ChartWatchers Newsletter logo

February 2006

ChartWatchers

DOW THEORY UPDATE

by Chip Anderson

Two weeks ago, I reported waning upside momentum for the Dow Industrials and Dow Transports. In addition, I noted that a Dow Theory non-confirmation was brewing, but a Dow Theory sell signal had yet to register. The Dow Industrials and Dow Transports would both have to move below their January lows for a Dow Theory sell signal. Flash forward and both Averages recorded 52-week highs this past week. In fact, the Dow Industrials recorded a 4 1/2 year high and Dow Transports recorded an all time high. The Dow Industrials broke Diamond resistance and pushed above 110000, while the Dow Read More 

ChartWatchers

SHORT-TERM OVERBOUGHT

by Chip Anderson

In my February 2 article I stated my belief that a medium-term correction is in progress because the PMM Percent Buy Index (PBI) has turned down and crossed down through its 32-EMA. The chart below shows this condition still exists, and I have not changed my mind at this point. Some readers pointed out that a similar occurrence in 2003 did not have serious negative effect on prices. I agree, and I should have mentioned this in the article. There is, however, a big difference in the 2003 PBI top and those that occurred afterwards. That 2003 top occurred after a huge upward thrust of Read More 

ChartWatchers

LOOKING AT OIL AND GOLD/SILVER INDEXES

by Chip Anderson

For the longest time, crude oil and gold prices have dominated the news in terms of bullish commodities. We like to look at the ratio between the Integrated Oil and Gold/Silver Indexes ($XOI:$XAU) for a possible "pairs trade", and every few years we are accorded any opportunity to do so. In fact…that time is now. If we look at the ratio, we find that the 150-week moving average is a very decent "fulcrum point" from which to trade; thus we will be moving into the trade via long positions in the XOI components of Amerada Hess (AHC) and Sunoco (SUN), while moving to a short position in Read More 

ChartWatchers

DOW HITS MULTI-YEAR HIGH

by Chip Anderson

The Dow was the only one of the major averages to reach a new high this week. That continues its new upside leadership that I wrote about last week. With the Dow now above the 11K level, the next potential upside target is its 2001 high at 11350. One of the big reasons for the Dow's strength was Honeywell. Last week I showed the Dow leader closing above 40 for the first time since mid 2001. It continued that bullish trend this week and appears capable of reaching 50. Another big Dow winner was Hewlett Packard. The chart below shows that Dow leader trading at nearly a five-year high Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

Stocks made a strong statement last week with the Dow Jones Industrials moving above the 11,000 mark decisively for the first time since June of 2001(!).   The Dow flirted with 11,000 in March of last year and briefly broke thru 11,000 at the start of this year, but both times it quickly retreated back below this major resistance level.  As the intraday chart below shows, this time the Dow broke thru 11K in the middle of Valentine's Day, fell back below 11K briefly 24 hours later, but has moved steadily upward since then on good volume.  While that is promising Read More 

ChartWatchers

DOW THEORY NON-CONFIRMATION

by Chip Anderson

The Dow is meeting staunch resistance around 11000, a level that turned the Average back in December and January. February is getting off to the same start with a big black candlestick on Thursday and 11500 remains the level to beat. In addition to a failure at resistance, MACD has a large negative divergence working and is poised to dip into negative territory for the second time this year. Things are looking bleak for the Dow. We also have a non-confirmation with the Dow Transports in January. The Dow Transports moved to a new reaction high in late Read More 

ChartWatchers

CORRECTION PHASE BEGINNING

by Chip Anderson

With the market having formed numerous tantalizing tops since the end of November, perhaps the title of this article should say that a correction phase is finally beginning. And, considering all those previous false starts, why am I so sure that this time is the real thing? Well, I'm pretty sure that a medium-term correction is in progress because the PMM Percent Buy Index (PBI) has turned down and crossed down through its 32-EMA. The PMM (Price Momentum Model) PBI is an important indicator that reveals the degree of bullish participation and whether that participation is getting Read More 

ChartWatchers

DECLINE IN HOUSING MARKET CONTINUES

by Chip Anderson

The decline in the housing market is becoming more and more real; however, the housing index has yet to fully reflect the risk of the potential for still slower housing growth numbers. In some cases such as Ryland's (RYL), new home sales were recently below 2004 levels. Thus, when we look at the Housing Index ($HGX), we find prices are now poised to correct their recent gains and still more. We foresee the index dropping from it's current 262 level all the way back to 200.We are short the homebuilders, and we want to become shorter. Read More 

ChartWatchers

SHARPCHARTS2 BETA 7 "SHIPS"

by Chip Anderson

NOTHING MUCH GOING ON - Yep, StockCharts.com is pretty quiet this week  Just Kidding!  SharpCharts2 Beta 7 is out.  Check out the article at the top of this newsletter for more details. Read More 

ChartWatchers

S&P 500 BREAKS ITS 50-DAY LINE

by Chip Anderson

The chart below shows the S&P 500 closing the week below its 50-day moving average. That suggests a further drop toward 1245. The daily MACD histogram bars also paint a short-term negative picture. They stayed below the zero line and failed to confirm the previous week's price bounce before weakening even further this week. That only affects the short-term trend. It's the weekly trend that I'm more concerned about.   Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

Have you tried SharpCharts2 yet?  The reception for our new "Beta 7" version of SharpCharts2 has been incredible!  More people have created more great looking SharpCharts2 charts in the past 3 days than ever before.  And many of you have sent us lots of wonderful feedback about what they liked and didn't like about the changes we have made.  And that in turn has allowed us to make SharpCharts2 even better - it's truely a win-win situation. In case you missed our mid-week mailing, the "Beta 7" version of SharpCharts2 will be our last unofficial release of Read More