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August 2007

ChartWatchers

EXTREME PESSIMISM MARKS BOTTOM

by Chip Anderson

We've discussed in the past the tendency of the market to put in long-term bottoms when the bearish sentiment reaches extreme levels. Extreme bearishness is exactly what we saw on Thursday, August 16. Over the past 4 years or so, we've experienced many occasions when the put call ratio has exceeded 1.0. But there have only been a dozen or so times that the "equity only" put call ratio has topped 1.0. Prior to the recent downtrend, when had seen only one previous occasion where that "equity only" put call ratio topped 1.0 on consecutive days. That occurred in mid-August 2004. On the chart Read More 

ChartWatchers

EXPECTING SHORT-TERM TOP

by Chip Anderson

In my August 17 article, Looking For A Retest, I speculated that we would get a bounce from the extreme price lows hit in mid-August, but that a retest of those lows needed to occur before we could be reasonably certain that the completion of a solid bottom had been accomplished. As it happened, the bounce was initiated before I posted the article. At this point I think the evidence suggests that the reaction rally has just about run its course, and that we should be expecting a price top to mark the beginning of a decline into the retest of recent lows. The evidence of which I speak can Read More 

ChartWatchers

WHERE ARE WE IN THE CYCLE?

by Chip Anderson

Given the volatility of the capital markets these past two weeks, we think it instructive to step back and take a longer-term viewpoint of the stock market to discern where we may be in the cycle. In doing so, we find the S&P 500 large caps - the strongest relative US average given its international exposure - trading well above its longer-term trendline as well as its 80-week moving average. In the past, this moving average has provided "fulcrum points" between bearish corrections in a bull market and outright bear markets. In the present case, this moving average was successfully Read More 

ChartWatchers

DATA FEED UPGRADE UPDATE

by Chip Anderson

We are continuing to make progress in our efforts to get a second data feed into our offices. A second data feed should help us avoid the kind of problems we had several weeks back. Unfortunately, two things are conspiring to slow our progress: the phone companies and the stock exchanges. Neither of them are making it easy for us to get something in here quickly. We will continue to work hard however despite the obstacles. At this point it looks like it will be several more months before the second feed is operational however. Stay tuned ANOTHER ROUND OF SERVER UPGRADES Read More 

ChartWatchers

WHERE'S THE VOLUME?

by Chip Anderson

Friday's higher prices continued the market rally that started the previous Thursday. The three charts below show major market ETFs all back above their 200-day moving averages, which removes any immediate threat of a bear market. All have recovered more than half of their July/August decline, The Dow Diamonds and the S&P 500 SPDR are now in position to test their falling 50-day lines. Since a market bounce that could last two to four weeks was expected, this week's bounce doesn't tell us if the worst is over or if there's another downswing to come (that could at least retest the Read More 

ChartWatchers

DOW TECHNICALS TURNING POSITIVE, BUT...

by Chip Anderson

Last week, some significant positive technical developments occurred on our GalleryView chart of the Dow: After recovering to remain above the 200-day moving the previous week (see the red candle whose shadow dipped all the way to 12,517?), the Dow has rebounded nicely with a nice string of tall white candles. Those candles have managed to turn around the MACD and push the MACD Histogram back into positive territory. In addition, the Chaiken Money Flow (CMF) has also returned to the green side of the ledger. So is it safe to jump back into the market right now? Well There Read More 

ChartWatchers

BULL/BEAR BATTLE THIS WEEK

by Chip Anderson

The S&P 500 ETF (SPY) firmed this week and found some support. The ETF hit support from the 40-week moving average and broken resistance. The 40-week moving average is equivalent to the 200-day moving average and this level is important to the long-term trend. Resistance stems from the February high and SPY broke this level in April. Securities often return to the their breakouts and this marks an important test as well. A bull-bear battle raged this week as SPY shot up to 149.5 on Tuesday and fell back to 144 intraday on Wednesday. That is about a 3.5% swing high-low swing in two Read More 

ChartWatchers

MARKET OVERSOLD AND DANGEROUS

by Chip Anderson

A month ago I wrote an article stating that I thought that the 20-Week Cycle was cresting and that we should expect a decline into the cycle trough that would probably break down through the support provided by the bottom of the trading channel, setting up a bear trap. So far so good. As you can see on the chart below, the S&P 500 has broken down through the horizontal channel support, as well as an important rising trend line. The trend line break is not decisive (at least 3%), but this break down has gone farther than I had expected. In the process of the recent decline the market Read More 

ChartWatchers

A BEAR MARKET IN FULL?

by Chip Anderson

Last week was a treacherous week indeed, with stock prices falling universally. That said, one of the "weakest indices" was related to the US small cap arena, and specifically to the Russell 2000 Index ($RUT). In the past, RUT led the market higher, but that changed last year as a bottom was forged against the S&P 500; however, we now see sharp absolute weakness has caused RUT to breakdown below its 85-week exponential moving average. This moving average during the bull market from 2002 has provided an excellent "buying point" – especially given when the 14-week stochastic has fallen Read More 

ChartWatchers

JULY PERFORMANCE FIGURES CARRY A MESSAGE

by Chip Anderson

The chart above shows "John's Latest Performance Chart" that reflects the market's stronger and weaker groups during the hightly volatile month of July. All are plotted around the S&P 500 which lost 3.2% during July. [The S&P can also be plotted as a zero line]. The bars to the left of the S&P did better than the general market. The two top gainers were gold and oil service stocks. The AMEX Gold Bugs Index ($HUI) gained 4.5% in the face of a severe market downturn. Oil Service stocks held up well on the back of rising oil prices (although the've started to slip during the Read More 

ChartWatchers

THE BATTLE OF 13,200

by Chip Anderson

The troops are mustered. The swords are out. The orders have been posted. The pieces are in place. The die has been cast. (The metaphors are getting lame. ) However you want to say it, the battle line for the Bulls and the Bears has been drawn. Can you spot it on this Dow chart? 13,200. Going back to early May. That is the major support level for the Dow. It was sorely tested last week and was broken on Friday. Will it bounce back this coming week? With the MACD clearly negative and the Chaikin Money Flow crossing below zero right now, things don't look promising Read More