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June 2007

ChartWatchers

FLIGHT TO SAFETY RATIO

by Chip Anderson

I discussed many months ago how the rotation from the tech-heavy NASDAQ to the safety of the Dow Jones evolves over time. As earnings disappoint and growth slows, money moves away from the high octane growth stocks to the more conservative components of the Dow. That's what we saw back from 1984 through 1991 and again from 2000 to 2002. But when our economy grows and earnings begin to expand, money flows in the opposite direction - away from the Dow and into the NASDAQ. I believe we remain in this latter environment. Our economy is expected to grow in the second half of 2007 and into 2008 Read More 

ChartWatchers

S&P MIDCAP ETF TESTS KEY SUPPORT

by Chip Anderson

The S&P Midcap ETF (MDY) remains in an uptrend for now, but a lower high and waning upside momentum are cause for concern. The ETF established support around 160-161 with reaction lows in May and June. In addition, the rising 50-day moving average marks support in this area. The ETF formed a lower high six days ago and a break below key support at 160 would forge a lower low. This would be medium-term bearish and call for a retracement of the March-June advance. According to the Aroon indicators, the upside is loosing momentum and the downside is gaining momentum. The uptrend was Read More 

ChartWatchers

BONDS CONTINUE TO WEAKEN

by Chip Anderson

On our first chart, a daily bar chart, we can see that bonds have been weakening for several months, with the most dramatic decline occurring in the last month or so. The question that comes to mind is whether this weakness is a correction in a longer-term up trend or the start of a more serious decline? Since the 50-EMA is below the 200-EMA, we have to assume that bonds have entered a long-term down trend. This situation could change fairly quickly, but for now we need to maintain negative assumptions. The second chart, a monthly bar chart, helps us put the decline into a very long-term Read More 

ChartWatchers

LOOKING AT THE SEMICONDUCTOR INDEX

by Chip Anderson

Last week's stock market correction was rather "brutal" to be sure; however, we believe that the balance of evidence suggests at this time it is nothing more than a correction and more likely a consolidation to higher highs. If this is so, then we want to be long those stocks that shall "lead" the market higher. At this juncture, our models and analysis argues that using current weakness in the semiconductor sector to accumulate shares will provide outsized gains in the months ahead. Looking at the daily chart of the Semiconductor Index ($SOX), we find a rather longer-term, large and Read More 

ChartWatchers

SERVER ROOM MOVE COMPLETED!

by Chip Anderson

It took w-a-y longer than it was supposed to but all of our servers are now fully moved into our new, cooler, more powerful datacenter. The new datacenter will allow us to continue adding newer, more powerful computers that will allow our site to run even faster. CHART SNAPSHOTS BACK ON-LINE - The "snapshot" feature of our ChartNotes tool is now working again. Extra members, please let us know if you have any problems with your Snapshots list. Read More 

ChartWatchers

SUBPRIME CONCERNS HURT BANKS AND BROKERS

by Chip Anderson

Growing concerns about the fallout in the subprime mortgage market caused heavy selling in banks and brokers today. Today's selling more than wiped out yesterday's rebound in the financial group. Chart 1 shows the Financials Sector SPDR (XLF) undercutting yesterday's intra-day low. It's now threatening its 200-day moving average. Most of the selling came in brokers and money center banks most directly affected by subprime problems. Read More 

ChartWatchers

SIX SIMPLE STEPS FOR FINDING GREAT STOCKS

by Chip Anderson

This week, I thought we'd revisit an article I wrote way back in November of 2001 about the "Six Steps" you can take at StockCharts.com to quickly guage the overall health of the market and find great stock opportunities. While the graphs are all out-dated now, the concepts are still very valid and hopefully helpful. Enjoy! - Chip We get lots of questions about what the best way to use StockCharts.com is, so this week I thought I'd incorporate one answer to that question into the newsletter. While there is no 100% best way to use all of the resources that StockCharts provides, here's the Read More 

ChartWatchers

A GOLDEN OPPORTUNITY

by Chip Anderson

The market periodically finds reasons to selloff, even in bull markets. This past week it was all about interest rates. You could see it coming. Interest rates had been rising for the last month. The yield on the 10 year treasury bond increased from 4.61% on May 8th to a high of 5.18% on Friday, June 8th, before settling back at the close to 5.12%. Equity markets get skittish as interest rates rise, and generally for good reason. When rates rise, access to capital begins to dry up, capital expenditures drop and corporate America sees shrinking profits. Think about what's driven the market Read More 

ChartWatchers

NASDAQ RECOVERS

by Chip Anderson

The Nasdaq held support and led the market higher on Friday. Even though Thursday's decline was quite drastic, the Nasdaq never broke support from its May lows and the medium-term uptrend remains. Nasdaq support is just above 2500 and extends back to the January highs. The index established a resistance zone around 2510 and this resistance zone turned into support during May. This is a classis tenet of technical analysis: broken resistance turns into support. While this week's three day plunge was the sharpest decline since late February, the index is still holding support and I would not Read More 

ChartWatchers

CORRECTION AT LAST!

by Chip Anderson

We have been watching prices trend higher for several weeks, even as internal strength trended lower and warned that price weakness could be ahead. Finally, this week prices broke down in a big way, signaling the start of a correction that could last at least a few weeks. Our first chart is of the Participation Index (PI). The PI measures short-term price trends and tracks the percentage of stocks pushing the upper or lower edge of a short-term price trend envelope. Specifically we track the participation of each stock in a given index. A trend needs a strong plurality of participation Read More 

ChartWatchers

MARKET FOCUSING ON 10-YEAR NOTE YIELD

by Chip Anderson

Last week saw stocks sell off rather sharply for several days, of which the catalyst was the sharp rise in bond yields as inflation and too strong growth concerns too center stage. Since bond yields are now the tail wagging the stock market dog – we think it imperative to understand perhaps where bond yields are headed given stocks are now showing a highly inverse correlation with bond yields. If bond yields are headed higher; then ostensibly stock prices are headed lower. The market's focus is upon the 10-year note yield; it is clear bond yields are in a bull market given the bottom Read More 

ChartWatchers

NEW SERVER ROOM STATUS

by Chip Anderson

We've moved about 70% of our servers into our new server room where our new chiller plant keeps the temperature a "toasty" 60F degrees at all times. We are working as hard as we can to ensure that there are as few interruption as possible as we move things around - so far there have been none - but at some point soon we are going to need take the site down to get the final couple of items relocated. Watch the "What's New" area of the website for an announcement on the specific time for the final move. SNAPSHOTS NOT WORKING - The "Snapshot" feature of our website has been Read More 

ChartWatchers

TRACKING THE DOW'S INTERNAL HEALTH

by Chip Anderson

Things got a little bumpy last week as the Dow had a big "down" day on Thursday. Friday's recovery was reassuring, but was any lasting damage done? One of the best ways to examine the overall "health" of the Dow is to look at the total number of Dow stocks that are above or below their 50-day moving average. StockCharts.com tracks that information closely via the $DOWA50 and $DOWA50R market indexes. $DOWA50 contains the actual number of stocks that are above their 50-day moving average. It is updated once a day after each market close. Because there are 30 Dow stocks, the value of Read More