Scanning the S&P 500

Over the weekend I used Finviz.com to scan through the S&P 500.  Below are some charts that caught my eye; listed in no particular order. Overall there a good number of bullish consolidations that should bode well for a continued move in the S&P after the recent softness in the general market recedes.

Many of these setups are tactical trades where I'm looking to employ a variety of trading strategies as they're not all at or near their old highs where you would traditionally look for breakouts. 

In some cases, I'm looking to buy near the bottom of tight trading ranges, then using tight stops just under the range that produces a good risk/reward ratio.  And in others I'm looking to buy pullbacks to original breakout points. It pays to stay flexible.

Looking at a monthly chart of the SPX over the last 20 years, we can see that the last 2 bull markets lasted 64 and 56 months respectively.  We're currently in the 43rd month of this bull move, so there's likely room to run longer.  Interestingly, the last 2 major topping patterns both took 11 months to play out.

A warning to those who like to buy blindly without using stop losses - DON'T DO IT.  Any stock can go anywhere at anytime, even stable blue chip stocks included in the S&P 500 index.  Stops are there simply as an insurance policy to protect your portfolio from unforeseen events that can arise at any time.

ALWAYS use stops to limit losses in your account.  Searching for setups that offer prudent areas to keep losses to 2-3% (or less) is well worth your time.

Note:  Some of the charts below are both daily and weekly.


Click on charts to enlarge:

 

Have Housing Stocks Topped for 2012?

Recently many of the U.S. home builders sold off after making huge gains since the beginning of the year.  Since bottoming out in October of last year, the Standard & Poors Homebuilder's Index ETF (XHB) has more than doubled in price.

Yesterday's price in XHB stands out because it marked the second day of selling on increasing volume, as the chart below shows.  It's also important because this index has topped out in 2010 and 2011 at the same time as the S&P 500 index also topped.

Click on charts to enlarge:

 

Two days of weakness in and of itself doesn't mark a top, so I looked at another chart that I've used in the past to look for a turn in housing stocks.  On Finviz.com they have a chart for random length lumber.  When I looked at the current weekly view it caught my eye as it has been a decent leading indicator for home building stocks.

What's interesting is that the weekly chart of lumber has signaled the top for the home builders the previous 2 years, and it's lead to big declines.  There's no guarantee that it will work again, but it's worth noting.

Here are the charts of XHB when they topped out in 2010 and 2011.  

2010 top:

 

 2011 top: