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February 2005

ChartWatchers

S&P 500 AND ELLIOTT WAVE

by Chip Anderson

The S&P 500 remains in bull mode and continues to outperform the Nasdaq 100. In Elliott terms, the index has taken on a 5-Wave structure since mid August. Wave 1 extends up to 1142, Wave 2 declined to 1090, Wave 3 advanced to 1218 and Wave 4 fell to 1163. The recent move above the upper trendline of the falling wedge represents the beginning of Wave 5. As a Wave 5 advance, the upside projection would be to around 1240-1245. Wave 5 is often 62 percent of Wave 3 or equal to Wave 1. The 62% stems from the Fibonacci number .618. As a Fibonacci 62% of Wave 3, the upside target would be to Read More 

ChartWatchers

APPLE: CAN YOU SAY "PARABOLIC?" TWICE?

by Chip Anderson

Investors love the Apple (AAPL) "story" and they are driving he stock's price into a vertical ascent. When a stock arcs into an ever-increasing angle of ascent it is called a parabolic rise. "Investors" get into a feeding frenzy, causing the price rise to become so steep that it is unsustainable. The inevitable outcome of a parabolic is a crash, because investor sentiment will at some point reverse, and people are suddenly trying to get out of the stock as fast as they were previously trying get in. What is at once amusing and tragic is that, as you can see on the chart, this isn't the Read More 

ChartWatchers

THE SCALE HAS TIPPED TOWARDS INFLATION

by Chip Anderson

At the New York Expo last weekend, Martin Pring made the case that the battle between the forces of deflation and inflation had reached a critical inflection point. In other words, his charts showed that the deflation/inflation scale was about ready to tip in one direction. He arrived at that conclusion by comparing rate-sensitive (deflation) stocks with commodity-related (inflation) stocks. When rate-sensitive stocks are in the lead, deflation is dominant. When commodity-stocks lead, inflation is dominant (or becoming so). Which brings me to our last chart. It's a ratio comparison of Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

2005 is well underway now and some important technical trends are developing on the year-to-date charts. As you can see on this PerfChart, since the start of the year, the energy-heavy AMEX index has outperformed the other benchmarks significantly. The Dow, the NYSE, and the Large-Caps are clustered around the break-even point and the small-caps and tech-heavy Nasdaq have both had significant losses so far. Will these trends continue? And if so, for how long? These are the questions that our commentators try to get a handle on during the rest of this issue. First, John Murphy Read More 

ChartWatchers

DIVIDE AND CONQUER

by Chip Anderson

To understand the Nasdaq and Nasdaq 100, it is important to look at the individual parts. These two indices can be broken down into four key industry groups: semiconductors (SMH), networking (IGN), software (SWH) and internet (HHH). While retail, telecom, hardware, biotech and other industry groups certainly play a part, these four are the key drivers and the first place to look for signs of weakness or strength. The same approach works for the S&P 500. This index can be broken down into six key sectors: Finance (XLF), HealthCare (XLV), Consumer Discretionary (XLY), Information Read More 

ChartWatchers

THE DECENNIAL PATTERN (YEARS ENDING IN 5)

by Chip Anderson

The Decennial Pattern refers to the fact that years ending in the number five (5) are up years for the stock market. This is not just a statistical tendency. In fact, this has been the case for every year ending in 5 since 1885. Furthermore, the price low for these years has been made in the first quarter of every year except 1965. Many find this evidence quite compelling, however, John Hussman (hussman.com) demonstrates in his 1/24/2005 weekly commentary why the decennial pattern is "statistically unimpressive." Nevertheless, there could be more to this pattern than luck and serendipity Read More 

ChartWatchers

MARKET RALLY IMPRESSIVE, POSES NEW QUESTIONS

by Chip Anderson

Last week's market rally was impressive to be sure. Now, the question whether the decline off the early January highs are in fact intermediate-higher or more short-term in nature. Previously, we postulated the monthly key reversals' in the major indices put them in a position to decline further; however, that isn't clear any longer. In fact, the S&P 500/Nasdaq Composite Ratio is now testing the critical 125-dma trading signal' we use; if prices breakout above it then technology shares are expected to underperform . But, given the 40-day stochastic is overboughtthen the probability Read More 

ChartWatchers

SHARPCHARTS 2 "BETA 5" NOW AVAILABLE!

by Chip Anderson

A "Beta" release is a preview / testing version of a new piece of software. We've received great feedback from our users about our previous four Beta versions of our new SharpCharts 2 charts. Now it's your turn. Check out the latest Beta version and let us know what you think. The new version features a completely revamped User Interface that now includes the ability to control indicator and overlay colors and styles. You can even ask for indicators of indicators - Bollinger Bands of the RSI for example! Are you ready for some real charting power? Click here to get started! Read More 

ChartWatchers

DOW AND S&P BREAK BARRIERS, MARKET IN FIFTH WAVE

by Chip Anderson

DOW AND S&P 500 CLEAR RESISTANCE BARRIER The hourly bars for the Dow Diamonds and the S&P 500 SPDR show both having cleared initial resistance at their mid-January highs. [Both also closed back over their 50-day moving averages]. Small cap indexes accomplished that earlier in the week, which hinted that the large cap indexes were heading in the same direction. I also showed the improvement in market breadth figures earlier in the week. That greatly increases the odds that the blue chip averages are headed for a challenge of their old high. IT Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

As you may have noticed, once again we are able to send out the newsletter in HTML format thanks to the good people at ConstantContact.com. We hope you enjoy the convenience of having the entire newsletter in your inbox rather than having to click a link to see it. As always, we want you feedback on changes like this, so feel free to tell us what you think. The other big change this week is the launch of the "Beta 5" version of our new SharpCharts2 charting engine! With this release, SharpCharts2 is almost complete. You can find a complete list of the new improvements in the "Site News" Read More 

ChartWatchers

GOLD STOCKS STILL TESTING LONG-TERM SUPPORT - TAKING WHAT THE MARKET GIVES US

by Chip Anderson

GOLD INDEX STILL TESTING TRENDLINE SUPPORT Back on January 10, I wrote about the Gold & Silver Index (XAU) being in a support zone defined by the rising trendline shown in Chart 1. The trendline starts in April 2003 and is drawn under the April/July 2004 lows (see arrows). The third arrow still shows potential trendline support near 90 in the XAU Index. Chart 2 applies Fibonacci retracement levels to the rally that began last May. It shows that the XAU has retraced close to 62% of that uptrend. That also makes the area around 90 a potential support level. That lower horizontal line Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

Today we have a special mid-week edition of ChartWatchers for you. Yesterday, John Murphy published a column and the long term outlook for Gold and the Market as a whole. The column received a very large number of positive comments from his subscribers and we thought we'd share it with everyone. We are also using this opportunity to clean out our newsletter subscriber list. You are getting this message because someone (hopefully you) entered your email address into our newsletter subscription form at some point in the past. If you no longer wish to receive these free, bi-weekly Read More