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January 2005

ChartWatchers

WHO STARTED THIS MESS ANYWAY?

by Chip Anderson

January and 2005 have not been good for the bulls. After a strong finish in 2004, stocks were hit with strong selling pressure to begin the year and have yet to recover. A look into November and December reveals early weakness in two key groups. More importantly, traders can turn to these two key groups for signs of a bullish revival. So who done it? Look no further than Retail and Semiconductors. The retail group makes up a big part of the Consumer Discretionary sector and influences the S&P 500. In addition, estimates are that retail spending drives 2/3 of GDP and exerts a large Read More 

ChartWatchers

OEX PUT/CALL RATIO SAYS BOTTOM NEAR

by Chip Anderson

The Equity and OEX Put/Call Ratios generally signal overbought and oversold conditions that help identify price tops and bottoms; however, sometimes the OEX Put/Call Ratio will invert relative to the Equity Put/Call Ratio. At these times the inversion signals the opposite of what we would normally expect. Here's how I think this works. The Equity P/C Ratio represents the activity of speculators (the little guys) who become more and more committed to price direction until it reverses on them, therefore the Equity P/C Ratio becomes oversold at price bottoms and overbought at price tops Read More 

ChartWatchers

JANUARY DECLINE GAINING IMPORTANCE

by Chip Anderson

The January decline to date is gaining in importance; if prices remain at current to lower levels through the next six trading sessions then a bearish key reversal month' will form. This would signal exhaustion' of the uptrend, with any and all rallies considered selling opportunities. The last such monthly formation signal was January-2002with the decline of nearly 50% materializing from January's high at 2098 to October's low at 1108. Now, we don't necessarily believe the decline is going to be this dramatic at this time, but we simply want to illustrate that a substantial decline is a Read More 

ChartWatchers

THE BUILD OUT CONTINUES

by Chip Anderson

THE BUILD OUT CONTINUES - In 2004, StockCharts.com spent over $750,000 on improving our technology infrastructure - things like servers, routers, switches, data, and all the things it takes to get you the best charts on the web as quickly as possible. We're not done yet however. You can expect to see us continue to upgrade and improve all aspects of our web site in 2005 as well. For example, across from my desk right now are boxes with 10 additional high performance servers (over 60 GHz of CPU speed) that we'll be adding to our site over the next couple of weeks. While many of Read More 

ChartWatchers

WHY I PREFER THE 50-DAY AVERAGE ...

by Chip Anderson

The 20-day average is usually too short for my purposes which is to spot bigger trend changes (although it is the period used in Bollinger Bands). At the same time, the 200-day average is too long. Imagine holding a long position in the market waiting to see if it breaks the 200-day average. The chart below shows that the Nasdaq would have to drop more than 200 points (10%) to give a sell signal. That's too much to give up in my opinion. That's why I rely most heavily on the 50-day average. One of the simple rules that I follow is to require that any sector, industry group, or stock that Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

The market finished last week with three big down days. So far this year, the Nasdaq is down 6.5%. Much of the fall has been driven by Small Cap stocks as the S&P 500 Large Caps is only down 3.6% during the same period. As John Murphy subscribers already know, the Technology sector has been the weakest so far this year while Energy and Consumer Staples have been the strongest. Speaking of John Murphy, this edition of the newsletter kicks off with a great educational piece on moving averages from John. Richard Rhodes then shows us why January's decline is becoming Read More 

ChartWatchers

US DOLLAR

by Chip Anderson

The Dollar may be giving us something to talk about…. and possibly even worthy of a short-term play. The US Dollar Index has consolidated for 4-5 weeks and formed long white candlesticks twice. These show strong buying pressure and, at the very least, reinforce support just above 80. Notice that the index reversed course twice before with similar consolidations (gray ovals) and failed once (red oval). A move above 83.5 would be the bullish trigger and open the door to 87-88. Resistance at 83.5 is marked by the highs of the two long white candlesticks. As long 83.50 holds, the bears rule Read More 

ChartWatchers

SENTIMENT: A SUDDEN ATTITUDE ADJUSTMENT

by Chip Anderson

There has been a lot of concern among analysts that sentiment has been too bullish; however, the recent correction has done a lot to alleviate that condition. The American Association of Individual Investors (AAII) performs an electronic sentiment poll every week. The cutoff is Wednesday and the results are published the next day. This quick turn around gives us an immediate view of investor sentiment before the results are stale and we can compare the results directly to the price action that generated them. As you can see on the chart below, the recent price decline has effected a Read More 

ChartWatchers

OUTPERFORMING THE INDICES IN 2005

by Chip Anderson

Last week's stock market correction was significant in our opinion; for the technical patterns suggest the correction will continue in the weeks ahead. But more significant in the fact that if the correction extends sufficiently below certain levelsthen the entire rally cycle off the October-2002 is complete. First and foremost, last week formed a bearish key reversal' lower that signals exhaustion from within the 50%-to-60% correction zone; this increases the probability of a test of the 1165 level, which is a mere 21 points lower. Thereafter, if extend lower through this level and then Read More 

ChartWatchers

S&P GIVES FIRST WEEK WARNING

by Chip Anderson

The S&P 500 ended the week with a loss of nearly 30 points (-2.4%). According to the historical record since 1950, a down close during the first week of January by the S&P 500 has resulted in a down year 45% of the time. A loss for the entire month of January raises the percentages for a down year to 58%. The good news is the the S&P 500 SPDRs (SPY) are still trading over their 50-day moving average. The bad news is that the Nasdaq market and the Russell 2000 Small Cap Index closed beneath that support line. Those were the two groups that led the market higher during the Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

Our first issue of 2005 kicks off with a great summary of the recent S&P action by John Murphy. Richard Rhodes then looks at last week's correction. Carl Swenlin examines the recent change in investor sentiment and Arthur Hill wraps things up with a look at the US Dollar. OK, here we go Read More