One effective way to spot potential market opportunities on a sector level is to regularly monitor  Bullish Percent Index (BPI) readings for each sector. Sector-focused BPIs tell you the percentage of stocks generating Point & Figure Buy Signals. From that point on, you can drill down to specific industries to find ETFs or stocks presenting tradable opportunities.

On Wednesday morning, following an encouraging CPI report and a strong kick-off to quarterly bank earnings, the BPI for the financial sector ($BPFINA) dramatically rose.

FIGURE 1. BPI FOR FINANCIAL SECTOR ($BPFINA). After a selloff, 56% of stocks in the financial sector triggered P&F buy signals.Chart source: StockCharts.com. For educational purposes.

After hovering above the 70% line for months, a threshold that signals potential overbought conditions, $BPFINA declined in December, falling short of touching the “oversold” threshold of 30%. On Wednesday, it jumped above 50%, a line that favors the bulls as it indicates that over 50% of stocks within the sector are generating P&F buy signals.

In addition to a tempered CPI report, one which followed a similar PPI reading from the previous day, strong bank earnings were a key driver behind Wednesday’s dramatic market rally, particularly the big players: JPMorgan Chase (JPM), Goldman Sachs (GS), Wells Fargo (WFC), and Citigroup (C).

Let’s use PerfCharts to compare the SPDR S&P Bank ETF (KBE), our bank industry proxy, to these four names. KBE provides an equal-weighted representation of small-, mid-, and large-cap bank stocks, giving a wider context to view relative performance.

FIGURE 2. PERFCHARTS OF KBE, JPM, GS, WFC, AND C. Note that all four banks are outperforming KBE.Chart source: StockCharts.com. For educational purposes.

This quick view tells you that in the last year, the “big four” have been outperforming the broader banking industry. Wells Fargo and Goldman Sachs are leading the pack, followed by JPMorgan Chase and Citigroup.

Suppose, however, you wanted to take a diversified position by going long KBE, anticipating the possibility that the banking industry might see a favorable year, especially under the new White House administration. Take a look at a daily chart of KBE.

FIGURE 3. DAILY CHART OF KBE. After losing bullish momentum, KBE is at a juncture that is neither definitively bullish nor bearish. Chart source: StockCharts.com. For educational purposes.

Here are a few key observations about the chart:

• The ZigZag line clearly shows the swing points identifying when the uptrend and near-term downtrend were broken (remember, uptrend = HH and HL, and the opposite is true of a downtrend).
• The orange circles highlight the nearest swing low and high points, both of which were breached, making the near-term uptrend or downtrend uncertain at this time.
• For the downtrend to resume, KBE would have to fall below $53, the November low (see blue dotted line) that served as support.
• For a new uptrend to take place, KBE must stay above $53 and eventually break above potential resistance at $58 (see red dotted line) before challenging the two November highs.

In short, it’s a wait-and-see moment. If you entered early, a stop-loss below $53 or any of the consecutive swing low points (see ZigZag) can be helpful.

If you’re considering investing in individual banking stocks, among the four big banks reporting outstanding earnings results, Citigroup made a new 52-week high. I identified this using the StockCharts New Highs Dashboard panel.

FIGURE 4. NEW HIGHS TOOL. Citigroup made a new 52-week high on Wednesday morning and is worth a closer look.

Let’s take a closer look. Below is a daily chart of Citigroup.

FIGURE 5. DAILY CHART OF CITIGROUP.  A steady uptrend culminating in a bullish yet parabolic jump.Chart source: StockCharts.com. For educational purposes.

A couple of main points:

• Citigroup saw a tremendous jump Wednesday as its Q4 earnings beat Wall Street’s expectations; analysts’ fundamental targets have been revised to as high as $102, with $80 as the median price target.
• The Relative Strength Index (RSI) barely entered overbought territory (see orange circle), indicating strong momentum.
• The Accumulation/Distribution Line (ADL) is recovering after a prolonged drop in money flows.
• The On Balance Volume (OBV) shows significant buying pressure.

