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March 2008

ChartWatchers

OIL PRICES, TRANSPORTS AND THE NEXT BUBBLE

by Chip Anderson

It makes perfect sense that higher oil prices could derail (no pun intended) transports as the implications are clear. But the truth might surprise you. From Chart 1 below, you'll see that oil prices have been rising dramatically over the past 6 years. The price per oil was below $20 per barrel in 2002. That seems almost unfathomable as we contemplate $110 per barrel oil. That's nearly a six fold increase in the price of oil over a six year period. There's no possibility that transportations could thrive in that environment, correct? I mean, it just doesn't make any logical sense. Or does Read More 

ChartWatchers

THE DOW AND THE JANUARY LOW

by Chip Anderson

Technical analysis is a little art and a little science, which makes it subjective and open to interpretation. It is kind of like, gasp, economics. With a test of the January lows and a big surge on Tuesday, some pundits are talking double bottom. The interpretation of this double bottom depends on the charting style. The two charts show the Dow with OHLC bars and with closing prices only. The bar chart sports a potential double bottom with two lows around 11750. In addition, the March low is actually above the February low. However, the close-only chart shows a clear downtrend with a Read More 

ChartWatchers

GET A LONG-TERM PERSPECTIVE

by Chip Anderson

One of the reasons that Decision Point has spent so much time and money to create dozens of long-term historical chart series is that we must often compare current price and indicator behavior to prior periods where market action has been similar. For example, we are currently in a bear market, so, if we describe indicators as being oversold enough to hint that THE bottom is nearly in place, we need to look at prior bear markets to verify that assertion. Currently, many analysts are claiming that deeply oversold long-term indicators are solid evidence that the bear market is nearly over Read More 

ChartWatchers

CHECKING OUT THE HOMEBUILDERS

by Chip Anderson

From a broader market perspective, the S&P 500 continues to weaken after having violated the 1982-2000 bull market was violated two weeks ago at near 1310. This would suggest that further weakness is forthcoming and quite sharp weakness at that. But in any bear market - the rallies are sharper and more poignant, and give rise to the "hope" that a bottom is forged. Last week's "Bear Stearns" implosion is simply part and parcel of the credit unwinding that appears to have quite a bit of distance to go if we take the S&P 500 trendline breakdown into account. We have projections near Read More 

ChartWatchers

ONE STEP FORWARD, TWO BACK

by Chip Anderson

As we continue to evaluate alternative data feeds, we continue to be surprised by the results we are getting especially when it comes to data accuracy. Last week, we finally started charting intraday data from several different providers in our test lab. That allowed us to visible compare the results and see which vendors could give us the "best" data. We were surprised to find out that our current vendors data was by far the "cleanest" of all the feeds we were looking at. That was surprising because our users alert us to minor intraday spikes on our charts all the time. We've asked Read More 

ChartWatchers

YEN HITS THIRTEEN YEAR HIGH

by Chip Anderson

Last week I showed the Japanese Yen testing major chart resistance its 2000/2004 peaks. Today's 2% gain against the dollar put the yen over 100 for the first time in thirteen years (1995). While that's good for the yen, it's not necessarily good for global stocks which have been falling as the yen has been rising since last summer. Another low-yielding currency had a strong day today. The Swiss Franc gain of 1.5% made it the world's second strongest currency and pushed it to a new record high against the dollar. With the dollar and U.S. rates falling sharply today (along with stocks) Read More 

ChartWatchers

THE DISPLACED MOVING AVERAGE RIBBON

by Chip Anderson

Hello Fellow ChartWatchers! A while back, demonstrated the concept of the Moving Average Ribbon here as a way for seeing the "waves and ripples" for any stock. The concept is simple - just plot lots of Moving Average overlays on the same chart but change the period for each MA by a fixed amount. Many people really liked that concept and many people still use it in their daily analysis. Here's a different take on that same concept - the Displaced Moving Average Ribbon: (StockCharts members can click the link above to see exactly how the chart was created.) Just Read More 

ChartWatchers

TRANSPORTS FALL FROM RESISTANCE

by Chip Anderson

The Transport iShares (IYT) is an ETF designed to match the performance of the Dow Jones Transportation Average. The key industry groups include airlines, railroads, truckers and air freight, all of which are quite sensitive to the overall economy. After surging in January, the ETF met stiff resistance in February and this week's decline looks like the start of another leg lower. Resistance stems from the 200-day moving average and the reaction highs from late August to mid December. The ETF surged to this zone, stalled and then backed off with a vengeance the last three days. In addition Read More 

ChartWatchers

WHIPSAW!

by Chip Anderson

All mechanical models have weaknesses, and our Thrust/Trend Model is no exception – it is vulnerable to whipsaw. Whipsaw occurs when the market moves just enough in one direction to trip the signal triggers in the model, then it reverses direction and moves just far enough to trigger a reverse signal. This results in a loss on the previous signal. This has happened a number of times in the last several months. Our model is designed to capture intermediate-term trends and to ride out the zigzag movements and minor corrections that occur as the market trends up or down; however, when the Read More 

ChartWatchers

US CLEARLY IN BEAR MARKET

by Chip Anderson

As the credit crisis continues to unfold in rather negative fashion; many believe that the US economy will not enter into a recession, and many believe that if we do enter into a recession - that it is likely to be short-lived and shallow. We'd beg to differ as this will not be a "V" shaped recovery as most hope for, but more of the "U" variety that few fearmore long and drawn out. Demand for credit is high; availability of credit is low. But our concern aside, the US equity markets have clearly entered into a bear market. Today, one should look at the monthly NASDAQ Composite chart to Read More 

ChartWatchers

WHY A RISING YEN ISN'T GOOD FOR STOCKS

by Chip Anderson

I first started writing about the danger posed to global stocks last summer when the yen first started rising. I also wrote that was because a rising yen was part of the unwinding of the so-called "yen carry trade". Over the last few years, global traders had been borrowing yen at almost no interest charge (shorting the yen) and using those funds to buy higher-yielding assets elsewhere including currencies and stocks. For awhile, it almost seemed like the global rally in stocks was predicated on the yen staying down and providing a continuing supply of cheap global liquidity. That all Read More 

ChartWatchers

BLOOD ON THE CARPETS

by Chip Anderson

Hello Fellow ChartWatchers! Sorry for the ghastly title to this article, but the charts are rather ghastly as the moment and - as the image below shows - the damage is widespread: That is a snapshot of our S&P Sector Market Carpet right now. Each stock in the carpet is represented by a colored square. The color of the square is determined by the change in the stock's price since February 1st. Dark red indicates a greater than 5% loss; dark green indicates a greater than 5% gain. As you can see, there's only one sector that survived February - the Energy stocks. Our Read More