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October 2004

ChartWatchers

NASDAQ MONTHLY

by Chip Anderson

Monthly charts are good for perspective and some projections. First, you can see that both volume and the index steadily advanced from 1991 to 2000. Volume has leveled out over the last 4-5 years, while the index suffered a sharp decline to 1108. The recovery over the last two years carried the index back above 2000 and retraced a mere 25% of the prior decline. Over the last nine months, the Nasdaq basically consolidated around 2000 and traded over to the lower trendline of the rising price channel. It looked as if this trendline was going to be broken in August, but the index managed to Read More 

ChartWatchers

THE SPX/VIX RATIO

by Chip Anderson

An indicator that has recently become quite popular is the SPX/VIX Ratio. I have tried to convince two of its proponents that it is a calculation that makes no sense, but to no avail. Nevertheless, I will present my argument here for your assessment. Ratio calculations are most commonly used to demonstrate relative strength between two price indexes, or to determine the price acceleration/deceleration of a single index. For the relative strength calculation you divide one price index by another. For example the chart tools on both DecisionPoint.com and StockCharts.com web sites have an Read More 

ChartWatchers

THE 'WINDS ARE A CHANGIN'

by Chip Anderson

For all intents and purposes, the cyclical bull market that began in March-2003; and during the entire move to higher prices - S&P 500 Large Cap index performance 'lagged' that of the S&P 600 Small Cap index. However, the 'winds are a changin' as they say; the S&P 500/S&P 600 Ratio is showing signs of bottoming given the bullish declining wedge breakout. If this is the case as we suspect, then subtle, but material change has taken place that will prompt the major market indices to move lower in a series of lower higher and lower lowsthe definition of a downtrend Read More 

ChartWatchers

ROTATION OUT OF ENERGY AND MATERIALS

by Chip Anderson

The biggest market feature of the week was the fact that Energy and Materials were the two weakest sectors. This is a reversal of recent trends. The loss of leadership by those two former leaders contributed to this week's market selling. At such times, money moving out of former leaders usually finds it's way into former laggards. We haven't seen too much of that yet. Utilities (Chart 1) and REITs (Chart 2) continue to hold up very well. That may be the result of low interest rates or, more likely, a pursuit of dividend-paying stocks. That may also explain why value stocks have done Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

Last time we talked (on October 2nd) there was reason for optimism with the Dow. Oh, how times have changed Unfortunately for the bulls, the promising uptrend that was created by the trough at 9,977 didn't fully materialize. After flirting with the red 200-day MA line around 10,390, the index retreated back below 10,000. Friday's 39 point gain probably won't hold up as the market really needs to test the August low (9783) before it can start another strong rally. The other important development on this chart has to do with the 200-day MA. Can you spot it? The Read More 

ChartWatchers

TLT IS LOOKING OVER THE CLIFF AGAIN

by Chip Anderson

It’s beginning to look like déjà vu all over again for the iShares Lehman 20+ Year T-Bond Fund (TLT). This bond ETF has been in a steady uptrend 20+ since May as rates have fallen. May just happens to coincide with the Fed’s first interest rate hike. Rates have risen at the short end of the curve (<2 years), but declined at the long end and TLT represents the long end (>10 years). As noted in last week’s report, TLT looks vulnerable to a pullback, consolidation or even a sudden reversal. This bond ETF traded to the upper trendline of a rising price channel and formed a bearish Read More 

ChartWatchers

THE 9-MONTH CYCLE

by Chip Anderson

We are currently expecting a price low associated with the 9-Month (40-Week) Cycle, but let's first review some cycle basics. The vertical lines show the location of all Nominal 9-Month Cycle troughs since 1996. The normal expectation is that the price index will arc from trough to trough, but sometimes other forces override normal cycle pressures, as happened in 1999 and 2000 when the market was transitioning from secular bull to secular bear. Because we are depicting "nominal" cycle projections, all the lines are of equal distance from one another, and they show where the cycle trough Read More 

ChartWatchers

RELUCTANTLY BULLISH

by Chip Anderson

Our comments will be quite short and to the point: In bull markets the more �aggressive' semiconductor sector leads the more �defensive' healthcare sector as market participants favor stocks with higher �betas' in order to increase performance. Over the past several weeks, that is exactly what has started to happen as many hedge fund managers have quite a bit of performance to make up between now and the end of the year. Looking at the technicals, the Drug/Semis ratio moved back below its 100-week moving average this week (see chart below). Given that development, we must consider last Read More 

ChartWatchers

NEW BOOKSTORE SECTION, SURVEYS, AND NEWSWEEK!

by Chip Anderson

NEW BOOKSTORE SECTION - We just started a BARGAIN BOOKS section in our bookstore.  You will find a number of good books on charting and analysis at great discounts.  You will always find books that are discounted at least 45% from their retail price.  Take a look, there is a good chance you will find something you have been wanting.  Be sure to check it often, as once we have sold out of an issue in the Bargain Books, it will not be available again.  Also, don't forget to check the NEW ADDITIONS section to see the latest books on Read More 

ChartWatchers

4TH QUARTER RALLY, AND WHY NASDAQ LEADERSHIP IS IMPORTANT

by Chip Anderson

NASDAQ 100 TOPS 200-DAY LINE One theme I keep repeating is the need for Nasdaq leadership during any fourth quarter rally. I'm happy to report that on the first day of the fourth quarter the Nasdaq 100 led a very impressive market rally that could carry through the rest of the year. Chart 1 carries three bullish pieces of information. First, the Nasdaq 100 Shares (QQQ) broke through their 200-day moving average. Second, the QQQ did so on the strongest volume in a month. Third, it was the strongest percentage gainer of the major market indexes and continues to show new market Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

There's some good news on the Dow chart this week. Despite Thursday's Merck-induced dip, the index moved higher on Friday and solidified last Tuesday's reversal at the 9977 level. That reversal was very significant as it was the first step in establishing a new uptrend for the index. Check out the chart below to see what I mean: . The turn at 9977 was much higher than the previous reversal back in August at 9783. While that's a very bullish sign, cautious ChartWatchers might want to wait for confirmation before getting too excited. Classical peak-and-trough analysis says that Read More