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May 2008

ChartWatchers

LOOKING A LITTLE TOPPY

by Chip Anderson

I've been bullish since my earlier bottom call in January. There were several reasons for the call, but in particular there were contrarian indicators moving off the charts in the bearish direction. That suggested that the next move in the market would be higher - and it was. After a retest in March with an incredibly bearish put call ratio in place, the market soared. There have been many positive technical developments since that time, with perhaps the most notable being the relative outperformance that the semiconductors have enjoyed. Below in Chart 1, I'm highlighting the relative Read More 

ChartWatchers

FINANCE AND HEALTHCARE LAG

by Chip Anderson

Money may be moving into Technology, but it is avoiding Finance and Healthcare. While the Dow Industrials ETF and S&P 500 ETF both touched their 200-day moving averages in May, the Finance SPDR (XLF) and the Healthcare SPDR (XLV) fell well short of their 200-day lines. The inability to keep pace with the broader market shows relative weakness. On the price chart, the Finance SPDR (XLF) broke down last week and then stalled this week. With a slight rise over the last 6 days, a mini-flag formed with support at 26. Support here is also reinforced with the 50-day moving Read More 

ChartWatchers

LOOKING BULLISH BUT OVERBOUGHT

by Chip Anderson

Our long-term model remains on a sell signal, so we have to assume that we are still in a bear market; however, the rally from the March lows has taken prices far enough to cause important bullish signs to appear: (1) The intermediate-term model for the S&P 500 is on a buy signal and has a gain of +5.6%; (2) all but one of the 27 sectors and indexes we track are on buy signals with an average gain of +6.6%; (3) prices have moved above the declining tops line drawn from the October top; and (4) the weekly PMO has bounced from oversold levels and generated a buy signal by crossing above Read More 

ChartWatchers

COMMODITY COUNTRIES HIT NEW HIGHS

by Chip Anderson

On Monday, I wrote about three foreign stock markets that were at or close to new record highs. Those three markets are Brazil, Canada, and Russia. What all three have in common was that they are producers and exporters of commodities. By the end of the week, all three markets had hit new records. Chart 1 and 2 show Brazil iShares (EWZ) and the Market Vectors Russia ETF (RSX) hitting new highs. Both cash indexes have done the same. Chart 3 shows the Toronto Composite Index (TSE) hitting a new record high as well. Canada iShares (bottom of Chart 3) have not reached new highs yet. As I Read More 

ChartWatchers

ON THE DANGERS OF WEB ACCELERATORS

by Chip Anderson

Last week, we started getting disturbing reports from several users about seeing the wrong name at the top of the page after they logged in to StockCharts.com. That set off HUGE RED WARNING LIGHTS here. We have numerous safeguards in place to make sure that people only see their own information. And yet here were credible reports showing that somehow those safeguards weren't working. Yikes! After scratching our heads for a while, we set us some "sniffing computers" on our network that recorded ALL of the "Welcome" messages that our site was sending out. These "sniffers" were Read More 

ChartWatchers

SEMICONDUCTORS AND FINANCIALS HELPING TO LEAD TURNAROUND

by Chip Anderson

It's been a long time since we've spoken about semiconductors or financials in a positive light. But times have changed and so have the charts for these two influential groups. Semiconductors are showing clear relative outperformance, but have now reached a critical resistance area. Check out Chart 1 below to see how the recent rally in semis have left them vulnerable as key resistance is tested. A break above would be quite bullish, but we'll need to see it first. Once the SOX broke through 380, there was very little resistance until the 404 level. We tested that on Friday Read More 

ChartWatchers

U.S. DOLLAR INDEX GETS A BOUNCE

by Chip Anderson

The U.S. Dollar Index ($USD) remains in a long-term downtrend, but the index is showing signs of strength with a consolidation breakout this week. After becoming oversold in March, the index firmed for 6-7 weeks and surged above its mid March highs this week. StochRSI moved below .20 in late February, firmed a few weeks and then broke above its mid point (.50). These breakouts opens the door to an oversold bounce that could extend to the 75-78 area. There are a number of factors pointing to resistance around 75-78. First, the trendline extending down from January-February 2007 Read More 

ChartWatchers

SIX-MONTH UNFAVORABLE SEASONALITY PERIOD BEGINS

by Chip Anderson

Something you will be hearing a lot about for a while is that for the next six months the market will be carrying extra drag caused by negative seasonality. Research published by Yale Hirsch in the "Trader's Almanac" shows that the market year is broken into two different six-month seasonality periods. From May 1 through October 31 is seasonally unfavorable, and the market most often finishes lower than it was at the beginning of the period. November 1 through April 30 is seasonally favorable, and the market most often finishes the period higher. Back testing of a timing model Read More 

ChartWatchers

"ROLLING CORRECTIONS" BENEATH THE SURFACE

by Chip Anderson

It is rather clear there are ongoing "rolling corrections" beneath the surface in today's markets. In terms of performance, whether one is bullish or bearish on the broader market hasn't made as much of a difference as we would have thought. But understanding where the 'funds' currently stand and where they are likely to 'move' makes a great deal of sense in terms of trading allocation. To that end, we want to look at the "long in the tooth" and very profitable pairs trade of Long Energy/Short Financials. In recent weeks, we have begun to see a topping process take place in spread as the Read More 

ChartWatchers

CRUDE AND NATURAL GAS LOOK OVERBOUGHT

by Chip Anderson

When only one commodity group is hitting new highs, that's usually a sign that it's out of step with the others. That seems to be the case with energy. I still believe that the energy complex is due for some profit-taking. Chart 1 shows the United States Oil Fund still in an uptrend. The 14-day RSI line, however, (top of chart) is backing off from overbought territory over 70. The daily MACD lines (bottom of chart) may be stalling at their March high. That's not a lot to go on. Add in the fact that energy shares are among the day's biggest losers, however, and we see a market group ripe Read More 

ChartWatchers

CLOUDS GATHERING ON THE HORIZON

by Chip Anderson

Clouds are gathering on your charting radar - can you see them? No, no - I'm not talking about the recent bad news on the US economy or the price of oil or any of that stuff. I'm talking about another new kind of chart that StockCharts.com will soon be offering to all our users - Ichimoku Cloud Charts! Ichimoku charts are similar to traditional candlestick charts but with several additional lines added to them as well as the unique "cloud" area. Here's an example of what one looks like: (Note: These are not available yet! We are putting the finishing touches on them this Read More