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November 2006

ChartWatchers

WILL THE NASDAQ RALLY FIZZLE?

by Chip Anderson

Not very likely. We've seen a very strong earnings season. Economic report after economic report suggests the Fed is done with its interest rate hike campaign. There are too many non-believers in the market's advance, just take a look at the short-sellers. Lots of cash sits on the sidelines - on corporate balance sheets and in money markets. Applied Materials reported earnings this week and indicated they had reduced the outstanding number of shares in their float by 10% due to an aggressive share buyback plan. We are seeing increasing interest among private investors in taking public Read More 

ChartWatchers

THIRD BREAKOUT FOR QQQQ

by Chip Anderson

For the third time in three months, QQQQ broke consolidation resistance and the uptrend shows no signs of abating. The gray ovals show consolidations in the second halves of August, September and October. These were followed by breakouts in early September, early October and early November. Broken resistance turned into support at 39.5 in September and again at 41 in October. These breakouts held and QQQQ never looked back. That shows strength. On the most recent breakout, broken resistance at 43 turns into support and this is the first level to watch for signs of trouble. A strong ETF Read More 

ChartWatchers

4-YEAR CYCLE RULES

by Chip Anderson

For quite a while I have been saying that the rally that began in July has been driven by persistent bearishness among investors. I still think this was a significant element, and it was encouraged by a strong belief that a major decline would be occurring in October in conjunction with the long-awaited 4-Year Cycle trough. Unfortunately for the bears, it appears that the 4-Year Cycle trough arrived early and without much fanfare (because the price decline into the cycle low was not very impressive). On our first chart we can see that the Cycle trough occurred after a mere 7.5% decline Read More 

ChartWatchers

CANDLEGLANCE, SITE SEARCH

by Chip Anderson

UPDATED CANDLEGLANCE PAGE - We've upgraded the Candleglance page so that people with wide screens will see more charts and less white space. Look for similar improvements throughout our site in the coming weeks. NEW ENHANCED SITE-SEARCH POWERED BY GOOGLE - We've also greatly enhanced our site search features allowing you to easily search for things using Google's search technology. To search from any page on our site, click the "Quick Action Dropdown box" in the upper right corner of any page and select "Site Search", then enter your search term and click "Go". Read More 

ChartWatchers

FALLING COMMODITIES HURT CANADA, EMERGING MARKETS LAG

by Chip Anderson

FALLING COMMODITIES HURT CANADA When commodity prices started to slide several months ago, I suggested that certain global stocks markets might suffer from falling raw material prices. One of them was Canada. Chart 1 shows the Toronto 300 Index (TSE) in the process of challenging its spring high. That's not too bad unless we consider that most other global markets have moved well beyond that chart barrier. The more important line on the chart is ratio of the TSE to the Dow Jones World Stock Index (solid line). Notice that the line has been falling since May. The means that the Read More 

ChartWatchers

STRONG TECHNICALS?

by Chip Anderson

Here's what a strong techincal picture looks like: Record closes for each of the past 4 days. Steady volume. Increasing Money Flow values. Quick recovery from a recent downturn. Bullish MACD cross-over. This chart has it all! Unless Maybe too many good signs is a bad sign. Maybe this baby is too "overbought" and is due for a correction. Things cannot possible get any better, right? This is the classic problem that investors face during a bull market. Reversed, this is the same dilemma that they face in a bear market too. However, this is really NOT a problem for Read More 

ChartWatchers

UNDERSTANDING THE MACD - NEGATIVE DIVERGENCES

by Chip Anderson

On the technical side, we believe the combination of price and volume is paramount to successfully trading the stock market. A strong second place finish goes to the Moving Average Convergence Divergence, or the "MACD". The standard settings on the MACD are 12, 26, 9. On daily charts, the MACD is the difference between the 12 day exponential moving average (12 day EMA) and the 26 day exponential moving average (26 day EMA) and this difference is plotted on StockCharts as the "thick black line". The 9 refers to the 9 day moving average of the MACD and is the "thin blue line". So what does Read More 

ChartWatchers

BEARISH DEVELOPMENTS IN SMH

by Chip Anderson

The Semiconductor group is important to the performance of the Nasdaq and the Nasdaq is important to the performance of the overall market. Recent bearish developments in the Semiconductor HOLDRS (SMH) bode ill for the group and this is likely to weigh on both the Nasdaq and the S&P 500. There are two bearish patterns at work and momentum recently turned negative. First, the advance from 29 to 36 formed a rising wedge and the mid October decline broke the lower trendline. Second, the ETF formed a head-and-shoulders pattern that extends back to early September and broke neckline Read More 

ChartWatchers

GOLD IS COMING BACK

by Chip Anderson

Since gold peaked around $725 in May of this year, it has been going through the process of digesting the huge advance that took place a year prior to that peak. At first it was not clear whether or not the gold bull market was over, but, as you can see on the chart below, the initially violent correction transformed into a sideways consolidation in the shape of a triangle. This week, over five months from the May top, gold decisively broke up through the top of the triangle, giving a pretty clear signal that the correction is over. On the weekly chart below the breakout appears even more Read More 

ChartWatchers

ANALYZING THE NASDAQ COMPOSITE

by Chip Anderson

The broader market rally off the June/July lows has pushed all the major indices higher; and in particular the Nasdaq Composite has outperformed rather noticeably if one looks at the Composite/S&P 500 Ratio. It has moved from 1.625 to 1.725; not a very large move, but a relatively profitable one to those wise enough to have been overweight technology shares. In that technical vein, we cannot help but note the very long and drawn out bullish consolidation forming; one that is nearly 3-years old right now, and that will become older until a clear breakout above trendline resistance is Read More 

ChartWatchers

SERVER RELOCATION SUCCESSFUL

by Chip Anderson

Our servers are now safely relocated to their new (temporary) home and the construction of our new server room has begun. Read More 

ChartWatchers

ENERGY STOCKS ARE BOUNCING AGAIN

by Chip Anderson

The last time I showed the Energy Sector SPDR (XLE) it was starting to bounce off chart support along its 2006 lows (see circles). Chart 1 shows that the XLE has climbed back over its moving average lines and may be heading toward the top of its 2006 trading range. Its relative strength ratio is starting to bounce as well. Oil Service stocks have been the weakest part of the energy patch. Chart 2 shows the Oil Service Holders (OIH) having broken their June/October downtrend line. I've suggested before that buying in energy stocks usually leads to buying in the commodities themselves Read More 

ChartWatchers

AVERAGING THE HIGHS AND THE LOWS

by Chip Anderson

There is a lot more power inside our SharpCharts2 charting engine than we currently make available to our users. The problem is making that power available in an easy-to-use way. A great example of that is the ability to calculate indicators based on something other than the closing value in the underlying dataset. Imagine seeing a MACD display based on a stock's High values rather than it's close. Or image seeing a Bollinger Band plot based on the Lows of the day. This week we took a step towards providing that level of flexibility by modifying the way that Simple Moving Averages and Read More