As Citigroup makes new highs, its parabolic move may be countered by a slight pullback. If so, the scenario is straightforward. If you look at the ZigZag lines and the support levels of the two most recent swing lows (see dotted blue lines), you can identify the prices that, if broken, could call the stock’s uptrend into question.

These levels, both of which should serve as support, are especially critical for any trader who has opened a long position. Also, monitor the $74 range that coincides with the last two consecutive swing high points. While these highs are near the current price, they could still act as a support level if the stock pulls back.

If you’re looking to enter a position, it may be wise to wait and observe how the price reacts to any of the support levels before deciding to go long. If the price falls below these levels, additional support could emerge at subsequent swing lows. However, in the case of a significant reversal, you would need to reassess the trend to determine whether support levels represent buying opportunities or merely temporary rally points in a bearish trend.

At the Close

Financials are showing signs of recovery and renewed momentum, with $BPFINA crossing a key bullish threshold. Strong bank earnings are driving market sentiment, with  Citigroup making a new 52-week high.

What to do: Add Citigroup to your ChartLists. Use a basic support and resistance perspective to guide your decisions and watch the swing points to determine the status of the trend.

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.

In this exclusive StockCharts video, Joe demonstrates how to use the 1-2-3 reversal pattern as a buy signal on the weekly chart. This approach can be used when the monthly chart is in a strong position. Joe shares how to use MACD and ADX to help when the trendline pattern isn’t clear, then shows the commodity charts and the shifts that are taking place. Finally, he goes through the symbol requests that came through this week, including VST, BLK, and more.

This video was originally published on January 15, 2025. Click this link to watch on Joe’s dedicated page.

Archived videos from Joe are available at this link. Send symbol requests to stocktalk@stockcharts.com; you can also submit a request in the comments section below the video on YouTube. Symbol Requests can be sent in throughout the week prior to the next show.

The December Producer Price Index (PPI) came in cooler than expected, as equities rose in early trading, sold off, and then rebounded.

The Dow Jones Industrial Average ($INDU), S&P 500 ($SPX), S&P 400 Mid-Cap Index ($MID), and S&P 600 Small-Cap Index ($SML) closed higher. The Nasdaq Composite ($COMPQ) and the Nasdaq 100 Index ($NDX) closed lower. There’s concern the equity market is getting toppy.

Will the December CPI and bank earnings on Wednesday be able to juice the markets and turn investors optimistic? Let’s dive in.

FIGURE 1. THE STOCKCHARTS MARKET OVERVIEW PANEL. You can get a big-picture view of the entire stock market in this panel. Image source: StockCharts.com. For educational purposes.

Around the Market in Sectors

Utilities, Financials, Materials, and Industrials were the best-performing sectors, followed by Energy and Real Estate. The StockCharts Market Carpet below gives a bird’s eye view of Tuesday’s stock market’s performance.

FIGURE 2. STOCKCHARTS MARKETCARPET FOR TUESDAY JAN. 14. Utilities, Financials, and Industrials were the top three performing sectors.Image source: StockCharts.com. For educational purposes.

While Technology wasn’t the worst-performing sector — it eked out a 0.26% gain — the largest cap-weighted stocks were in the red. It was a similar scenario in the Communication Services and Consumer Discretionary sectors.

The Healthcare sector was the worst-performing sector on Tuesday, thanks to Eli Lilly’s loss of 6.59%.

Equity indexes have been chopping around. There needs to be more upside movement to confirm further bullishness.

The S&P 500 and Nasdaq are trading below their 21-day exponential moving average (EMA), which is trending lower. The moving average convergence/divergence (MACD) for both indexes is declining (see chart below).

FIGURE 3. S&P 500 INDEX AND NASDAQ COMPOSITE. The 21-day EMA and MACD need to reverse and turn higher to confirm a reversal.Chart source: StockChartsACP. For educational purposes.

The MACD line needs to turn upward and cross above its signal line to confirm a reversal. As of Tuesday’s close, it looks like it will be a while before that happens, but the stock market can shift on a dime.

