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May 2004

ChartWatchers

VOLATILITY INDICES BREAK 200-DAY SMA’s

by Chip Anderson

Although there is more than one way to interpret volatility, the simple fact is that the S&P 100 Volatility Index (VIX) and the Nasdaq 100 (VXN) trend lower when the market trends higher and trend higher when the market trends lower. In other words, these indicators actually trend and move inverse to the underlying indices. VXN broke below its 200-day SMA in Dec-02 and remained below for over a year. Similarly, VIX broke below its 200-day SMA in Mar-03 and remained below for almost a year (red arrows). These breaks coincided with a strong and sustainable uptrend that lasted from Read More 

ChartWatchers

LOOKING FOR A BOTTOM IN GOLD STOCKS

by Chip Anderson

At the end of April the XAU monthly Price Momentum Oscillator (PMO) -- not shown here -- topped at very overbought levels, rendering a long-term sell signal. This action confirmed the sell signal top on the weekly PMO a month earlier, shown on the chart above. Both the monthly and weekly PMO can issue long-term signals, but the monthly PMO is much more serious. Nevertheless, the weekly PMO shows that the longer-term overbought condition has been relieved, and the daily PMO (not shown) is becoming overbought, so we should be looking for a bounce from around the rising trend Read More 

ChartWatchers

TAKING ADVANTAGE OF WEAKNESS IN BONDS

by Chip Anderson

The recent capital market turmoil across the oceans and through all asset classes be it bonds or stocks or gold, has exacerbated certain risk-reward relationships between these asset classes as the "carry trade" is being unwound. And while these relationships may become even "more skewed" in the weeks and months ahead - we believe the time is approaching whereby asset allocators will begin to favor bonds over US stocks. Increasingly, this relative valuation will come to bear upon investment gainsand must be exploited as the next larger picture trade for the coming year. That Read More 

ChartWatchers

SURPRISED BY SURPRISED ECONOMISTS

by Chip Anderson

CPI AND PPI NUMBERS SURPRISE ECONOMISTS The most frequently seen words in the financial press are "economists were surprised". It seems they're always being surprised by something. This week it was the "surprising" jump in the CPI and PPI inflation numbers. The fact that economists were surprised is a story in itself. It shows what happens when people ignore the clear messages being sent by the financial markets. And when they ignore the obvious. Take commodity prices for example. The CRB Index has been rising for two years and recently reached the highest level in a Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

At the height of last Wednesday's big decline all of the major averages except one had moved below their 200-day (40-week) moving averages. This was the first time that had happened since the start of 2003 and it is another important technical milestone that occurs as a significant uptrend turns into a significant downtrend. First the 50-day MA is broken, then the 50-day MA starts moving lower, then the 200-day MA is broken, and finally the 200-day MA starts moving lower. Each of those milestones is important and watched closely by the market. Don't believe it? As soon as the S&P 500 Read More 

ChartWatchers

NASDAQ FAILING AND INDICATORS CONFIRMING

by Chip Anderson

There are three ingredients to a downtrend: lower high, lower low and trendline break. The final ingredient (trendline break) is open for debate, but the lower low and lower high are not. With this week’s failure to hold the big gains above 2030 (22-Apr) and break below the 1978, the Nasdaq is well on its way to a trend change. The index formed another lower high below 2100 (black arrows) and broke below the trendline extending up from March 2003. Two of the three ingredients for a trend change are in place and a move below the March low (1898) would solidify the reversal. In addition to Read More 

ChartWatchers

S&P 500 NEW HIGHS AND NEW LOWS

by Chip Anderson

Here's a new chart we've just deployed on DecisionPoint.com, showing the 52-week new highs and new lows for just the stocks in the S&P 500 Index. I think this is useful because it shows what is happening with the stocks in the world's most "indexed" index. I have been collecting this data since 2001, but I have never seen it on a chart before. The most surprising aspect to me was that there were not more new lows in 2002 as the market was putting in a bottom, but I assume this is due to the high sponsorship of these stocks. Currently, the most obvious feature is the sharp contraction Read More 

ChartWatchers

CONSOLIDATION OR DISTRIBUTION?

by Chip Anderson

Over the course of the past 4-months, price action in all of the indices have been "locked" within wide trading ranges. One question to be be answered is whether this is a "consolidation" to new highs; or a "distribution" to lower lows. If we had to answer this - we would suggest that against the fundamental backdrop of higher interest rates - the financial system has begun "DELEVERAGING" itself from the "carry trade" estimated to be $1.5 trillion. Therefore, we can conclude this trading range is a distribution formationof which lower prices are Read More 

ChartWatchers

CHART OVERLAYS COMING THIS WEEK

by Chip Anderson

MURPHYMORRIS.COM TRANSITION COMPLETE - We have moved all of the MurphyMorris.com content from that website into the "John Murphy" section of StockCharts.com now. Subscribers to the Murphy Market Message should now click on the "John Murphy" tab at the top of our pages to see John's latest market commentary. John's charts look better (see above for two examples) and we've added a calendar of John's upcoming appearances as well. Look for us to add more features and specials to the Murphy area in the coming months. LOOK FOR CHART OVERLAYS LATER THIS WEEK - We're putting Read More 

ChartWatchers

A-D LINE TURNS DOWN

by Chip Anderson

LOWEST LEVEL IN MONTHS It's been awhile since we've talked about the Advance-Decline lines in the various markets. The two charts below show why we're showing them now. The NYSE Advance-Decline line has fallen to the lowest level in four months. This is its weakest showing since the market rally started last March. The Nasdaq AD line looks even worse and has broken its 200-day moving average. That confirms that most of initial technical damage came from the Nasdaq. Trouble is it's now spreading to the rest of the market. All the more reason to be defensive at this point. Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

Rolling over. The short term technical picture shows the markets rolling over right now into a new down leg. The key test will be when the Nasdaq tries to move below 1900 this week. Right now, most technical signals point to much lower prices if that occurs. John Murphy and Arthur Hill have more on the possibilities later on. But first SCANNING FOR CHANNELS - TAKE 2 Last issue, I showed you several techniques for creating scans that find stocks that have been moving sideways in a channel between two fixed price levels. But what about stocks that are moving sideways between other Read More