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October 2008

ChartWatchers

IS THIS THE BUFFETT-BOTTOM?

by Chip Anderson

Warren Buffett said he was buying stocks this past week. Should you? Well, it depends. If you buy stocks on a regular basis as part of a disciplined strategy - say in your 401(k) plan - then keep buying. The idea of buying stocks over the long haul is not only to buy when the market is soaring, but more importantly, to also buy when the market is falling. The key element is your time horizon. If you don't need the money for the next 5-10 years, then you stay invested and keep buying. Here's the problem. Fewer and fewer of Americans buy and hold. We've seen many of our strongest companies Read More 

ChartWatchers

DIA RETURNS TO THE GAP

by Chip Anderson

In a volatile week with huge swings, the Dow Industrials ETF (DIA) returned to Wednesday's gap with another 10% move. The magenta lines on the 30-minute chart show the zigzag indicator, which measures movements that are 10% or more. As you can see, there was an advance greater than 10% on 12-13 October, a decline greater than 10% on 14-16 October and an advance greater than 10% on 16-17 October. Wow, what a week for day traders. There was a day when these swings would look impressive on a weekly chart. Obviously, this is not your father's Dow. With these big swings Read More 

ChartWatchers

VERY OVERSOLD MARKET

by Chip Anderson

To say that the market is very oversold is not exactly breaking news because it has been oversold for at least a few weeks; however, the oversold condition has been steadily getting worse over that time, and we have perhaps reached the limit of how oversold the indicators will get without the market taking some time to clear the condition. Keep in mind that the condition can be cleared if the market merely drifts sideways while indicators drift higher toward neutral territory, but, considering the kind of volatility we have been experiencing, it seems that a rally is more likely Read More 

ChartWatchers

"JUMP OFF POINT" FOR CRUDE OIL?

by Chip Anderson

Quite simply, the trend is sharply lower. The massive de-leveraging taking place in the capital markets has not spared crude oil at all; however, this shouldn't be a surprise given the "bell ringing" at the top was none other than a "key reversal month" that has led to mean reversion back into the 50-month moving average. The question is whether this level now crossing at $73.43 can be regained in the days ahead and be used as a "jump off point" to further gains. Unfortunately, we think not. A number of fundamental and technical factors at play will not allow for this to occur, with the Read More 

ChartWatchers

COMMODITES ARE LAST ASSET TO PEAK

by Chip Anderson

A number of readers have asked if I thought the U.S. was in a recession or heading into one. Others have asked if I thought this recession would be worse than most. Although I'm not an economist, it is possible to make some judgements about the direction of the economy by looking at various financial markets. Two of them are stocks and commodities. On July 18, I wrote an article suggesting that commodities were peaking based on a number of technical indicators. That article also contained a headline that read: "Commodities Peak During Bear Markets". Here is an excerpt from that earlier Read More 

ChartWatchers

DISPLAYING MORE THAN ONE STOCK ON A CHART

by Chip Anderson

Hello Fellow ChartWatchers, Recently we've gotten several questions about how someone can display more than one stock on a single chart. I thought I'd take time this week to go over the steps you can take to do that with our SharpCharts Workbench. Let's get started. In this example, we'll create a chart of the Dow with the S&P Large Caps, Mid Caps, and Small Caps below it. Create a chart of your "first" stock There are several ways to create a new SharpChart. The easiest is to just go to our homepage and enter Read More 

ChartWatchers

SEPTEMBER WEAKNESS SPILLING OVER

by Chip Anderson

Two weeks ago, I said to buy the bottom. Sometimes, you're just wrong. I was wrong. Technical analysis is to the study of price action to increase the odds of predicting future price action. It's not an exact science, there are no guarantees, and there are times when you just have to tip your hat to the other side. So far, that's been the case. The market fell precipitously this past week, closing at new lows across our major indices. Volume was increasing late in the week, though it wasn't as heavy as we saw a couple weeks earlier. We can argue that it was the fault of Congress for Read More 

ChartWatchers

FILTERING THE NOISE

by Chip Anderson

September was one of the most volatile months in recent memory. Bar charts and candlestick charts are great, but the wild high-low swings can interfere with basic trend analysis. Moving averages provide a good means to smooth this volatility by cutting through the daily noise. For those who want it all, a combination of high-low-close bars and a short moving average may even be appropriate. This combination shows the high-low range, but also focuses on average prices to discern a trend. The accompanying chart shows the S&P 500 ETF (SPY) with bars in gray and a 5-day EMA in Read More 

ChartWatchers

BUYING OPPORTUNITY?

by Chip Anderson

In my September 19 article I said: "Our indicators and price action suggest strongly that we are beginning a rally that should last at least a couple of weeks. I also think that this week's deep low needs to be retested, and I am not convinced that a retest will be successful." As it turned out, there was no rally and the expected retest and failure encompassed one of the worst one-day declines in history. From top to bottom the S&P 500 Index has dropped nearly 30%, but as usual we can't turn on financial news without hearing somebody assert that this is now the "buying opportunity Read More 

ChartWatchers

WHERE ARE WE NOW?

by Chip Anderson

The bear market reasserted itself last week in a violent manner; trading sharply higher and lower in a matter of hours and days. This isn't your garden variety bear market as this one smells and feels much different given the enormity of the credit crisis. And there is no end in sight to the crisis from a fundamental perspective, which is giving rise to increasing calls that a "crash" is imminent. Perhaps that indeed what lurks around the corner, but crashes are very low probability events as they reside at the "end of the tail" of the probability distribution curve. We would argue we've Read More 

ChartWatchers

SELLING SHOULD HAVE BEEN DONE MONTHS AGO

by Chip Anderson

Over the past couple of weeks, I've suggested taking no new action in the stock market. Part of my reasoning is that we've been recommending a bearish strategy for the past year and see no reason to change that. Selling should have been done earlier in the year when major sell signals were first reported here. My January 3 Market Message reported on the major sell signal given by the monthly MACD lines last December (Chart 1). A number of other technical indicators also give major sell signals at the start of the year that we reported on. None of those sell signals have been reversed and Read More 

ChartWatchers

THE NEW LANDSCAPE

by Chip Anderson

With all the changes happening in the financial world right now it's gotten really hard to keep up with the latest news. This bank is failing. That company is merging with this one. That sector is over exposed to the credit crunch. Etc., etc., etc. One of the great things about technical analysis is that it works REGARDLESS of market conditions - you just have to remain calm and understand how to use the tools at your disposal. In this case, as always, a great place to start is our S&P Sector Market Carpet. Here are all the stocks that make up the nine S&P sector ETFs in one Read More