All Eyes on Banks

Although the December Consumer Price Index (CPI) is expected on Wednesday, investors will have their eyes and ears peeled on bank earnings. Citigroup (C), JP Morgan Chase (JPM), Wells Fargo (WFC), and Goldman Sachs Group (GS) are up first. Bank earnings set the stage for earnings season, and strong reports from the big banks could fuel investor optimism, which the stock market badly needs. However, banks are an interest rate-sensitive industry group, and a hotter-than-expected CPI number could damper earnings. The dialing back of interest rate cuts this year is front and center in investors’ minds.

The SPDR S&P Bank ETF (KBE) is trading just below its 21-day EMA and the S&P Financial Sector Bullish Percent Index (BPI) is at 44.44 (see chart below). This is still not bullish — it’ll have to move above 50 — and the EMA needs to turn upward.

FIGURE 4. DAILY CHART OF SPDR S&P BANK ETF. Things haven’t looked rosy for banks since the end of November. What will it take to shake this interest-rate-sensitive group of stocks?Chart source: StockCharts.com. For educational purposes.

The bottom line: A hotter-than-expected CPI and lukewarm earnings from the banks could send the broader indexes lower. Investors seem to be somewhat nervous, so it’s not surprising to see the broader indexes grinding sideways. Add to that the possibility of only one interest rate cut in 2025 and uncertainty surrounding the incoming administration, and you have a situation where you need that inflation number to be cold and bank earnings to be stellar to see positive price moves. You don’t want to miss Wednesday’s stock market action.

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.

Will small cap stocks finally take on a leadership role in 2025? In this video, Dave provides a thorough technical analysis discussion of the Russell 2000 ETF (IWM) and how that compares to the current technical configuration of the S&P 500 index. He also shares three charts he’ll be watching in the coming weeks to determine whether small caps are more likely to outperform their large cap counterparts.

This video originally premiered on January 14, 2025. Watch on StockCharts’ dedicated David Keller page!

Previously recorded videos from Dave are available at this link.

Gold has been in the headlines over the last few months, perhaps more so now than in years. This heightened attention stems from shifts in global conditions, including worldwide inflation, escalating geopolitical tensions, a surge in central bank gold purchases, de-dollarization efforts, and the influence of BRICS nations.

If you follow financial media, $3,000 an ounce is the key number, according to analysts from Goldman Sachs, Bank of America, and Citi research, though their timings may vary.

Regardless, the global economy can change a lot over the next few months, especially when the new White House administration takes hold. So, despite analyst projections, keep a close eye on the technical action, as it will likely reflect these changes moving forward.

The weekly chart of gold futures ($GOLD) below gives a wider perspective on gold prices today.

FIGURE 1. WEEKLY CHART OF GOLD FUTURES. Note how gold started going slightly parabolic in March 2024. Is it topping?Chart source: StockCharts.com. For educational purposes.

Gold began its upward trend after hitting a low during the fall of 2022. Throughout most of 2023, the yellow metal remained trapped within a broad trading range. However, in March 2024, gold broke out of this range, gaining significant momentum. This rally culminated in a three-month consolidation pattern, which is where gold is today.

Side note: While this consolidation pattern may resemble a symmetrical triangle to many, it lacks a few key characteristics—especially in terms of volume—so I am reluctant to label it as such.

Gold is generally considered to have a negative correlation with the US Dollar ($USD). As shown in the price overlay, the dollar has been rising since October 2024. Typically, when the dollar strengthens, gold prices decline. However, gold’s reaction to the dollar’s recent advance appears to be relatively subdued so far. So where does that leave us now, with rate-cut uncertainties weighing on market sentiment and inflation data, namely the CPI and PPI, set for release this week?

Shift over to a daily chart comparing $GOLD with the SPDR Gold Shares (GLD), a popular choice for stock investors seeking exposure to gold. I’ll compare both charts since they differ slightly.

FIGURE 2. DAILY CHART OF GOLD FUTURES AND GLD. Note the differences between the ETF and the futures, despite their correlations. Note that $GOLD is EOD, so you are not seeing the current decline at the time of writing.Chart source: StockCharts.com. For educational purposes.

The difference between gold in the futures market and GLD is quite notable. Since futures trade 24 hours a day, price gaps are rare. Additionally, trading volume differs slightly, with the futures market typically attracting larger institutional traders compared to GLD.

