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December 2004

ChartWatchers

EARLY VOLUME SURGE

by Chip Anderson

It is shaping up to be a banner month for December volume. On this chart, the vertical black line shows the beginning of December, the red line the end of December (D) and the green line the end of January (J). Over the last three years, there was strong volume in early December (usually the first 2-3 days). In 2002 and 2003, volume soon tapered off and December finished with its normal below average volume performance. Things are different this year, at least for the first 17 calendar days of the month. Nasdaq volume started strong and continues strong with 12 of the last 13 trading Read More 

ChartWatchers

DOLLAR TRYING TO BOTTOM

by Chip Anderson

The daily chart of the US Dollar Index shows that the dollar is trying to put in a bottom. The encouraging signs are that the 9-year low earlier this month survived a sharp retest this week, the index has broken above the short-term declining tops line, and there is a PMO crossover buy signal. The problem is that sentiment has moved from extreme bearishness to neutral, which means that quite a few bulls have arrived on the scene. This happened too quickly, in my opinion, and there may be more work to do (and lower lows seen) before the bottoming process is complete. Read More 

ChartWatchers

Long-term Oil vs. Gold

by Chip Anderson

Today we take a very long-term look at the relative valuation of integrated oil-related shares in comparison to gold shares ($XOI/$HUI). After the very long rise in gold shares in both absolute and relative terms; we find the present time is opportune to prune back long gold holdings and buy into integrated oil shares at current levels. This certainly isn't a popular decision given many are ‘gold bugs', but the fact of the matter is that this investment allocation merits strong consideration; for given when the Fed raises interest rates….they generally go too far and gold shares do quite Read More 

ChartWatchers

RATES SHOULD BE MOVING HIGHER

by Chip Anderson

This time last year I wrote about my expectation for long-term interest rates to start moving higher during 2004. I got it only half right. They moved higher during the first half, but then fell back during the second half. It looks like bond yields will end the year pretty much where they started. A number of readers have asked why bond yields have stayed so low for so long and for my outlook for next year. Chart 1 shows bond yields turning back down at the start of 2000 and bottoming in mid-2003. The 2000 peak in yields coincided a falling stock market and rising bond prices. The Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

Chip's personal message goes here, talking about what John Murphy, Richard Rhodes, Carl Swenlin and the rest of the gang have to say in this issue. This segment should be limited to a couple sentences we want to keep people engaged with concise text that is valuable and useful to them. Leads into Chip's column about specific issues Chip's Headline Goes Here Chip's market commentary goes here. Chip's market commentary goes here. Chip's market commentary goes here. Chip's market commentary goes here. Chip's market commentary goes here. Chip's market commentary goes here. Chip's Read More 

ChartWatchers

DIVERGENCES WITHIN THE SEMICONDUCTOR GROUP

by Chip Anderson

While the Nasdaq trades near a 52-week high, the Semiconductor HOLDRS (SMH) remains well below its Jan-04 high and has shown relative weakness over the last few months. There is also a split within the group as Applied Materials challenges resistance and Micron Technology (MU) tests support. Until both get on the same page, the Semiconductor group is likely to remain in a funk and continue underperforming the Nasdaq. Applied Materials (AMAT) formed a double bottom over the last few months and is testing key resistance around 18. The double bottom represents a base over the last few Read More 

ChartWatchers

WEAK CASH FLOW PRECEEDS PRICE DECLINES IN PRECIOUS METALS STOCKS

by Chip Anderson

When there is weak cash flow into Rydex Precious Metals Fund it is a fairly reliable warning to expect price weakness in the short-term, and sometimes the corrections can be quite severe. As a general rule we expect cash flow to more or less follow prices -- when prices are going up, cash flow should also be moving up proportionately -- however, when prices rise and cash flow suddenly dries up, it tells us that the sector is losing support. Higher prices are failing to attract more money. On the chart we can see four negative divergences between cash flow and price. In the Read More 

ChartWatchers

CONSUMER DISCRETIONARY VS. STAPLES

by Chip Anderson

Today we look at the high relative valuation of Consumer Discretionary vs. Staples stocks. Current levels have not been seen; at the 2000 high in which the bubble burst', the ratio stood near 1.40. We believe that this stretched valuation' argues for one to reassess their portfolios in terms of the shares within them. To move into Staples would imply a defensive move' related to a decline in the overall stock market. While that may not be today's or tomorrow's businessone must be cognizant of the high probability discretionary stocks will not outperform from this point forward. Read More 

ChartWatchers

LONGER-TERM IMPLICATIONS FOR STOCKS

by Chip Anderson

The last paragraph in the September 23 report carried the headline: LONG TERM IMPLICATIONS FOR STOCKS AREN'T GOOD. To repeat what I wrote then, "An October pullback in oil would probably be helpful to the stock market during the fourth quarter. The ability of oil to stay over $40, however, will remain a drag on the stock market and the economyand will probably limit stock market gains during 2005". So far, the October top in oil (and this week's downturn) has been bullish for stocks and fits into the idea of a fourth quarter rally lasting into the start of next year. The longer-term Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

Happy Holidays! Welcome to this special holiday edition of ChartWatchers! This time around John explains why $40 is such an important number of Oil prices, Richard explains why he'd buy Coke but sell McDonalds, Carl has a chart that explains while Precious Metal prices are headed lower, and Arthur Hill looks at AMAT and MU. Here we go Read More