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May 2007

ChartWatchers

TAKE ME OUT TO THE BALLGAME

by Chip Anderson

Folks, we're merely in the second or third inning of a nine inning game. Let there be no doubt, the bulls are in charge. And they will remain in charge. This current bull rally goes beyond interest rates, earnings, inflation, blah, blah, blah. It's not that those fundamentals aren't important, they are. But we are talking about supply and demand, Economics 101. We are seeing deal after deal after deal. We have been talking for months at Invested Central about the long-term effect of all of these buyouts and private equity deals. First of all, the fact that these deals are occurring at all Read More 

ChartWatchers

DOLLAR TRYING TO TURN UP

by Chip Anderson

The U.S. Dollar is trying to turn up for the fourth time since it topped in 2004, but this bottom looks more promising than the prior three. While the long-term trend is down, this bottom is the third confirmation of the descending wedge formation, a technical configuration which normally resolves to the up side. This wedge is also a long-term formation, so the direction of a breakout has long-term implications. In the short-term we have a PMO (Price Momentum Oscillator) buy signal, generated when the PMO crosses up through its 10-EMA. Also, the price index has broken above the Read More 

ChartWatchers

PLATES STILL SHIFTING

by Chip Anderson

We recently featured the S&P 500 Large Cap vs. Russell 2000 Small Cap ratio surrogate using the ETFs SPY:IWM; with the implication that the tectonic plates were shifting beneath the markets, with large caps slowly, but surely coming back to favor at the expense. This was simply the thesis based on "looking through" out indicators; however, last week provided clear confirmation that indeed - a major breakout had taken place on the daily as well as the weekly and monthly charts. Obviously, this has major implications for our trading strategy; we are increasingly likely to trade the Read More 

ChartWatchers

DOW IN PERSPECTIVE

by Chip Anderson

The Dow Jones Industrials continues to rise week after week setting new records as it goes. I thought it would be good to take a quick look back and see if history can teach us anything about what the Dow does to signal the end of these long up-trends. Here's a weekly chart of the Dow Industrials going back to 1990. This is a semi-log scale chart (the vertical axis is logarithmically scaled, the horizontal axis is not) and includes my favorite one-size-fits-all indicator, the 20-period Chaiken Money Flow. The log scaling helps us see that the recent rise, while Read More 

ChartWatchers

SEMICONDUCTORS FINALLY MAKE THEIR BREAK

by Chip Anderson

We've been watching and following the semiconductors for the past many months, awaiting their attempt to join the stock market's rally. But it hadn't happened.until this past week. We have remained steadfastly bullish over the past couple years and became very bullish when we saw long-term positive divergences form on the MACD on the major indices last July. Lower lows were in place, but the MACD actually put in a higher reading on those lower lows. We could see that selling momentum was dying. In articles over the past several months, we've indicated that we believe the market could Read More 

ChartWatchers

THOSE LAGGING SMALL CAPS

by Chip Anderson

Even though the Dow is trading at all time highs and the S&P 500 is trading above 1500 for the first time since 2000, the Russell 2000 continues having trouble with resistance around 830. Thinking in terms of Dow Theory, I view this as a non-confirmation. A bull signal is triggered or renewed when both the Dow Industrials AND the Dow Transports move to new highs. Failure by one of these averages results in a non-confirmation and this questions underlying strength. The Dow and the S&P 500 cleared resistance with relative ease, but the Russell 2000 has been consolidating around 830 Read More 

ChartWatchers

MARKET IS BULLISH BUT OVERBOUGHT

by Chip Anderson

The weekly chart of the S&P 500 Index below reveal that prices are behaving in a very bullish fashion. The index has broken above the gradually rising trend channel that prevailed from 2004. In March prices pulled back and successfully tested the support provided by the top of the channel. Since then the rally resumed, making new highs and apparently establishing an even steeper rising trend channel. Because prices have reached the top of the channel, we must consider that the market is overbought, and there are plenty of other indicators that will confirm this; however, there is no Read More 

ChartWatchers

NETWORK SPEED, CHILLER

by Chip Anderson

NOTHING SPECIAL HAPPENING HERE - NOPE - It's certainly not worth your time to completely read Chip's article this week. Nope. I'd just skip it entirely. NETWORK SPEED BACK TO NORMAL WITH ZERO ERRORS! - We've been slowly and steadily getting the speed of our network back up to Gigabit speed. (We had to slow it down last month in order to avoid some performance bottlenecks that had crept into things - see the last two newsletter for details.) I'm please to say we are back to our Gigabit speed and have been running for six days now with a grand total of zero internal network errors! Even Read More 

ChartWatchers

XAU INDEX IS TESTING ALL-TIME HIGH

by Chip Anderson

One of the most consistent of all intermarket relationship is the inverse relationship between gold assets and the U.S. Dollar. Nowhere is that more evident than in the chart below. The green line plots the U.S. Dollar Index (which measures the dollar against six foreign currencies. The Euro has the biggest impact in the USD). The orange line is the Gold & Silver (XAU) Index of precious metal stocks. It's clear that they trend in opposite directions. For example, the 1996-2000 dollar rally coincided with a major downturn in the XAU (see arrows). The fall in the dollar at the start of Read More 

ChartWatchers

TAKE ADVANTAGE OF US, PLEASE!

by Chip Anderson

Our Spring Special is running throughout the month of May! Let me repeat that in case you missed it: Our Spring Special is on from now until May 31st! Sorry for the blatant plug, but every time one of these special periods end, we get flooded with message from people who claim that they missed it. The reasons range from the comic to the tragic and we do our best to accommodate everyone but it is waaaaay better if everyone would sign up for the special NOW while it is on, instead of sending us panicky email after it ends. I will now take questions from the audience: Q: What the Read More