If you follow financial news, you may have noticed that many analysts highlight $2,600 as a key support level, suggesting that gold has the potential for further upside. This would be comparable to $238-$240 in GLD. If gold breaks below those levels, the next swing low, one that marks the lowest price point of the consolidation, it would be near $2,544, and for GLD it’s at $236. A break below these levels would invalidate the current uptrend and potentially lead to more downside.

In this scenario, it’s important to reevaluate the broader context—considering technical, fundamental, and geopolitical factors—to gain a clearer understanding of what might be unfolding.

If you’re curious about the momentum and money flow for $GOLD and GLD, you’ll notice a slight difference in their readings. This disparity could provide some actionable insights.

Take a look at a daily chart of gold futures:

FIGURE 3. DAILY CHART OF GOLD FUTURES. Compare this to the GLD chart below, which has the same set of indicators.Chart source: StockCharts.com. For educational purposes.

• The Relative Strength Index (RSI) shows a slight rise in momentum starting at the pattern’s low shown in the previous chart; currently, the RSI is above the 50-line and rising.
• The Accumulation/Distribution Line (ADL) marks the difference between the futures and the ETF. Here, the ADL line has risen above the price whereas it had been moving below it and then unison to it. This paints a picture of bullish accumulation potentially leading price toward a positive breakout.

The daily chart of GLD doesn’t show the same ADL reading.

FIGURE 4. DAILY CHART OF GLD. The ADL reading is declining rather than ascending here.Chart source: StockCharts.com. For educational purposes.

The RSI is the same as the $GOLD chart above, but the ADL in GLD’s chart appears to be descending rather than ascending. This suggests that money flow is decreasing in GLD, while it is increasing in the gold futures market.

Here’s one way to interpret this: If the ADL is rising in the futures but declining in the ETF, it could indicate a divergence in behavior between both markets: institutional and large-scale traders are accumulating positions, signaling confidence in gold, while retail investors are taking profits, less certain about gold’s prospects or more concerned about its risks.

Essentially, this brings up the question: If the institutional traders are the so-called “smart money,” are they going to lead gold higher before the retail crowd jumps in? That’s something to keep in mind as you chart the market.

At the Close

Gold remains a focal point in today’s market, much of it driven by economic and macroeconomic concerns. If gold prices break out above or below its current consolidation range, keep an eye on the key levels. Also, note that institutional actions currently differ from retail sentiment. Is the “smart money” leaning more bullish? That’s something to consider in the days ahead.

Again, the larger economic context is slippery and subject to variants, meaning conditions can change quickly. So, if you want to invest in gold, monitor these changes closely.

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.

In this video, Tony starts the week with a very different tone as he looks at how markets are currently playing out. He the shares individual trade ideas, pointing out which ones they continue to have a bullish or bearish outlooks on. He looks at some key stocks including META, NVDA, AAPL, and more. This segment is meant to be the foundation of all of the trade ideas that OptionsPlay sends to members throughout the week.

This video premiered on January 13, 2025.

In this exclusive StockCharts video, Julius takes a look at asset class rotation on Relative Rotation Graphs. He then addresses the 6 sectors that are NOT in the “best five sectors” for this week. To conclude, he dives into the Technology sector to find some of the best performing (relative) stocks.

This video was originally published on January 13, 2025. Click on the icon above to view on our dedicated page for Julius.

Past videos from Julius can be found here.

#StayAlert, -Julius

To understand what makes the Dow Jones tick, you have to first understand one of the key differences between the Dow Jones and the S&P 500 indices. There are a few, but none more critical than the following:

Index Weighting

The S&P 500 is market-cap weighted, meaning that companies with the highest market capitalization have a stronger hand in moving the S&P 500 index value. Currently, these are the companies that play the largest role in moving this benchmark index, including their weighting:

• AAPL – 7.58%
• NVDA – 6.59%
• MSFT – 6.27%
• AMZN – 4.11%
• GOOGL – 4.02%

These are 5 of the Mag 7 stocks and they carry 28.57% of the entire weighting of the benchmark S&P 500 index. It’s easy to see how the S&P 500 can be swayed easily by the performance of just these 5 stocks.

