low and point to a labor market that is at, or is very near, full employment.
  • Retail Sales: The consumer is in gear for the holidays as a very strong retail sales report lifts the outlook for fourth-quarter consumer spending. Retail sales surged 0.8 percent in November which is far beyond expectations and is 3 tenths over Econoday’s high estimate. The data include a strong upward revision to October which now stands at a 0.5 percent gain vs an initial increase of 0.2 percent. November’s strength comes despite a 0.2 percent decline in auto sales excluding which sales rose a full 1.0 percent. Core readings underscore all the strength: up 0.8 percent for both ex-auto ex-gas and for the control group. Most major components outside of autos show gains including a standout 2.5 percent jump in nonstore sales which speaks to unusual strength in e-commerce. Electronics & appliances appear to be early holiday favorites with these stores reporting a 2.1 percent jump on top of a 1.2 percent rise in October. Price discounting for apparel that was evident in yesterday’s consumer price report did not hold down totals for clothing stores which gained 0.7 percent for a second straight month. Restaurants also show strength, up 0.7 percent following October’s 0.4 percent rise. Consumer spending proved a little soft in the third-quarter GDP report at only 2.3 percent annualized growth but today’s report, including the revision, is certain to lift the outlook for fourth-quarter GDP. And it may even encourage talk that the economy, fed by unusual strength in the labor market, could be at the risk of overheating.
  • Import and Export Price:  A monthly jump in energy prices drove import prices 0.7 percent higher in November which were otherwise unchanged when excluding imported fuel. Petroleum prices jumped 7.2 percent for the largest monthly rise since October last year. Natural gas prices also show pressure, up 26 percent for the biggest jump since July last year. But the story of November import prices is no better than mixed as lower prices for foods, feeds, and beverages offset higher prices for nonfuel industrial supplies, consumer goods, and autos. Import prices for capital goods recorded no change in November. Export prices rose 0.5 percent in November but the gain is narrow, led by industrial supplies that offset lower prices for capital goods and automotive vehicles. Export consumer goods prices recorded no change. And agricultural prices fell 0.6 percent on lower prices for vegetables and meats that more than offset higher prices for fruit. Year-on-year, both import and exports are up 3.1 percent which are the most constructive showings since April. Yet, in a persistent negative, the nonfuel reading on the import side is up only 1.4 percent which unfortunately is right in line with other readings on core prices, all of them weak.
  • PMI Composite Flash: The flash Composite Purchasing Managers’ Index (PMI) provides an early estimate of current private sector output by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. The flash data are released around 10 days ahead of the final report and are typically based upon around 85 percent of the full survey sample. Results are synthesized into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains flash estimates of the manufacturing and services PMIs. The data are produced by Markit.
  • Bloomberg Consumer Comfort Index: The Bloomberg Consumer Comfort Index is a weekly, random-sample survey tracking Americans’ views on the condition of the U.S. economy, their personal finances and the buying climate. Details are available only to subscribers. In May 2014, the series range was changed to zero to 100 from minus 100 to plus 100.
  • Business Inventories: Business inventories have been climbing solidly in line with underlining sales but are expected to ease back in October. Lower inventories during a time of rising economic demand point to the need for restocking and are a plus for employment and production. Forecasters see a 0.1 percent draw for October inventories.
  • EIA Natural Gas Report: The Energy Information Administration (EIA) provides weekly information on natural gas stocks in underground storage for the U.S. and five regions of the country. The level of inventories helps determine prices for natural gas products.
  • 3-Month Bill Announcement, 6-Month Bill Announcement, 5-Yr TIPS Announcement
  • Fed Balance Sheet: The Fed’s balance sheet is a report showing factors supplying reserves into the banking system and factors absorbing (using) reserve funds. Essentially, the balance sheet shows the various Fed programs for injecting liquidity into the economy and how much the Fed has used each for adding or withdrawing reserves. This report is called Factors Affecting Reserve Balances – otherwise known as the “H.4.1” report.
  • Money Supply: The monetary aggregates are alternative measures of the money supply by degree of liquidity. Changes in the monetary aggregates indicate the thrust of monetary policy as well as the outlook for economic activity and inflationary pressures. Money supply is in terms of two components—M1 and M2 (the Fed formerly produced a version called M3 but no longer does so). M1 and M2 are progressively more inclusive measures of money: M1 is included in M2. M1, the more narrowly defined measure, consists of the most liquid forms of money, namely currency and checkable deposits. The non-M1 components of M2 are primarily household holdings of savings deposits, small time deposits, and retail money market mutual funds.

