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March 2004

ChartWatchers

The AD Volume Lines

by Chip Anderson

Breadth stats reflect continued preference to be overweight small and mid-caps, while underweight techs and large-caps. As the AD Volume Lines show, the S&P Midcap Index and S&P SmallCap Index remain the strongest. Both indicators for MID and SML remain above their 89-day EMAs, although the AD Volume Line for MID is currently testing the 89-day EMA (black arrow). The AD Volume Line for the Nasdaq 100 declined below its 89-day EMA in early March and remains weak (red arrow). The AD Volume Line for SPX is finding some support near the 89-day EMA and has yet to make a clean break Read More 

ChartWatchers

DETERMINING THE TREND AND CONDITION OF THE MARKET

by Chip Anderson

The trend and condition of the market should dictate the kind of actions we will take, so these are the first things we should evaluate during the process of making investment/trading decisions. This process is necessary for all time frames, but for this article I will focus on the longer-term. TREND: On a weekly-based chart we can evaluate the longer-term trend of the market using trend lines and moving averages. We can see that the long-term trend line drawn from the 2000 price top has been violated to the up side, and a new up trend is in the making. For a more objective definition Read More 

ChartWatchers

NOT YOUR "GARDEN VARIETY" CORRECTION

by Chip Anderson

The past two-month trading period is one at the present time considered a "correction"; however, there are nascent signs it may be something quite a bit larger than just your "garden variety" correction. First, we note that trendline resistance is proving its merit by turning prices lower, which up to this point during March has allowed prices to form an "outside reversal month" lower. Now, whether this collective pattern remains in force and the monthly close near its low will be determined nextbut it is negative nonetheless at this point. Secondly, and a bit Read More 

ChartWatchers

WHAT'S NEW IN BETA 3

by Chip Anderson

SHARPCHARTS2 BETA 3 - The improvements just keep coming! This week, we've added the Money Flow Index (see Chip's article above), Equivolume charting, support for annotations, the ability to email charts to others, the ability tostore charts in your browser's "bookmark" area, and a special color scheme for people with color deficient vision. Click here to get started and, as always, let us know how we're doing! P&F CHARTS GAIN MORE SHARPCHARTS FEATURES - One of the "hidden gems" of our SharpCharts Read More 

ChartWatchers

NASDAQ 100 LEADS MARKET LOWER.

by Chip Anderson

NASDAQ 100 LEADS MARKET LOWER The Nasdaq 100 QQQs were the worst percentage losers on Friday and reflected continuing weakness in the largest technology stocks. The daily chart shows the QQQ ending the week on a down note. The only saving grace was the relatively light volume. With the SOX leading the way down today, it looks like the QQQ will probably test its December low and its 200-day average just above 34. The final chart shows the hourly bars for the past week. Of particular notice was the last hour's volume bar. In the last hour of trading on Friday, the QQQ fell to a three-day Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

The current market pull-back is getting serious. Check out the current Nasdaq chart: See the long "Price-by-Volume" bar sticking out from the left side of the chart around the 1900 level? That represents the largest support level for the Nasdaq during the course of the past 12 months. If prices were to move below 1875, there's not much near-term historical support left. Staying above 1900 is very important for the index right now. Our other newsletter contributors have more on the current state of the market below, but first I want to look at the newest indicator we've added Read More 

ChartWatchers

SECTORS AND EXPANSION

by Chip Anderson

Relative strength or price relative charts provide an idea of which sectors will lead and lag over the next few weeks and months. These are formed by dividing the Sector Index by the Wilshire 5000 or another broad market index. These particular four sectors are positioned according to the place in an economic expansion in which they perform best. Techs and Transports are supposed to perform best during the early expansion phase, while Basic Materials and Energy perform best in the late expansion phase. Sector performance suggests that we are in the late phase of an economic expansion Read More 

ChartWatchers

LONG-TERM SELL SIGNAL FOR GOLD?

by Chip Anderson

When the monthly PMO (Price Momentum Oscillator) reaches a range extreme and changes direction, it is a pretty good indication that the long-term trend is changing. PMO direction changes in the middle of the range can often just be "noise", but, when the PMO has a long, sustained move in one direction and changes direction at an extreme overbought or oversold level, it demands our attention. Such is the case now. The monthly PMO has been moving up for nearly three years, and it turned down this week. The PMO direction change is not official until the end of March , and, if gold rebounds Read More 

ChartWatchers

THE "CONSUMER" SECTOR RATIO

by Chip Anderson

The stock market environment over the past six weeks has been fraught with a good deal of rotation out of specific indices such as the Dow and Nasdaq and into the S&P 400 midcaps and S&P 600 small caps. And it is precisely this rotation effect that we believe is developing in the weeks and months ahead between the Consumer Discretionary shares (XLY) and Consumer Staples shares (XLP). In essence, the relationship between these two is a "signal" into investor confidence regarding spending patterns - a high ratio such as at 1.40 or above current levels mind you - indicates a belief Read More 

ChartWatchers

SC2 BETA 2 NOW READY!

by Chip Anderson

SHARPCHARTS BETA 2 NOW AVAILABLE! - We're continuing the roll-out of our new charting engine - SharpCharts 2 - with the release of the second "Beta" version this week. Here's the scoop on what's new in Beta 2: CandleVolume Charts - The width of each candle is proportional to the corresponding volume for that day. Select "Candlevolume" from the "Style" dropdown. Moving Average Channels and Price Envelopes - Two new overlays that can help you spot oversold or overbought stocks. TRIX Indicator - We've added the TRIX to your arsenal. More Duration Read More 

ChartWatchers

PLUNGING BOND YIELDS BOOST FINANCIAL SHARES

by Chip Anderson

WEAK JOBS REPORT A MIXED BLESSING  Today's weak job report was a shocker. It's weakness, however, is a mixed blessing. It's a potential negative for the economy since it erodes consumer confidence. At the same time, its negative economic message pushed bond yields sharply lower. Lower interest rates are good for the economy. That's probably why the stock market recovered today led by rate-sensitive stocks. But there's more. Lower interest rates keep the dollar weak. A weak dollar is bullish for commodity markets. That was seen in today's jump in most commodities. In the past Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

Last week saw all of the major averages post modest gains with the Russell 2000 (+2.3%) leading the way. The Nasdaq fell on Friday while the other averages rose and that behavior is consistent with a big change that happened last week on the Nasdaq's chart: Prior to 23-Feb, the Nasdaq's 50-day Moving Average had provided support for the index on numerous occasions going back 12 months. On 23-Feb, the index moved below the average and then, last Tuesday (01-Mar), the index tried but failed to move back above that average. Friday's action provided more evidence that the 50-day moving Read More