Well, guess what? We need a cute lil name for the Top 5 price-weighted stocks in the Dow Jones, because their collective weight is 32.43% of the entire Dow Jones Industrial Average. The Dow Jones, by contrast, is a price-weighted index. The highest priced stock carries the most weight, while the lowest priced stock carries the least weight. Market capitalization plays NO role in the weighting. Want to know who the “Fabulous 5” are? Here ya go:

• GS – 8.25%
• UNH – 7.29%
• MSFT – 6.07%
• HD – 5.60%
• CAT – 5.22%

All 5 of these stocks now trade beneath their declining 20-day EMAs and only one (MSFT) still shows a 20-day EMA above its 50-day SMA. In other words, 4 of the 5 have experienced “death crosses”, which are bearish technical developments.

Looking at the RRG

Here’s another way to look at the change that’s taken place within the Fabulous 5, just over the past 5-6 weeks. But before we do that, let’s first pull up the chart of the entire Dow Jones:

Heading into December, there was a solid uptrend on the Dow’s absolute chart and mostly sideways relative action after a very strong relative performance in July. Since early December, even late November, everything has headed south on the Dow Jones.

We can now take a look at an RRG as of early December to show how the Fab 5 were leading at that time:

This shows how each of the Fab 5 were performing relative to the benchmark S&P 500. 4 of the 5 were situated on the right side of the chart in the leading or weakening quadrants. This means they were relative leaders. Now, just a handful of weeks later, check out how these 5 stand relative to the S&P 500:

All 5 are currently residing on the left side of this chart, indicative of relative weakness, not strength. Momentum is building in the majority of the companies, so if that continues, we could begin to see relative outperformance of the Dow Jones again. For now, though, caution is the word.

One last thing. I’ve updated my Dow Jones Components ChartList and have numbered them 1 to 30, in price order, which reflects the highest-weighted to lowest-weighted stocks in the Dow Jones. I’m sorting this ChartList based on 1-month performances (SCTR scores are also reflected):

Of the 7 worst 1-month performers, 5 of them are in the Top 7 in terms of market weight. In other words, many of the worst recent performers in the Dow Jones also happen to be among the most heavily-weighted. Also, it’s important to note that many of the top-weighted Dow Jones stocks are also among the worst relative performers, as measured by SCTR scores (StockCharts Technical Rank, a form of relative strength). This combination is what has been crushing the Dow Jones. Until this changes, the Dow Jones will remain under relative pressure vs. the other major indices.

My Favorite Dow Jones Component

There are a number of ways to rank the potential of the various Dow Jones component stocks for 2025 and, obviously, it depends on your criteria. But I’ll be providing my FAVORITE Dow Jones stock (and why) for 2025 in Monday’s EB Digest, our 100% free newsletter. If you’re not already an EB Digest subscriber, and you’d like to check out my pick for 2025, please CLICK HERE and enter your name and email address. Again, it’s completely free and there’s no credit card required!

Happy trading!

Tom

The stock market is in pullback mode with the S&P 500 EW ETF down 5.15% over the past month and down 1% year-to-date. This makes it a good time to monitor relative performance and create a relative strength watch list. Stocks and ETFs holding up best during pullbacks often lead when the market regains its footing. Today’s report will show a starter list and analyze the chart for an AI Robotics ETF.

The table below shows 1-month and year-to-date performance for a selection of industry group ETFs. With the S&P 500 EW ETF down on both timeframes, ETFs with gains are holding up well and ETFs with smaller losses show relative strength (less weakness). Five ETFs are up on both timeframes and holding up well in the face of broad market weakness.

Note that this list is simply the first cut. I would make a further cut by insuring that the ETF is in a long-term uptrend. For example, the Clean Energy ETF (PBW) is below its 200-day SMA and would not make the cut. The Medical Devices ETF (IHI) and Robotics AI ETF (ARTY) are in long-term uptrends, and make the cut. Let’s look at ARTY. A recent Chart Trader report/video highlighted the recent breakout in IHI.

