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March 2006

ChartWatchers

DARK CLOUDS FOR XLK

by Chip Anderson

The dark cloud is a bearish candlestick reversal pattern made up of two candlesticks. The first is white and the second black. The open of the second is above the close of the first and the close of the second is below the mid point of the body of the first. The open-close range forms the body of the white candlestick. The thin lines above and below the body are called shadows and these represent the high and low. A dark cloud foreshadowed the January peak and this week�s dark cloud should be watched closely for confirmation. In January, the subsequent Read More 

ChartWatchers

MARKET IS ST OVERBOUGHT AND AT RESISTANCE

by Chip Anderson

Last week I wrote an article entitled Investors Intelligence Sentiment Helps Bulls in which I pointed out that sentiment had become very bearish, and that the market was more likely to rally than decline. Since then the market has enjoyed a short rally, but sentiment continues to be steadfastly bearish, a persistent positive for the market; however, the market has become short-term overbought and it has run into long-term resistance. The bottom two panels on the first chart show the breadth and volume versions of the Swenlin Trading Oscillator (STO) -- short-term indicators. As you can Read More 

ChartWatchers

BROAD MARKETS TAKING "DEFENSE POSITIONS"

by Chip Anderson

With the broad market indices such as the Dow Industrials and S&P 500 hitting new multi-year highs, one would reasonably believe that the advance has further to travel and riskier and riskier positions taken. However, when we look underneath the hood, we find rotation taking place towards more traditional �defensive positions�. This suggests market participants are skittish about the lagged effects of the past 2-year Fed interest rate hiking campaign, and are moving to decrease their beta exposure. Our case in point relates to the ratio between the Pharmaceutical Index ($DRG) and the Read More 

ChartWatchers

BOOKSTORE BEST SELLERS

by Chip Anderson

TOP TEN BEST SELLERS- We maintain a list of the top ten best-selling products in our online store. Hint: they are best-sellers for a reason. Take a look. Read More 

ChartWatchers

HEAD AND SHOULDERS DOLLAR BOTTOM?

by Chip Anderson

It's possible that the current dollar pullback is part of a large basing pattern of the head and shoulders variety. A case can be made that the Dollar Index formed a left shoulder at the start of 2004 and a head at the start of 2005. The fourth quarter peak near 92 stopped right at the spring 2004 peak. That allows for a neckline to be drawn over those two peaks. That interpretation allows for a drop in the USD to last summer's low near 86 as part of a possible right shoulder. That would be a fifty percent retracement of the 2005 price advance and would be a logical spot for new buying to Read More 

ChartWatchers

HOME DEPOT CONSOLIDATES WITH A MASSIVE TRIANGLE

by Chip Anderson

HD is no stranger to long consolidations. The stock surged in 2003 and then consolidated for a year (gray box). The advance continued with a surge in 2004 and the stock consolidated over the last 12 months with a large triangle. The gains from 2003 and 2004 are largely holding and the ability to maintain high prices is bullish. The next big move, however, is dependant on the direction of the consolidation breakout. A move below 37 would break key support and be most bearish. A move above 44 would break the upper trendline and 2005 high. This would forge a 52-week Read More 

ChartWatchers

RYDEX CASH FLOW IS BEARISH

by Chip Anderson

The Rydex Cash Flow Ratio*, which is shown on the first chart below, reflected a fair amount of bullish sentiment and peaked around the end of November. Since then it has been sliding down toward the bearish side of the range in spite of the fact that prices have been moving higher. This is not normal -- prices normally drive the Ratio as money flow adjusts to price movement. My first conclusion was that over-anxious bears were placing their bets too early and driving prices higher with their short covering; however, a closer examination of the Ratio's components reveals that something Read More 

ChartWatchers

A LOOK AT THE HOUSING INDEX ($HGX)

by Chip Anderson

Sometimes the best trade is the most obvious trade; and for us that is the “short housing” trade, or more succinctly…short the homebuilders. Interest rates moved sharply higher this week on the short-end as well as the long-end of the curve, and ht prospects are good for a continuation of this move. Thus, there is a fundamental component to the trade. As the chart shows, the uptrend was clearly violated, with a “head & shoulders” topping pattern still under development. If $HGX breaks 235 – and we think this is a “good bet” given the 50-week moving average is rolling over with Read More 

ChartWatchers

SHARPCHARTS2 FOR FREE USERS

by Chip Anderson

FREE USERS CONVERTED TO SHARPCHARTS2 - As mentioned above, we retired SharpCharts1 for Free Users last week.  Be sure to click on the "Instructions" link for help with common pitfalls that ex-SharpCharts1 users are hitting when first starting to use SharpCharts2. MORE SHARPCHARTS2 CONVERSIONS COMING SOON - Watch for us to continue to gradually change all of the features on the website over to SharpCharts2 in the coming weeks.  Soon, Scan Results and the Market Summary will link to SharpCharts2 for everyone.  Next, an alternate SharpCharts2-based version of Read More 

ChartWatchers

GLOBAL RATES ARE HEADING HIGHER

by Chip Anderson

Yesterday's decision by the ECB to raise rates was pretty much expected. What wasn't expected was the hawkish comments that accompanied that rate increase with hints of more to come. The Japanese have been talking about doing the same and may do so before the month is out. From a global standpoint, I find the impending Japanese move to raise rates more significant. For one thing, Japan is the second biggest economy in the world. Another reason (that I've written about before) is my belief that Japanese deflation has been one of the reasons that long-term bond yields have stayed so low Read More 

ChartWatchers

Hello Fellow ChartWatchers!

by Chip Anderson

STRUGGLING WITH 11,000 The Dow continues to test the big breakout about 11,000 it had last month.  Here's a chart of the recent action on a 15-minute scale which shows how the initial push has waned and how 11,000 is providing major support for the index (and the market) right now.     MID-CAPS ON A ROLL This week we added one of the last big features we needed to add to SharpCharts2 - Performance mode.  Similar to "Cumulative" mode which we've supported for years, Performance mode changes the main charting area so that a stock's Read More