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January 2008

ChartWatchers

IS IT BEAR SEASON?

by Chip Anderson

The two most frequently asked questions these days are as follows: (1) Are we in a bear market? (2) Where's the bottom? Let's take them one at a time. A bear market is generally defined as a decline of 20% or more. At the close on Friday, the declines across the major indices from their recent highs are: Dow Jones: -2181 pts, or -15.27% S&P 500: -251 pts, or -15.93% NASDAQ: -521 pts, or -18.21% NASDAQ 100: -395 pts, or -17.64% Russell 2000: -183 pts, or -21.38% The Russell 2000 is already in a bear market and the other indices are closing in on it. We believe it's going to be close as Read More 

ChartWatchers

DOUBLE TOP PARADE CONTINUES

by Chip Anderson

The Materials SPDR (XLB) joined the double top club with a sharp decline this past week. The Finance SPDR (XLF) and Consumer Discretionary SPDR (XLY) started the club with double top support breaks in August. The Russell 2000 ETF (IWM) broke double top support in November. And finally, the S&P 500 ETF (SPY) broke double top support this year. These are not small double tops, but rather large reversal patterns that have been confirmed. Moreover, these are important ETFs and lower lows are clearly bearish. The double top unfolded as XLB met resistance around 43 in October and again in Read More 

ChartWatchers

BEAR MARKET RULES APPLY

by Chip Anderson

On January 8 the 50-EMA crossed down through the 200-EMA on the S&P 500 daily chart, generating a long-term sell signal and declaring that we are now in a bear market. This was confirmed this week when the weekly 17-EMA crossed down through the 43-EMA. Let me say that these signals are not 100% reliable, but there is a ton of additional supporting evidence, such as the decisive violation of the long-term rising trend line, and the violation of the double top neckline, seen on the chart below. The next chart presents a long-term view, which makes it more clear how serious the situation Read More 

ChartWatchers

BULL MARKET IS OVER

by Chip Anderson

The bull market is over; the Dow Industrials broke below its major bull market trendline extending from the 1982 bear market lows through the 2002 bear market lows. Obviously, one cannot take this lightly, as last week's negative price action was more of a bear market "exclamation point" intended to say that from this point forward - rallies are to be sold and sold hard. However, it would appear the initial decline is coming to an end quite soon; the 30-month moving average crosses at 12,038 and was successfully tested on Friday. Too, the previous highs all-time highs at 11,500 are just Read More 

ChartWatchers

AVOIDING PROBLEMS BEFORE THEY START

by Chip Anderson

Here are three things that everyone should do periodically to ensure that your computer works well when using StockCharts.com. Every day we get messages from lots of people that are having problems with their web browser and usually one of these steps will fix the problem. If you follow these tips at least once a week, you'll have a better browsing experience on StockCharts.com (and most other websites too!). CLEAR YOUR BROWSER'S TEMPORARY FILE CACHE PERIODICALLY - Your browser stores copies of all the web pages you visit on your hard disk in something called the Read More 

ChartWatchers

SO MUCH FOR GLOBAL DECOUPLING

by Chip Anderson

I've expressed reservations before about the recent theory of global decoupling. The reasoning was that foreign markets would remain relatively immune to a major selloff (and possible recession) in the U.S. That view struck me as strange, especially with the close correlation that's existed between global markets over the past decade. Which is why Chart 1 shouldn't come as a surprise to anyone. It shows a sampling of the world's major developed stock markets over the last year. And, not surprisingly, each and every one of them started to fall in November along with the U.S. market. Most Read More 

ChartWatchers

"BEARISH" PERCENT INDEXES

by Chip Anderson

Lots of people are doing the Chicken Little thing these days. Is the concern/panic justified? Are we really entering a new Bear market? Which charts are going to calmly and objectively tell us what is really going on? Whenever I want to study "the big picture" and see if anything really significant has changed, I usually turn to the "Bullish Percent" charts that we maintain here at StockCharts.com. For those of you that haven't heard of them before, a "Bullish Percent" chart plots the percentage of stocks in a predefined group that currently have a "P&F Buy Signal" on their Point and Read More 

