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July 2008

ChartWatchers

POOR SENTIMENT, MAX PAIN AND THE BOWLEY TREND

by Chip Anderson

Tuesday afternoon marked a short-term bottom. In my opinion, we're going to print AT LEAST one more low in time; however, the sentiment had deteriorated on Tuesday to a point where we normally we see a rebound. In addition, there was TONS of net put premium (in-the-money put premium minus in-the-money call premium) and options were set to expire on Friday. We'll discuss sentiment issues shortly, but first take a look at the following closing prices on ETFs as of Tuesday and their respective max pain (the price point at which the premium on in-the-money call options equals the premium on Read More 

ChartWatchers

BAD NEWS FOR BONDS

by Chip Anderson

After the Producer Price Index (PPI) surged on Tuesday, it was little surprise to see big gains in the Consumer Price Index (CPI) on Wednesday. Bernanke warned of inflation in his congressional testimony last week and the PPI-CPI figures confirm. The CPI surged 5% year-on-year and 1.1% month-on-month. That 1.1% monthly gain translates into an annual rate much higher than 5%. The 5% year-on-year change was the highest since 1991, while the 1.1% month-on-month change was the highest since 1982. For the sake of argument, let's take the 5% year-on-year change as the annual inflation rate. The Read More 

ChartWatchers

DISASTER AVERTED, SO FAR

by Chip Anderson

In my July 3 article I warned that the market was oversold, dangerous, and vulnerable to a crash. On Tuesday of this week, the S&P 500 opened down, breaking significant support, and kept moving lower. I thought to myself, "This is it. Crash in progress." Then subtle buying began, the decline was stopped in its tracks, and an advance began that lasted three days. My sense of the events was that the Crash Prevention Team had acted, but that is pure speculation about an urban myth. Certainly there were fundamental events later in the week that assisted the rally -- the president's Read More 

ChartWatchers

RALLY FORTHCOMING IN HOUSING MARKET?

by Chip Anderson

Last week may very well have been an important turning point in the US stock market, with the Dow Industrials and the Russell 2000 Small Caps as forming bullish "key reversal" patterns to the upside. This would suggest an increased probability of further strength on the order of several weeks or perhaps even months; however, we would caution that the probability of such a rally isn't as high as it would be normally given the weak advance/decline figures as well as the up/down volume figures - hence we believe it will be nothing more than a countertrend rally apt to fail. We'd like to have Read More 

ChartWatchers

SHORT-TERM SELL SIGNALS GIVEN

by Chip Anderson

This week's downturn in crude oil prices has had a depressing effect on the entire commodity group. Chart 1 shows the CRB Index (plotted through Thursday) breaking a three-month up trendline (and its 50-day moving average). The 12-day Rate of Change (ROC) line (top of chart) has fallen to the lowest level in more than three months. And the daily MACD lines (bottom of chart) have turned negative after forming a "double top" between March and July. The minimum downside target is most likely a test of the 400 level which would test a yearlong support line and the early May low. I wouldn't Read More 

ChartWatchers

PINNING DOWN YOUR ANNOTATIONS

by Chip Anderson

Hello Fellow ChartWatchers! This week I wanted to tell you about a new feature we've just rolled out in our ChartNotes chart annotation tool. It is called "pinning" and it allows you to prevent any of your saved annotations from scrolling to the left over time. Normally, you want your annotations to scroll to the left because that is what the price bars do. As the price bars move, you want your trendlines and arrows and other annotations to move with them. However, there are certain kinds of annotations that you might not want to move - particularly "High Level" text comments, i.e Read More 

ChartWatchers

PANIC AND FEAR? NO SIGNS JUST YET

by Chip Anderson

I'm the conservative type. I'm also nervous. I never like to see the market fall precipitously while market participants yawn. In a nutshell, that's what we've been seeing. Yes, the talking heads will say the sky is falling, but unfortunately for bulls, that's not the case amongst those actually trading the market. I've provided in previous articles how the put call ratio correlates to market tops and bottoms. I won't go into the details again. However, everyone needs to understand that market participants are not panicking yet. That is a very big clue to me that we've got more work to Read More 

ChartWatchers

BEAR MARKET EXPANDS!

by Chip Anderson

Sector performance in May and June shows the bear extending its grip into other key sectors. The Financials SPDR (XLF) and the Consumer Discretionary SPDR (XLY) woke up the bear with dismal performances in May. The first PerfChart shows sector performance from 1-May until 2-June, which is basically the month of May. XLF and XLY led the way lower in May. Notice that the Industrials SPDR (XLI), Materials SPDR (XLB) and Technology SPDR (XLK) held up relatively well in May. In fact, selling pressure in May was pretty much limited to the financial and consumer discretionary sectors. Read More 

ChartWatchers

VERY DANGEROUS MARKET

by Chip Anderson

A bullish take on the stock market would be that (1) market indicators are very oversold, (2) there is a triple bottom setup on the S&P 100 Index, and (3) sentiment polls show a lot of bearishness. I agree that those conditions exist, but we are in a bear market and these conditions can easily see price movement transition into a crash. The reason, as I have said many times before, is that bullish setups don't always work so well in bear markets, and an oversold market can very quickly become significantly more oversold. Let me be clear, I am not predicting a crash. If the market Read More 

ChartWatchers

SITE NEWS: "UNIVERSAL LOGIN" NOW WORKING

by Chip Anderson

"UNIVERSAL LOGIN" NOW WORKING - We've finally, finally, finally fixed something that has been bugging lots of people for a long time. In the past, we had two very different ways to log into our website. People who subscribed to our Extra or Basic charting service logged in using the boxes on our homepage. People who subscribed to John Murphy's Market Message logged in by clicking the "John Murphy" tab and then entering their information in the popup box that appeared. People that subscribed to both services had to enter their information in both places (ugh!). WELL NO LONGER! Now Read More 

ChartWatchers

SECTOR ROTATION SAYS BEARISH

by Chip Anderson

SECTOR ROTATION MODEL One of our readers asked where we are in the Sector Rotation Model. That model shows the normal sector rotation that takes place at various stages in the business cycle. The chart shows that basic materials and energy are market leaders at a market peak. As the economy starts to slow, money starts to rotate out of those two inflation-sensitive groups. Basic materials peak first and energy last. This week's downturn in basic material stocks suggests that the topping process is moving even further along. Energy may be the next to roll over. As the economy slows Read More 

ChartWatchers

UNAVOIDABLE BAD NEWS (AND HOW TO AVOID IT)

by Chip Anderson

Hello Fellow ChartWatchers! This week's edition of ChartWatchers is full of important information including a lively debate about the health of the market - Tom Bowley is actually optimistic (well somewhat), Arthur Hill not so much. But first, I have several items that are super important for our members: BAD NEWS: WE'RE GOING TO RAISE OUR PRICES BY US$5 PER MONTH Behind the scenes here at StockCharts, the sad fact is that the data vendors have been continually increasing the price they charge for their data. We have been protecting our subscribers from those price increases for as Read More