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May 2005

ChartWatchers

NASDAQ OVERBOUGHT, BUT NOT BEARISH

by Chip Anderson

The current rally is the strongest of the year and is unlikely to disappear over night. This strength is confirmed by price movement as well as two momentum indicators. First, the 15-day Rate-of-Change surged to levels not seen since early September and mid November. Second, 15-day RSI moved to its highest level of the year. Third, the Stochastic Oscillator moved to its highest level since mid November. All three are testament to the power behind the recent move. Even though the Stochastic Oscillator has become overbought, the 2004 rally suggests further upside before all is said and Read More 

ChartWatchers

INITIATION CLIMAX?

by Chip Anderson

One of Decision Point's proprietary indicators is the Participation Index (PI). It measures extreme (climactic) activity within a short-term price envelope. When a large number of stocks are participating in a particular price move (up or down), we recognize that such high levels of participation are unsustainable and refer to it as a "climax". There are two kinds of climaxes -- an initiation climax, which marks the beginning of a longer-term price move and an exhaustion climax, which marks the end of a price move. Both kinds of climax can be followed by some consolidation activity Read More 

ChartWatchers

RECENT DECLINE IN XOI CORRECTIVE

by Chip Anderson

Quite simply, the recent decline in the AMEX Oil Index (XOI) appears corrective in nature; and thus one would want to be long these shares at this time as the risk-reward parameters are now favorable. If past is prelude, and although it is not perfecta simple rhyme will do; the current correction is testing the sharply rising 110-day moving average, which when coupled with the lower 40-day stochastic level has provided excellent buying points over the past several years. If this test is successful as we expect; then a test of the highs is forthcoming. Therefore, we are long shares such Read More 

ChartWatchers

NASDAQ LEADS MARKET HIGHER...

by Chip Anderson

In my view, the most significant improvement has taken place in the technology-dominated Nasdaq market. The Nasdaq Composite Index broke through its 200-day average on Tuesday and has broken its 2005 down trendline. Its relative strength line has turned up relative to the S&P 500 . That's usually a positive sign for both. Nasdaq leadership is essential in any market upturn. That's what we're getting right now. One of the missing ingredients in recent market bounces has been higher volume . Yesterday's market upturn, however, saw all the major averages exceed their normal daily volume Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

It took a couple of big days to get the Dow back above the 10,400 level but last week's reaction rally has managed to do the trick and allowed the Dow to finish at 10,471. But will it last? The technical signs aren't convincing: With Friday's weak close, declining volume and the 50-day moving average moving below the 200-day moving average, things are primed for a quick re-test of the 10,400 level. On the positive side, the MACD and Chaikin Money Flow indicators are still rising. It should make for a very interesting week coming up. Let's see what our other commentators Read More 

ChartWatchers

THE LEADERS AND THE LAGGARDS

by Chip Anderson

The S&P 500 can do it, but the Nasdaq and the Small-caps can't do it. Or at least not just yet. Led by Finance, the S&P 500 broke above its late April high and resistance at 1165. However, the Nasdaq and S&P SmallCap Index stalled at corresponding resistance levels. This amounts to a non-confirmation. The generals (large-caps) are charging ahead, but the troops (small-caps and technology) are getting cold feet. It is hard to be fully bullish with these indices lagging. Read More 

ChartWatchers

VOLATILITY STILL HISTORICALLY LOW

by Chip Anderson

The CBOE Volatility Index (VIX) is a measure of the implied volatility of SPX index options. (According to the CBOE web site, "volatility is a measure of the fluctuation in the market price of the underlying security.") As a practical matter, the VIX measures the amount of fear that options writers have about the future volatility of the market, and, as with any sentiment gage, it is based upon current market action. While the VIX is most commonly used for short-term analysis, it is also useful to interpret it in a longer-term historical context. I have done this before, but Read More 

ChartWatchers

A SIMPLE ROADMAP

by Chip Anderson

From a structural and fundamental point-of-view, things are bearish right now; however, the technical and sentiment action surrounding recent price gains is quite constructive; thus a larger rally appears underway. We are bullish but only insofar as the 65-week moving average of the S&P 500 holds at the 1145 level on a closing basis. If the 1164 level is broached, then this will be the first sign a larger breakdown is underway, and hence will put us into an initial short position; with a break of 1145 consider an 'all out bear market' calling for an overweight short position Read More 

ChartWatchers

A LOOK AT THE NYSE COMPOSITE INDEX ...

by Chip Anderson

Every time I write about a certain stock market index, I'm asked why I don't write about some of the others. I generally try to spread my coverage around to all the major stock indexes, but can't cover them all at once. I also try to find the one that's giving the truest read on the overall market. Yesterday, for example, I used the S&P 500 for an in-depth market view and came up with a mixed picture. If I had chosen the Nasdaq, I would have a gotten more negative reading. If I had chosen the NYSE Composite Index , I would have come up with a slightly more positive read. Chart 1 shows Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

After its big drop in mid-April, the Dow has rallied back to a classic resistance level now: 10400. Just look at the chart: This is one of those "support-becomes-resistance" levels that has had a big impact on the market in the past (blue arrows) and will probably continue to influence the market's thinking for some time to come. But enough about that, let's see what our other commentators are thinking these days . Read More