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June 2004

ChartWatchers

EVERYTHING IS RELATIVE

by Chip Anderson

The advance since October 2002 is certainly impressive on its own merits, but pales when compared to the prior decline. The advance has not even retraced 38% of this decline and formed a rising price channel. As long as the lower trendline holds, the trend is firmly bullish and further strength is expected (as outlined above). A failure to hold above 2000 AND a break below the May low at 1865 would be quite negative. At best, it would signal a retracement of the Oct-02 to Jan-04 advance. At worst, it would signal a continuation of the prior decline (5133 to 1108). Read More 

ChartWatchers

S&P 600 MID-CAP STOCKS ABOVE 200/50/20-EMA

by Chip Anderson

I'm very pleased to announce that we now have a chart showing the S&P 600 Small-Cap stocks above their 200-EMA, 50-EMA, and 20-EMA. But wait! There's more! We also have this chart for the S&P 400 Mid-Cap, S&P 500, Nasdaq, Nasdaq 100, S&P 100, and NYSE Composite. In my opinion, this is a much better picture of breadth than advance-decline numbers, particularly since decimalization has introduced so much volatility into them. (A change of only a penny can classify a stock as an advance or decline.) The relationship of a stock's price to these three moving averages gives us Read More 

ChartWatchers

FUNDAMENTALLY INTERESTING

by Chip Anderson

From a fundamental perspectivethe past several months shows US interest rates to have risen very sharply as US economic data continues to show strength - from employment to manufacturing to retail sales et al. Moreover, higher energy prices led by gasoline and crude oil have further thrown a "negative light" upon interest rates; which in combination have caused sentiment to become decidedly negative. In fact, the 10-year note futures are now showing their largest short interest in quite some timeperhaps ever. Consequently, this Read More 

ChartWatchers

FALLING DOLLAR MAY BE HELPING COMMODITIES

by Chip Anderson

During the two years prior to 2004, a falling U.S. dollar pushed commodity prices to the highest level in more than a decade. During the first half of this year, a rebound in the dollar has coincided with a downside correction in commodities. That may be changing. Chart 1 shows the dollar rally stalling near its 200-day moving average during May (see circle) and again during June (see red arrow), and showing signs of rolling over to the downside. On Friday morning, the announcement of a record first half account deficit pushed the dollar even lower. Right on cue, gold prices jumped nearly Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

Stocks moved sideways last week with most of the major averages finishing within 1% of where they started. The Amex was the big "winner" - up 1.7% - while the Nasdaq lost 0.6% and everyone else finished up somewhere in between. In this week's newsletter, John Murphy looks at the relationship between the US Dollar and Commodities, Carl Swenlin looks at how the mid-caps are doing, Richard Rhodes looks at Interest Rates, and Arthur Hill looks at the Nasdaq's "Big Picture". But first, I'm kicking off a ten part series on John Murphy's 10 Laws of Technical Trading: LAW #1: MAP THE Read More 

ChartWatchers

ELLIOT COUNT SUGGESTS A FIFTH WAVE HIGHER

by Chip Anderson

There are two distinct advances and two declines on the weekly Nasdaq Composite chart with the fifth wave still to come. The first advance started in October 2002 and ended in December 2002 to form Wave 1. The second advance from 1253 to 2154 is clearly the longest in both duration and price appreciation, which is typical for a Wave 3 move. The first decline extended from December 2002 to March 2003 and formed Wave 2. The second decline extended from 2154 to 1865 and retraced 23.6-38.2% of the Wave 3. This is a bit shallow, but the pattern looks like a falling flag and quite similar to Read More 

ChartWatchers

A NEW RECORD FOR NYSE MEMBER BUYING

by Chip Anderson

In the week ended May 15, 2004 NYSE Member Net Buy/Sell numbers hit a new, all-time high of net buying of +741,439,000 shares. There are only two other occasions of net buying that even come close to this -- +540,105,000 shares in the week ended November 14, 2003, and +588,248,000 shares for the week ending March 28, 2003. As you can see by the chart, there is no other week that even comes close to these three huge buying spikes. You will also note that each of the two prior buying spikes occurred immediately prior to a significant market advance, and, in my opinion, the Read More 

ChartWatchers

RISING WEDGE ON RATIO CHART BEARISH

by Chip Anderson

Over the past two week's, sentiment has gone from "highly bearish" to "highly bullish" - a change in circumstances that shows confusion above all, but the fact remains the current rally in the major indices has reached the important 50%-60% retracement levels typical of countertrend rallies. Therefore, there is reason for caution at this junction, and we find other "esoteric" reasons for being so: a change in leadership between "mid-cap" and "small-cap" shares that has accompanied the transition from bearish to bullish to bearish markets. Quite simply, we use the S&P 400 and S&P Read More 

ChartWatchers

BOOKSTORE CHANGES

by Chip Anderson

NEW BOOKSTORE DESIGN - We're very pleased with how our bookstore redesign project turned out and we think you will be too. Check out the new look and features of StockChartsBookStore.com and let us know what you think! The best selection and prices for online T/A books and software just got a whole lot better. And speaking of our bookstore MURPHY MARKET MESSAGE SUBSCRIBERS SAVE AN ADDITIONAL 10%! - Subscribers to John Murphy's Market Message receive an additional 10% off of any and all purchases made in our online bookstore. Depending on what you order, that Read More 

ChartWatchers

ENERGY STOCKS MAY BE TOPPING

by Chip Anderson

One of the principles of intermarket behavior is that commodity-related stocks usually peak before the commodity. That's why the next chart is so interesting. While energy prices hit a record high early this week, the Energy Select Sector SPDR peaked in late April. That created a negative divergence with the rising commodity. The three peaks formed since early March also have the look of a potential "head and shoulders" top. To confirm that bearish pattern, however, the XLE would have to break the "neckline" drawn under the March/May lows. The relative strength line has been dropping for Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

Last week saw the major markets put in another "lower high" for the current downtrend - the third major one since things started moving lower back in March. This three-point downtrend is easiest to see on the Nasdaq's chart, but it appears on most of the other major charts to one degree or another. Here's a new "behind" chart (discussed in our last newsletter) that shows the three-peak downturn for the majors: Later in this issue, John Murphy looks at Energy stocks, Carl discusses NYSE Member Buying, Arthur Hill is bullish based on Elliott while his friend Richard Read More