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July 2007

ChartWatchers

DON'T IGNORE HISTORY

by Chip Anderson

We discuss so many different technical scenarios that sometimes we lose sight of what history has taught us. It's time to pause for a bit after a very nice rally in the equity markets and see what history has to say. For purposes of this discussion, all numbers below relate to historical performance on the S&P 500. At Invested Central, we focus a great deal on historical tendencies and we believe you should too. There is overwhelming evidence that suggests viewing a calendar from time to time can immensely improve your trading or investing results. Let me give you a few historical Read More 

ChartWatchers

THE MOMENT-OF-TRUTH FOR FINANCE

by Chip Anderson

Despite a sharp decline over the last six weeks, the Finance SPDR (XLF) remains in a long-term uptrend on the weekly chart and support is at hand. The Finance SPDR (XLF) met resistance at 38 twice this year and declined to around 36-36.5 in June and July. The lower trendline of a rising price channel and the 40-week moving average mark support here. The 40-week moving average is equivalent to the 200-day moving average (40 x 5 = 200) and the 40-week held in October 2005, July 2006 and March 2007. This key moving average is getting a big test once again and a move below the July low would Read More 

ChartWatchers

GOLD: LONG-TERM PICTURE LOOKING SHAKEY

by Chip Anderson

On Thursday our trend model for gold switched to a buy, which means our medium-term posture is bullish on gold; however, when I looked at a very long-term chart of gold I saw something that gave me a slightly queasy feeling. What I saw was that gold is forming a pattern now that has very similar dynamics to the one that preceded gold's crash in the early 1980s. Note the huge parabolic blowoff top in 1980, followed by a failed rally top, followed by the crash. While the current pattern is not as exaggerated as the earlier one, the dynamics are the same – a blowoff top, followed by a rally Read More 

ChartWatchers

SMALL CAPS FAIL TO SET NEW HIGHS

by Chip Anderson

I suggested Friday that part of the recent weakness in market breadth figures was most likely due to the fact that most of the recent buying has been in large cap stocks, and that small cap indexes had yet to hit new highs. That discrepancy is shown in the chart below. The Russell 2000 Small Cap Index has been unable to clear its early June peak. [The same is true of the S&P 600 Small Cap and the S&P 400 MidCap Indexes]. The relative weakness in small caps is even evident in today's market selling. Small caps fell much harder than large caps. Below, the RUT is in danger of Read More 

ChartWatchers

SCANNING FOR DOLLARS

by Chip Anderson

Recently, we've seen a big increase in the number of people sending in questions about our scanning feature. Here's an article that I wrote about creating and running scans waaaaay back in October of 2002. While the example scan's results and charts are out of date, the lessons about creating effective scans are not. Enjoy! - Chip The job of a ChartWatcher is simple: 1.) Determine the Market's overall trend. 2.) When that trend is up, find promising stocks that have just started to move higher. 3.) Use sensible money management techniques to enter and exit positions in those stocks Read More 

ChartWatchers

THE WEAK DOLLAR COULD STRENGTHEN YOUR PORTFOLIO

by Chip Anderson

The U.S. Dollar Index is approaching levels not seen since 1992. The reasons are fairly obvious. Global interest rates are on the rise and our own interest rates have been on hold for 8 straight meetings. As foreign interest rates rise, foreign currencies generally strengthen, weakening the US dollar on a relative basis. The Fed could act to raise our rates and strengthen the dollar, but we don't see that occurring - at least not at this time. Refer to Chart 1 below to see how the recent changes in Fed policy have affected the U.S. Dollar Index. The green arrow reflects the beginning of Read More 

ChartWatchers

20-WEEK CYCLE CRESTING

by Chip Anderson

When performing market analysis it is best to first look at the long-term view of what is happening because it provides us with the relevant context for analysis of shorter-term market action. With this in mind, on the weekly bar chart we can see that the S&P 500 Index is still trending higher inside a rising trend channel. However, at the present time it is moving down after having reached the top of the channel. While this could very well be the last top before a major decline, we are in a bull market and we have to assume any decline will be stopped by the rising trend line. On the Read More 

ChartWatchers

NASDAQ/S&P 500 RATIO

by Chip Anderson

In November-2006, we noted that if one previewed the NASDAQ Composite/S&P 500 Ratio, one would find a very well pronounced and bullish consolidation forming. Well, its been 3 ½ years and the consolidation is still forming; however, there are emerging technical signs that a major breakout is forthcoming – one that would see technology stocks move to the forefront of market leadership in a manner not seen since the October-2002 to January-2004 relative rally that took the ratio from 1.42 to 1.88. Moreover, the rally could well become explosive to the upside. First, we would Read More 

ChartWatchers

DATAFEED PROBLEMS CONTINUE

by Chip Anderson

In case you've been under a rock, we have been having severe problems with our intraday datafeed during the past two weeks. We've created a detailed page explaining the problem and the current status of the solution. Click here to get the latest information. Read More 

ChartWatchers

A TOUR OF OUR NEW DATACENTER

by Chip Anderson

The Dow is poised to re-test the 13,700 level next week. If it is able to break above that level, it will be a very bullish development indeed. Given that the Dow has faltered just below that level twice in the previous two months, odds are it will fail again this time. Smart ChartWatchers will be watching closely however - our Dow Gallery View charts are a great place to watch the action. TAKING A LOOK AROUND For the past 18 months or so, I'm been putting periodic updates in this newsletter about the progress of our new datacenter project. Now that things are complete, I thought I'd Read More