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November 2007

ChartWatchers

DON'T GIVE UP, BULLS!

by Chip Anderson

There has been clear technical damage on the major indices as a result of concerted selling. The NASDAQ 100, which has led the market higher for most of 2007, has been treated rather rudely over these past few weeks and that's never good. The reason? During periods of economic expansion, the higher growth technology stocks tend to outperform because of their ability to grow earnings more rapidly. The stock market, for the first time in a long time, is sending a message that the economy is much worse off than was originally forecast. The good news is that inflation is dormant per the tame Read More 

ChartWatchers

IWM FORMS BIG DOUBLE TOP

by Chip Anderson

The Russell 2000 ETF (IWM) shows the beginnings of long-term downtrend. In stark contrast to QQQQ, IWM forged a lower low in August and a lower high in October. The inability to move above the summer highs showed relative weakness on the way up. The ETF is already testing support from the 2007 lows and relative weakness continues. The pattern at work looks like a large double top with a ton of support around 74-76. A break below the 2007 lows would confirm the pattern and the downside target would be to the support zone around 64-66. Read More 

ChartWatchers

MARKET ENTERING OVERSOLD RANGE

by Chip Anderson

Two weeks ago I stated that market strength was mixed, and that I thought that the correction had several more weeks to go before it was over. Since then further breakdowns of support have occurred, most notably on the Nasdaq 100 Index chart, which experienced a major break of its rising trend line, eliminating the one area of strength that supported a "mixed" assessment for the overall market. Currently, a correction is in progress that is affecting all major indexes, and my opinion is that it is likely to continue into mid-December. One of the reasons I believe this is that, while the Read More 

ChartWatchers

BEWARE THE ETF "TRAP"

by Chip Anderson

Hello Fellow ChartWatchers! Last month I had the pleasure of sitting in on several local Technical Analaysis User Groups and seeing how they used many different tools to do group stock analysis. It was a very educational experience for me and I strongly recommend that everyone reading this newsletter join your local technical analysis user group. (If there isn't one in your area, why not start one?) Doing technical analysis with other people is probably the best way to improve your investing success - period. But as I was sitting in the back of one of the classes, I watched them fall Read More 

ChartWatchers

NET NEW HIGHS ARE DRAGGING

by Chip Anderson

Even though the Nasdaq and the NY Composite hit new closing highs earlier this week, Net New Highs did not keep pace and this could become a problem. Net New Highs equals new 52-week highs less new 52-week lows. I apply a 10-day moving average to smooth the data series and look for crosses above or below the zero line for a trend bias. The bias is bearish when the 10-day SMA for Net New Highs is in negative territory and the bias is bullish when the indicator is positive. On the charts below, the indicator is shown in area format and the underlying index is shown as a red line. The 10-day Read More 

ChartWatchers

MIXED MARKET

by Chip Anderson

Two weeks ago I stated that a correction had begun, and that the initial selling had resulted in an initiation climax – a technical condition that indicated that the initial down pressure was probably near exhaustion, but that signaled the beginning of a new down trend. My expectation was that there was going to be a bounce (reaction rally), but that more selling would follow after that rally was finished. This week the rally ended and the selling resumed. It is still my opinion that the selling will probably continue into mid-December where my 9-Month Cycle projection calls for a price Read More 

ChartWatchers

GOLD MARKET SOARING HIGH

by Chip Anderson

The bull market in commodity has extended beyond what many had believed it would in such a short period of time; be it crude oil prices or gold prices or even wheat prices - the bull market has surprised in its violence. The question before all traders and investors alike is whether the "risk-reward" of holding on to or adding to such positions is tenable. We don't believe it is in any of the aforementioned cases, but we'll only discus the gold market today, for it clearly has a "larger-than-life" following given it bottomed in earnest in 2001. Quite simply, the rising gold market, and Read More 

ChartWatchers

BEAR MARKET IN BANKS

by Chip Anderson

Earlier today I showed the Bank Index on the verge of hitting a new low for the year. By day's end, it had fallen to the lowest level in two years (Chart 1). This puts the BKX on track to challenge its 2005 low. In case you're wondering what that means, the BKX has fallen more than 20% from its early 2007 peak. That qualifies as an official bear market in bank stocks. That 5% daily drop helped make financials the day's weakest group. Consumer discretionary stocks came in second worst. Other large losers were small caps and transports. Those are the same market groups that have been Read More 

ChartWatchers

JUST CHECKING IN

by Chip Anderson

Hello Fellow ChartWatchers! I'm pretty busy this weekend and just have time to mention the following things: We've just released John Murphy's entire 2006 collection of articles in CD-ROM format. The CD includes a new video intro from John as well as a private search engine that makes searching all of these articles a breeze! Be sure to check it out. Don't forget to grab a copy of the 2008 Stock Trader's Almanac now so you can plan the start of 2008. John and I both love this thing and recommend Read More