The Three Charts Louise Yamada is Watching

Louise Yamada is a legendary technician with nearly four decades of experience navigating markets. She was head of technical research at Smith Barney before starting her own shop, Louise Yamada Technical Research Advisors, LLC. Her work is highly respected among institutional investors and she's often featured in various financial media outlets.

Yesterday Louise made an appearance on Bloomberg with host Abigail Doolittle to talk a little bit about her market outlook. She came armed with three charts to show that the market is currently sending some mixed signals.

The first chart Louise presents is this monthly chart of the S&P 500 index. She points out that it’s hard to tell if this was a bear market rally or did we just experience a pullback within a long-term uptrend. She uses MACD as a momentum indicator and warns that it flashed a sell signal back in October. This would suggest the trend has changed and will begin to move downward or sideways for some time.

Since the S&P 500 chart isn’t giving Louise a clear buy or sell signal, she takes a look next at a chart of the Industrial sector. The chart is a monthly chart with a relative strength indicator below it. She explains the trend has been broken, and relative strength is still declining. She explains:

“we’re not seeing the kind of rotation that one might anticipate if this were going to be a new advance”

The last chart Louise presents is of crude oil. She explains its found support at the $42 level and is now in a range between $42 and $54. If we breakout above $54 she thinks it could run but notes that it needs to hold above that $42 support level.

Louise emphasizes that the charts aren’t showing any clear trend and there are plenty of warning signs. Louise concludes by advising that investors approach the market with caution going forward. Check out her whole Bloomberg segment here.