ChartWatchers

KEEP AN EYE ON BONDS

by Chip Anderson

We've been following the bond market closely and for good reason. Earnings and interest rates drive the stock market. We are seeing a lot of signs of an economic slowdown, perhaps even a mild recession. As a result, earnings will not be spectacular and we'll likely continue to see companies lowering guidance. The equity markets are already discounting prices to account for lower profits in first half of 2008. Stocks have taken a huge hit to begin 2008, but divergences are indicating that selling momentum is slowing similar to what we witnessed in the summer of 2006. One of the hardest hit Read More 

ChartWatchers

RATE CUTS NOT HELPING

by Chip Anderson

The Fed started cutting interest rates on August 17th with a surprise 50 basis points cut in the Discount Rate. There have been three more rate cuts since 17-Aug, but the Dow Jones Industrial Average has nothing to show for these cuts. The first two rate cuts fueled the rally from mid August to mid October. However, the last two rate cuts coincided with reaction highs on 2-Nov and 11-Dec (third and fourth cuts). The negative reaction to the last two rate cuts indicates that something is rotten in the kingdom of stocks. With Friday's employment report, the Dow moved below 13000 and Read More 

ChartWatchers

RETEST STILL IN PROGRESS

by Chip Anderson

Currently, the stock market is still in the process of retesting the November lows. This process needs to end now or some serious technical damage will be done, specifically the long-term rising trend line is in danger of being decisively violated. On the chart below you can see the long-term rising trend line is being tested, and a decisive violation would be a decline to about 1375, where coincidentally there is another support line. Unfortunately, that doesn't give me much comfort because that line looks a lot like the neckline of a rounded or double top, and considering that a decline Read More 

ChartWatchers

HISTORY REPEATING?

by Chip Anderson

The S&P 500 is off to its worst start to begin a new year since 2000; however, this isn't the larger headline to us. If were writing the story, the headline would indicate the probability of a bear market having begun rose significantly last week; but it did not do so given the very poor US employment report. It did so given our demarcation line between "bull and bear markets" – the 80-week moving average – was violated in earnest last week. We don't take this signal lightly; nor should our clients. As the S&P 500 Weekly chart illustrates, there is a bit of "symmetry" between the Read More 

ChartWatchers

SINGING IN THE (TICKER) RAIN

by Chip Anderson

Just what you wanted right? Actually, this is the "Ticker Rain" that we talked about in the last newsletter. It is finally up on our website at http://stockcharts.com/charts/tickerrain.html. What is "Ticker Rain" you ask? It's a Java program that creates a chart which shows you many of the ticker symbols that are being requested by StockCharts.com users. The ticker symbols "rain" down the chart and stack up into columns. The taller the column, the more popular the ticker symbol. Up to 100 columns build up over time. You can click on any of the columns to see a SharpChart for that Read More 

ChartWatchers

S&P 500 THREATENS 400-DAY MOVING AVERAGE

by Chip Anderson

During the August market drop, I wrote about the importance of the 400-day moving average as a major support line. [That line is gotten by converting the 20-month moving average to a daily line. I'll show why we use that line shortly]. The daily bars in Chart 1 show the August and November price declines bouncing off that long term support line. The chart also shows, however, the S&P 500 closing below that support line today. [That's the first Friday close below that line in five years]. The 400-day line also resembles a "neckline" drawn below the August/November lows. That's another Read More 

ChartWatchers

S&P BULLISH PERCENT GIVES THE BIG PICTURE

by Chip Anderson

Hello Fellow ChartWatchers! Welcome to 2008! The start of a new year is always a good time to look for the big-picture perspective on things and few things say "Big Picture" better than the Bullish Percent Indices. By condensing the technical picture for 500 important stocks down into just one number, the S&P 500's Bullish Percent value ($BPSPX) gives you a great indication of the overall health of the market. Check it out: Starting in 2004, the BPI settled down into a nice little pattern - rallying after hitting 50% (green arrows) and then reversing soon after Read More