 

Our Technical Analysts’ Commentary

SPX Daily Chart

  • The S&P 500 rose to a new intraday lifetime high yesterday, however, it faced selling at higher levels and closed at 2662.85, down 0.05% for the day. The total intraday range was 9.03 points.
  • The health of the broader markets improved, as the number of advancing stocks outperformed the number of declining stocks. The number of stocks at new 52-week highs is also rising gradually.
  • We, however, find profit taking at higher levels. Therefore, we do not expect the markets to rally much higher from the current levels by the end of the year. Nevertheless, the markets are likely to end on a positive note in December.
  • We continue to tighten our stops as the stocks move higher. We shall buy aggressively once we get the much-awaited dip. Until then, most of our purchases will be for the short-term.

Market Data

  • 1661 stocks advanced on the NYSE; 1308 stocks declined. 141 stocks made new 52-week highs; 31 stocks made new 52-week lows.
  • 1804 stocks advanced on the Nasdaq; 1117 stocks declined. 105 stocks made new 52-week highs; 51 stocks made new 52-week lows.

Intraday Chart

  • Yesterday, the index broke out of 2670, but it could not sustain the higher levels. The index was pushed back towards the support of 2664. Another attempt in the second-half of the day to breakout of 2672 failed. As a result, the S&P 500 has formed a double top11 in the short-term. If the index breaks down of 2663 levels, it can fall to 2654 levels. On the other hand, if the index breaks out of 2672 levels today, a rally to 2681 is likely.

 

 

Glossary:

  1. Ascending Channel – An ascending channel is the price action contained between upward sloping parallel lines. Higher pivot highs and higher pivot lows are technical signals of an uptrend. Trendlines frame out the price channel by drawing the lower line on pivot lows, and the upper line is the channel line drawn on pivot highs. Price is not always perfectly contained but the channel lines show areas of support and resistance for price targets. A higher high above an ascending channel can signal continuation. A lower low below the low of an ascending channel can signal trend change.
  2. Ascending triangle pattern– is a bullish formation that usually forms during an uptrend as a continuation pattern.
  3. Bearish Engulfing pattern – chart pattern that consists of a small white candlestick with short shadows or tails followed by a large black candlestick that eclipses or “engulfs” the small white one.
  4. Break– a rapid and sharp price decline
  5. Breakdown– price movement through an identified level of support, which is usually followed by heavy volume and sharp declines
  6. Breakout– a price movement of a security through an identified level of resistance, which is usually followed by heavy volume and an increased amount of volatility.
  7. Candlestick– a chart that displays the high, low, opening and closing prices of a security for a specific period. The wide part of the candlestick is called the “real body” and tells investors whether the closing price was higher or lower than the opening price.
  8. Correction – a reverse movement, usually negative, of at least 10% in a stock, bond, commodity or index to adjust for an overvaluation; generally temporary price declines interrupting an uptrend in the market or an asset; shorter duration than a bear market or a recession, but it can be a precursor to either.
  9. Descending Triangle pattern– A bearish chart pattern that is created by drawing one trendline that connects a series of lower highs and a second trendline that has historically proven to be a strong level of support.
  10. Doji – candlesticks that look like a cross, inverted cross or plus sign; forms when a security’s open and close are virtually equal for the given time period and generally signals a reversal pattern for technical analysts
  11. Double top – technical analysis to describe the rise of a stock, a drop, another rise to the same level as the original rise, and finally another drop.
  12. Gravestone doji – a type of candlestick pattern that is formed when the opening and closing price of the underlying asset are equal and occur at the low of the day.
  13. Head and Shoulders pattern – a chart formations that predicts a bullish-to-bearish trend reversal; believed to be one of the most reliable trend reversal appears. It is one of several top patterns that signal, with varying degrees of accuracy, that an upward trend is nearing its end.
  14. Inside Day formation– A candlestick formation that occurs when the entire daily price range for a given security falls within the price range of the previous day. Inside day often refers to all versions of the harami pattern and can be very useful for spotting changes in the direction of a trend.
  15. Long legged doji – a type of candlestick formation where the opening and closing prices are nearly equal despite a lot of price movement throughout the trading day. This candlestick is often used to signal indecision about the future direction of the underlying asset.
  16. Relative Strength Index – (RSI) is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100. Traditionally RSI is considered overbought when above 70 and oversold when below 30.
  17. Resistance – a price point on a bar chart for a security in which upward price movement is impeded by an overwhelming level of supply for the security that accumulates at a particular price level.
  18. Rounding Top pattern– is identified by price movements that, when graphed, form the shape of an upside down “U”; may form at the end of an extended upward trend and indicates a reversal in the long-term price movement; considered a rare occurrence.
  19. Support Level– refers to the price level below which, historically, a stock has had difficulty falling. It is the level at which buyers tend to enter the stock.

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