The chart below shows ARTY hitting a new high in early December and price above the rising 200-day SMA. ARTY is in a long-term uptrend. There was a big breakout in mid October, an oversold reading in late October and then a 17% run to new highs. ARTY then formed a pennant and broke out with a surge earlier this week, only to fall back the last three days. Overall, I think the pennant breakout is still bullish and this is a throwback to the breakout zone. A break below the pennant lows would negate this pattern and argue for a deeper correction.

The middle window shows the price-relative (ARTY/RSP Ratio) breaking above its 200-day SMA in late November. ARTY shows relative strength and the price-relative hit a new high in early January. The lower window shows %B, which I use to identify oversold conditions within an uptrend. A dip below 0 means the close is below the lower Bollinger Band. This means there was a pullback within the uptrend, which is an opportunity.

I will be following ARTY and other leading ETFs closely in the Chart Trader reports and videos. Our reports warned of the breakout in the 10-yr Treasury Yield in before Christmas (HERE) and we also showed how to distinguish between a robust bounce and a dead cat bounce (HERE).

Click here to take Chart Trader trial and get immediate access.

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The markets extended their decline over the past five sessions and ended the week on a negative note. While the week started on a bearish note, the Nifty violated a few key levels on higher and lower time frame charts. Along with the weak undercurrent, the trading range widened again as the Nifty moved in a 745-point range. The volatility spiked up, and India Vix surged 10.16% to 14.91 on a weekly basis. Following a thoroughly bearish undertone, the headline index closed with a net weekly loss of 573.25 points (-2.39%).

The week that has gone by has remained important from a technical perspective. The Nifty started the week by violating the 200-DMA placed at 23940 and has closed significantly below this crucial level. On the weekly charts, the Nifty has breached another critical level of 50-week MA, currently at 23659. In the process, the Nifty has dragged its resistance points lower; any technical rebound will find resistance at this point. It is important to note that the 50-week MA has been violated after three retests, and the breach of this level will have bearish considerations for the markets. Unless the Nifty crosses above this level again, it will stay vulnerable to a prolonged phase of weakness.

Monday is likely to see the Nifty beginning on a soft note; the levels of 23650 and 23880 are likely to act as resistance points. The supports come in at 23300 and 23050 levels.

The weekly RSI is 43.53; it has marked a new 14-period low, which is bearish. The RSI also shows a bearish divergence against the price. The weekly MACD is bearish and stays below the signal line. The widening Histogram hints at accelerated momentum on the downside.

The pattern analysis of the weekly chart shows Nifty completing a painful process of mean reversion by finding support at the 50-week MA in November. Since then, it has retested this level three times and has breached it by closing below this crucial level. The 50-week MA is placed at 23659; so long as the Index stays below this point, it remains vulnerable to an extended period of weakness in the near term.

Over the past week, the technical developments have created a strong resistance zone for the Nifty between 23650-24000 level. So long as the Index stays below this zone, it will likely trade with a weak undercurrent. Given the current technical setup, cutting down on leveraged exposures and keeping them at modest levels is extremely important. While initiating fresh exposures, staying in the stocks with strong or improving Relative Strength will be necessary as that would provide resilience to the investments. While staying highly selective, a highly cautious outlook is recommended for the coming week.

Sector Analysis for the coming week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

Relative Rotation Graphs (RRG) show that Nifty Bank, Services Sector, Nifty Financial Services, and Nifty IT indices are inside the leading quadrant. Barring the Nifty IT index, all others are seen giving up on their relative momentum. The Nifty Midcap 100 has rolled inside the leading quadrant and may relatively outperform the broader markets.

The Nifty Pharma Index stays inside the weakening quadrant.

The Nifty Metal Index has rolled inside the lagging quadrant. Along with the Media, PSE, Energy, and Commodities, it is likely to underperform the broader markets relatively. The Infrastructure, Auto, FMCG, and Consumption Indices are in the lagging quadrant but are improving their relative momentum against the broader markets.

The Nifty Realty index is well placed inside the improving quadrant. The PSU Bank Index is also inside the improving quadrant, but it is seen paring its relative momentum against the broader markets.

Important Note: RRG™ charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae