Technical analysis allows investors to identify trends, support, resistance, and different chart patterns to make better informed trading decisions.

While there are a lot of great investment books out there that cover stock charts, they all lack one key ingredient, interaction. Reading text and looking at images gets old after a while and can be noneffective.

To change this, I cofounded InvestingTeacher.com last year which provides completely interactive content. I am talking drawing trendlines on charts, drag an drop, built for tablets such as the iPad, interactive questions, and more.

We initially launched the site with courses and lessons, however after compiling feedback from users, we've combined all our content (156 pages worth) and created a first of its kind, 100% completely interactive eBook, appropriately titled The Interactive Guide to Technical Analysis.

The guide consists of 28 chapters, teaching everything there is to know about stock charts. From the basics of what a stock chart is to identifying Cup & Handle formations to trading engulfments, there is a lot of depth.

I am extremely excited to have wrapped up the 1st Edition and can't wait for you all to read it. The first chapter is free, with the full 156 page guide costing just $29.95 thereafter.

Read the 1st Chapter Now at InvestingTeacher.com

Original post: Learn Stock Charts with this 156 Page Interactive Guide

With the S&P 500, you can see the past two days there have been buyers at the spot where the index broke out from in early May out of a bull flag - old resistance can turn into new support so that is the case.  Now bulls want to recapture the 10 day moving average which the index has not been below almost the entire month.  Bears obviously want to see the lows of the past two sessions broken.

The McClellan Oscillator fell well below the -50 range in the morning selloff which has been a good place for short term bounces; so it makes sense there was some buying after the initial bout of selling.

Let's look at how some of the major commodities are doing.  We can see oil remains in the same condition it has been for a long while - there are a series of lower highs forming; if that changes and oil breaks out above this trendline it should bode well for a move up.  Otherwise it is range bound.

Gold and silver remain among the weakest areas of the market - no life in gold, and silver continues to stair step down in a series of bear flag formations.

One individual name that we can circle back to as we have not discussed it much is Facebook (FB).  There is a reason for that - the stock is not acting well at all and continues to work through a descending channel.  Until it can break out of this pattern it remains a place to avoid and/or short.

Markets are closed Monday for the holiday so have a good Memorial Day and we'll see you back here Tuesday where we will see if the bears can make any progress or this is just a rest stop for another move up for the bulls.

Original post: STTG Market Recap May 24, 2013

The S&P 500 came back to test the bull flag it broke out of in early May near 1636 in the morning.  It bounced back to the 10 day moving average.  Certaintly is not all systems go here as each time we see a major faltering like yesterday we have to ask "was that the top?" but as mentioned, we could fall all the way down to the breakout over 1597 and still be in a primary bull move.   Notice the 50 day moving average (currently 1590) has served as support all year.  But even before that the bottom of the channel that has worked all but one time since the advent of this move in Nov 2012 serves as a key support.

Almost identical story in NASDAQ.

The McClellan Oscillator weakened today and is now down to a -35 reading; generally -40 to -50ish readings have been good short term buy signals.

With the first real selling pressure in over a month today was a good day to see which stocks traders immediately flock to, as they should provide leadership on any bounce.  A lot of the hot names of late came to the forefront - anything associated with Elon Musk...

...and the 3D printing stocks.  While 3D Systems (DDD) was only up slightly on the day it made a huge move off its morning low.

Music sharing service Pandora (P) also had a strong day ahead of earnings - after the bell it reported a strong quarter which led to another 8% upside in the after hours, up to the mid $18s.

Internet radio company Pandora Media Inc. reported higher-than-expected revenue in the latest quarter, with losses in line with analysts' forecasts, as the number of subscribers who pay for ad-free listening more than doubled to exceed 2.5 million.  Pandora predicted that it may break even in the current quarter after adjusting for one-time costs, and it predicted annual earnings and revenue that exceeded Wall Street forecasts.

Original post: STTG Market Recap May 23, 2013

The fact we are going into that testimony on such a huge run and at the top end of the channel probably means odds are he is going to say something that someone will interpret at somewhat hawkish and we might actually get some modest selling, but we'll see.

Well we got some modest selling; in fact a bit more than modest.  Not versus Tuesday's close but certainly versus the highs enjoyed this morning.  The S&P 500 moved in a 35+ point range today as every comment from Bernanke (and then later in the day during the minutes of the last Federal Reserve meeting) was cause for concern, pro or con.  This is what the market has become - simply a daily monitoring of what the central powers say and will do.  Really nothing new was said - the Fed is monitoring things and will adjust their program in the future.  The S&P 500 fell 0.83% and the NASDAQ 1.11% but it certainly felt worse in the fact mid and small caps took bigger hits and the drops from morning highs were far more substantial.   Here is a chart of the wicked intraday volatility:

Technically the indexes had what is called a bearish outside day, rising above the previous day's highs and then falling below its lows.  Prior to the quantitative easing era this would be a serious warning sign.  In the QE era warning shots like this often end up being forgotten in a few days as stocks start another leg up.  So to be blunt the constant flood of liquidity into markets alter the traditional way things work and cautionary signals often fail.  But we're throwing it out there for examination.  For the S&P 500 all today did was take the index from the top of its channel back to the 10 day moving average, a place it has not seen since May 2nd.

The McClellan Oscillator quickly turned to a mildly oversold condition in the mid -20s.

Unlike prior selloffs for most of the past few years, there was NOT a flight into bonds as the reason for the selling is an eventual slowdown in bond buying by the Fed.  Hence without the biggest buyer on the planet prices go down for bonds, and yields up.  But it is too premature to forecast when that will be.

You can see this "bearish outside day" action in a host of sector ETFs and stocks - see the ETFs for financials and industrials for example.   Again, in a normal environment this often signals a turning point or at least a place to be cautious to see what the market does in the following 3-6 sessions.  In the QE environment all bets are off.

With market players trained to buy every dip and volume sure to drop off significantly the next few days as traders head out early for the holiday weekend it seems unlikely to see any major downside action but we'll see what happens when people return early next week.

Here is some data through yesterday's close from BeSpoke Investment, speaking to how consistent the rally has been in 2013.

This Friday will be the 100th trading day of the year, and no matter how the rest of the week plays out, 2013 will rank near the top in terms of years where the S&P 500 was the most consistent in terms of positive days. So far this year, there have been 61 up days and 35 down days. Even if the S&P 500 trades down every day this week, 2013 will be tied for 5th place in terms of most up days to start the year. If the index trades up every day for the remainder of the week, it will have had 65 positive days in the first 100 trading days, which would rank second all-time behind 1995 (68).

 In the table below, we have listed each year where the S&P 500 traded up on the day in at least 60 of the first 100 trading days. Prior to 2013, there were eight other occurrences. Of those eight years, the S&P 500 averaged a gain of 9.1% over the rest of the year with positive returns seven out of eight times. Furthermore, in the one year where the S&P 500 was down for the remainder of the year 1975), the decline was less than 1%.

Original post: STTG Market Recap May 22, 2013

No change on the indexes from recent comments - overbought in terms of where they are in within the channel but other secondary indicators such as the McClellan Oscillator are fine.  A nice 1-2% pullback here would allow for some things to reset and offer more favorable entry points but the market is simply not allowing it.

Keep an eye on oil as it continues to be kept contained by this slightly falling trendline connecting highs of the past few months - a push above would really help the energy sector of course.

There was no major sector rotation on the day other than a rebound in healthcare stocks so we'll look at some interesting names.

There are very few Japanese stocks that trade on U.S. exchanges, but Sony (SNE) is one of them.  Recently a hedge fund manager took a major stake and is looking to potentially split up the company to "unlock value".  Japanese stocks as a whole have been on a fantastic tear since last December, but this is an additional catalyst.  You can see the spike when the hedge fund disclosure happened last week (note the massive volume) but today we saw another similar move.

Retailer Under Armour (UA) shows a great example of why a move over previous resistance can (not guaranteed) be powerful.  The stock had been battling the $58s level throughout April, than finally moved over it for good in early May and has not looked back since, riding an ascending channel which today it popped out of to the topside.  So short term it would appear to be very overbought but a good pattern to look for in other stocks.

Recreationaly vehicle maker Polaris (PII) is an example of another pattern - this is a simple reversal after breaking a trend.  There have been MANY of these in the past month as the cyclical stocks that were out of favor for two months have seen money flow into them beginning three weeks ago.  So you can connect the series of lower highs and once that pattern is broken you have a decent probability trade to the upside.  This has been a 9% move in just 11 market days.  Of course the current situation is a bit extreme as the market has gone straight up with no rest but even in more modest rallies when money flows into the cylical type stocks you can get powerful moves like this.

Last, via SentimenTrader yesterday (today was day 17!), we have a snippet that doesn't give us a good prediction of the future but tells us how rare a situation we are in in this rally.

The Nasdaq Composite has enjoyed a remarkable streak of 16 straight days with a higher intraday high than the previous trading day, a streak matched only 3 other times in 40 years (8/28/79, 1/29/85 and 11/18/99).  In '79, it nearly top-ticked the market, before the onset of a -11% correction.  In '85, the Nasdaq managed to continue its rise for another two weeks, then gently corrected about -4% over the next couple of months.  In '99, it helped kick off the manic phase of the end of that bull market.

Original post: STTG Market Recap May 21, 2013

With Bernanke again, people will be looking for any and all signs of him dropping even a minor hint if taking away the spiked punch bowl - that really is the bottom line in the market currently.  The fact we are going into that testimony on such a huge run and at the top end of the channel probably means odds are he is going to say something that someone will interpret at somewhat hawkish and we might actually get some modest selling, but we'll see.  Economic data has been relatively poor the past month - which ironically is "good" for the stock market.

As to the S&P 500 - note the 5 circles at the bottom channel of our trendline, each has marked a support level.  Only once has this channel failed and that was mid April which was a time to get very cautious because something had changed.  But in the QE infinity  market that didn't end up mattering either as we start hitting some historic milestones.  But if we find anything in the market that has a succes rate of 70-80%+ it is  a bonus.  It has been decades since we've gone this long without 3 down days in a row in the DJIA; the DJIA has been up 18 Tuesdays in a row, we've been up 16 of 20 weeks this year, etc etc.

Small caps continue to lead, with the Russell 2000 going up at a 45 degree angle of late - this change in leadership about 3 weeks ago is bullish.  Remember this was the only index to actually make a lower low (versus the previous low) in mid April - that is traditionally bearsh.  But not in the QE market.

While we are the top end of our channels in the major indexes the McClellan Oscillator continues to be contained, so some conflicting signals.

Why does this happen?  Each day we have a rotation into a new group or groups of stocks.  Today it was energy for example.

Meanwhile, biotechs which had been hot have corrected the past 3-4 sessions.  So what do we see on the sector ETF (IBB)?  It has pulled back to support nicely - generally this ETF has bounced between the 20 and 50 day moving averages.  When it stops doing that it will be a change in character ... but until then it is an obvious pattern.

Also notable today were some laggards such as silver.  It actually opened down in the overnight session some 8%.. this morning it was only down 2% but staged a big reversal midday to finish up.  Is it a great chart? No.. but it was massively oversold.

Solar stocks continue to be the center of speculative activity - Elon Musk's other company SolarCity (SCTY) has become a market momentum darling.  Look at the volume spike the past two sessions.

Last we have this snippet from BeSpoke Invest Premium who compares the current market to 1995's market.

In a B.I.G. Tips report we sent out to clients on Friday, we highlighted years where the S&P 500 has had the closest correlation to 2013 through 5/16. With a correlation coefficient of 0.96, 2013 has so far been more similar to 1995 than any other year in the S&P’s history.

Original post: STTG Market Recap May 20, 2013

MetaTrader Platform

MetaTrader is a standalone trading platform used primarily for trading Forex and also supports Futures, Stocks, and CFDs.

The MetaTrader platform has everything one would expect: trading, charting, technical analysis, etc. The company's foundation began with MetaQuotes, and over the years has brought them to MetaTrader 5. Hundreds of brokers support the platform, and if you have traded forex before, I assume you already are familiar with MetaTrader.

The software can be downloaded for free, then you simply install it, link your online broker account, and trade. The default setup is with FXCM, a popular forex broker, so if you do not have a broker account, this is the broker they sign you up with (I recommend StockBrokers.com for broker comparisons).

Quick note: I have never personally traded using MetaTrader, this is because I do no trade Forex or Futures, which is the platform's primary focus. For a list of the trading products and services I use, see my 2013 Trade Tools post.

Automated Trading

One of the primary reasons traders use MetaTrader is to build their own automated trading systems. These systems effectively analyze forex quotes or stock quotes and execute trades automatically; a trading robot if you will.

In fact, automated trading is such a big part of MetaTrader that MetaQuotes hosts an Automated Trading Championship each year. Traders build their own systems, enter them in the competition, and the highest return at the end takes the prize. Here are the results from 2012 Championship,

Trading Signals Service

Given the MetaTrader's community's focus on automated trading, MetaQuotes recently launched Trading Signals, a social trading / trade mirroring service provided through MetaTrader.

Using Trading Signals for MetaTrader 4 and 5, clients can pay for a system created by a fellow community member and run it thereafter to automatically trade their own accounts.

When browsing the available systems, I found there was little to choose from and the prices varied dramatically. I assume this is because the offering is new. 1 credit is $1.

Now, before becoming euphoric over the idea that you can purchase a system that will automatically trade your way to quick riches, a few key points should be immediately noted:

1. Forex can be is certainly is extremely risky. When trading stocks, typically you trade with whatever cash you have in your account or use margin to leverage up 2:1. Forex on the other hand utilizes leverage of up to 500:1. 
2. Automated trading is rarely a ticket to riches. Just because a system worked in the past does NOT mean it will work in the future. I repeat, past performance is not indicative of future returns.
3. Trading systems often used skewed data. If I had access to the weather data of every day for the last 100 years, I am sure with some data mining I could come up with a great stat such as, "On every 3rd Wednesday of the month during leap years in English speaking countries, the weather is sunny 52.63% of the time." I completely made this up, but the point is that when creating a system, the data can be skewed to show a desired effect.

For example, take a look at this system, Freak, which is currently featured 1st for its five star reviews. The system costs 1139 credits ($1,139) to buy. Note the performance data, because apparently this system turned $1,000 into over $17 million over the course of three years.

If this was the case, and this author, Freak Universe, had created an automated system that could turn $1,000 into millions, then why the heck would he or she sell it at all, let alone for a measly $1,139?

Now, take a look at this Free system, ADXSign. The system has as clear cut formula using a common market sentiment indicator, "Implementation of the Average Directional Movement Index (ADX) indicator described in the book 'New Concepts in Technical Trading Systems' by Welles Wilder."

While I have no idea if this system actually returns profits over the long haul, I have far more initial credibility off the bat for this system since it is using a clear cut formula that I can understand.

My Bottom Line

All in all, the concept of the Trading Signals services makes sense on a macro level: MetaTrader is a platform used by traders to create automated systems for trading forex, futures, etc, so now traders can sell their systems directly to the community and help others make money.

However, just because a trader made a system with a gazillion percent return using historical data, doesn't mean it will work in the future.

Forex trading is extremely risky business. The reality is that significantly more traders lose money than make money trading over the long haul.

With that said, for those trading Forex and Futures, MetaQuotes has been in the business for over a decade, their platforms MetaTrader 4 and MetaTrader 5 are supported by hundreds of brokers, and thus the platforms are certainly worth a consideration.

And, for traders who have been in the game for a long time, understand the risks, and understand how automated trading systems work, not too mention how to select winners, Trading Signals by MetaQuotes could be an asset.

For everyone else, me included, it's probably best to stick to buying and selling stocks and options.

Original post: Trading Signals for MetaTrader Review

A preliminary reading of the Thomson-Reuters/University of Michigan consumer-sentiment index for May rose more than expected to help fuel Friday's rise. And the Conference Board's Leading Economic Index for April increased, exceeding forecasts.

You can see with the indexes we continue to hover at or even above the top end of this channel it has been in (with the exception of a pitstop in mid April) since November 2012.  One of the stronger rallies in recent memory that is for sure.   In the S&P 500 a break over the double top at 1597 set up a strong move off the jobs report in early May; that turned into a 4 day bull flag from which we cleared over 1636 and now we did not even rest at the index level (although individual sectors had small corrections) just going sideways for a day before a new high.

To put in perspective how overbought the market is in a longer term sense, the lack of any correction since November has pushed the S&P 500 way above its monthly bollinger band.  This is a measurement popular in the land of technical analysis to mark overbought or oversold.  Here is a 15 YEAR chart of the S&P 500 - even in 1999 and late 2006/mid 2007 the index hovered at or just above the upper bollinger band.  You can see we are not hovering now - we have broken clear above.   So on a long term perspective, the inability for any meaningful rest for this market has led to the most overbought conditions in at least a decade and a half by this measure.  Rare air indeed.

Today was an excellent day for breadth as almost every sector participated.   Some interesting names below:

SolarCity (SCTY) which was founded by the same person who founded Tesla - Elon Musk has seen the speculative money flow into it of late.  It appears investors see the magic of Tesla and want to be in anything associated with Musk.  (For those who don't know Musk, he was part founder of Paypal - which Ebay eventually bought, founder of Tesla, founder of a service to send people into space, and even has been used as a reference for the character for Iron Man!)

There were breakouts in refiners (which should mean higher has prices at your local pump soon!)...

... in auto stocks...

... in energy related names....

You name it, it was moving.

The only area to really completely avoid right now remains the precious metals.  They have been a horror show in 2013, and remain so.

Original post: STTG Market Recap May 17, 2013