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February 2007

ChartWatchers

SEMICONDUCTORS FINALLY PROVIDING A LIFT

by Chip Anderson

We have been very bullish the equity market for months and we continue to be. But one wild card has been the semiconductors. In order to truly sustain a nice market rally, we felt the semiconductors would need to participate. Well, we've been waitingand waitingand waiting. Finally, a critical technical move was made this week. Semiconductors got the fundamental lift from Analog Devices (ADI) which said that January business conditions were improving. That was music to technology investors' ears. We've seen the fundamental news before, however. We wanted to see price action follow Read More 

ChartWatchers

STRONG BUYING PRESSURE IN IWM

by Chip Anderson

The Russell 2000 iShares (IWM) broke consolidation resistance this month and two key volume-based indicators point to strong buying pressure. The first chart shows the Russell 2000 iShares (IWM) and volume. The ETF surged from mid August to mid November and then consolidated for 10 weeks. This consolidation represents a rest in the uptrend and the breakout signals a continuation of the uptrend. Notice that broken resistance is turning into support and the ETF is holding above broken resistance. This shows strength and a move back below the resistance breakout would be the first sign of Read More 

ChartWatchers

A NEW OPINION ON RYDEX CASH FLOW

by Chip Anderson

In my 2/16/2007 article, Cash Flow Shows Wall of Worry, I asserted that the dearth of bullish Rydex cash flow was a sign that the rally would probably continue because the bulls were still not committing in a big way. For the sake of variety I try not to repeat a topic too soon, but I received an unusual amount of mail about this, much of it asserting that ETFs and other products are siphoning bullish funds from Rydex and other mutual fund groups. The following letter makes the point very well. Hi Carl, While I don't disagree with your overall opinion about the market 'climbing a wall of Read More 

ChartWatchers

HAVE THE SEMICONDUCTORS BECOME "DEAD MONEY"?

by Chip Anderson

The technology rally from July-to-present has occurred without the participation of the Semiconductor Index ($SOX). We find this rather "odd" to be sure, for one of the basic tenets of any broader market rally were that they were led in general by the technology sector, and more specifically the "high-beta" semiconductor industry. That hasn't been the case recently however, for the semis have lagged rather badly , and the question before us is whether they are "dead money" or not. A reasonable question we think. Our opinion: the semis are poised to trade sharply higherifif they can Read More 

ChartWatchers

ONE OF THE NICEST KUDOS WE'VE SEEN!

by Chip Anderson

Someone, we honestly don't know who exactly, sent us the following feedback earlier this week. It completely blew us away: "I'm astonished at how customer friendly your service, website, and daily charts are. Thank you, thank you, thank you. This is my first day with your service but I have noticed some things about your website that let me know your organization will be good to work with. Your organization a.) does not force me to renew the service beyond what I pay up front (you give me an OPTION for auto renewal or NOT); b.) your service is reasonably priced and allows for monthly Read More 

ChartWatchers

COMMODITY PRICES ARE RISING AGAIN

by Chip Anderson

Just when it seemed like inflation was on the wane, another rally in commodity markets suggests just the opposite. [This week's unexpected jump in the core CPI also caught the market's attention]. Chart 1 shows the DB Commodities Tracking Fund (DBC) challenging its late November peak at 25.33. A close above that chart barrier would signal even higher commodity prices. Most commodity indexes benefitted from crude oil closing back over $60 and strong gains in precious metals, copper, and agricultural markets. [Corn hit a new 10-year high]. Since most commodity indexes have a heavy energy Read More 

ChartWatchers

PERCENTAGE ABOVE/BELOW THE EXPONENTIAL MOVING AVERAGE

by Chip Anderson

Mary W. writes "I'd like to see how much above or below the 200-day moving average a stock currently is. Does your charting system show that?" While we don't have a specific indicator for "Percentage above/below the Moving Average", clever chartists that understand how the "Price Oscillator (PPO)" works can create such an indicator easily. The PPO is very similar to the well-known MACD Indicator. Both are based on the difference between two exponential moving averages. The PPO differs from the MACD in that it's values are converted into a "percentage difference" rather than the "absolute Read More 

ChartWatchers

TRANSPORTS LOOKING SOLID

by Chip Anderson

Money generally rotates from one sector to another. Identifying the rotation early in the cycle can make a big difference in trading successfully. If you look at a long-term chart of the Dow Jones Transportation Index (below), you'll see that the group has been trending higher for several years. However, there have been periods when money has rotated out of the group as transports consolidated prior gains. In the past week, we have seen transportation issues rise to the front of the pack. This past week saw transports finish at an all-time high close. Volume was accelerating during this Read More 

ChartWatchers

GETTING CHOOSY

by Chip Anderson

The S&P Small-Cap iShares (IJR) hit a new all time high this week and led the market higher over the last six days. Just a few weeks ago, this group was lagging and relative weakness hung over the market The ETF broke above its December high and this is a vote of confidence for both small-caps and the market as a whole. Unfortunately, this vote of confidence from small-caps is overshadowed by a no-confidence vote from techs. Like small-caps, tech stocks typically have higher betas, higher volatility and higher risk. Investors are risk loving when these two groups lead and risk averse Read More 

ChartWatchers

BOND TIMING

by Chip Anderson

Timer Digest has ranked Decision Point #1 Bond Timer for the 52-week period ending 1/26/2007. We were also ranked #3 Bond Timer for the year 2006, and #5 Bond Timer for the last five years. Since past performance does not guarantee future results, this information is not particularly useful, except to highlight that we have done something right in the last year or so. Perhaps it would be more accurate to say that the market has favored our methodology, because sometimes it does not. Rather than focusing on the capture of the elusive prize, I thought it would be useful to describe the Read More 

ChartWatchers

SPY OUTPERFORMING XLY

by Chip Anderson

From our vantage point; the S&P 500 SPDR (SPY) is poised to outperform the Consumer Discrectionary SPDR (XLY) in all-time frames (short-intermediate-long), with a new highs expected to be reached in the late-2007 to 2008 time frame. Our reasoning is such: First, the fibonacci 62% retracement level was obatined, and indeed did hold as it should during a bull market. Secondly, a bullish declining wedge is confirmed, of which steep trendline resistance was broken. Prices are consolidating short-term, but given the postive 20-day stochastic divergencethe Read More 

ChartWatchers

SERVER ROOM, DATA FEED, CHARTSCHOOL

by Chip Anderson

SERVER ROOM PROGRESS REPORT - We've had a bit of a set back on the construction front for our new server facilities. The building management team veto'd some of our construction plans at the last second (Chip was livid) and we are redesigning some things as a result. It has set back our schedule by about a month. The good news is that we have found ways to upgrade our servers even before the new server room is completely finished. Look for us to start installing more servers in the next couple of weeks as we continue to expand our capabilities. DATA FEED CAPACITY DOUBLED - Read More 

ChartWatchers

REVUE OF A SUCCESSFUL MOVING AVERAGE TECHNIQUE

by Chip Anderson

Last July, I reviewed a moving average technique that used weekly exponential moving averages. [I first described this system in October 2005]. I'm revisiting it today because it continues to do remarkably well. And I'd like to suggest expanding its usefulness. The technique is a moving average crossover system. In other words, trading signals are given when the shorter m.a. line crosses the longer. The two moving averages are the 13 and 34 week exponential moving avarages (EMAs). [EMAs are more sensitive than simple moving averages because they give greater weight to more recent price Read More