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November 2008

ChartWatchers

LOOK UNDER THE SURFACE

by Chip Anderson

This has been one ugly bear season. It cannot be compared to anything else seen on the S&P 500 since 1950. Not even close. But I'll say one thing - there's an awful lot of horrible economic news priced into this market right now. I am convinced that the worst is behind us. That doesn't mean we won't continue to see horrendous economic reports. This will be a holiday shopping season that every retailer in America had wished they could have skipped. We will see hundreds and hundreds of thousands of jobs lost in the coming months. As a result, home prices are nowhere near stabilizing Read More 

ChartWatchers

DOW BATTLES SUPPORT

by Chip Anderson

The Dow Industrials surged off support for the fourth time in five weeks. Will this bounce produce a breakout or failure? As the candlestick chart below shows, the Dow Industrials is locked in a volatile trading range with support around 8000 and resistance around 9700. The Dow dipped below 8250 least four times and surged above 9250 at least three times. Talk about a yo-yo. In an effort to weed out some of this volatility, I am also looking at a close-only chart. There are three dips below 8500 and a broadening formation is taking shape. These patterns are normally associated Read More 

ChartWatchers

RYDEX RATIOS DIVERGE

by Chip Anderson

Decision Point charts a couple of indicators that are useful in determining investor sentiment based on actual deployment of cash into Rydex mutual funds. The Rydex Asset Ratio is calculated by dividing total assets in Bear plus Money Market funds by total assets in Bull funds. The Rydex Cash Flow Ratio is calculated by dividing Cumulative Cash Flow into Bear plus Money Market funds by Cumulative Cash Flow into Bull funds. (A thorough discussion of these ratios can be found in the Glossary section of our website.) When total assets in a given fund increase/decrease, the cause is an Read More 

ChartWatchers

S&P JUMPS 6% AFTER TOUCHING NEW LOW

by Chip Anderson

After dropping briefly to the lowest level since March 2003, the S&P 500 achieved an upside reversal day (as did all of the other major indexes) that resulted in a 6% gain. It also did that on the highest volume in weeks. The fact that the S&P touched a new low before rallying is especially impressive (Chart 1). The Nasdaq did the same (Chart 2). The Dow Industrials bounced off psychological support near 8000. The rally was aided by short-term positive divergences in both the daily RSI and MACD lines. Although all market groups participated, the biggest gains were seen in consumer Read More 

ChartWatchers

NYSE HIGH-LOW LINE TELLS THE TALE

by Chip Anderson

StockCharts.com is all about visually representing what's going on in the markets. Here's a sobering visual representation for you: Daily NYSE High-Low Line: Weekly NYSE High-Low Line: You can view these two charts anytime at http://stockcharts.com/charts/gallery.html?$NYHL The $NYHL index a market breadth indicator that is calculated at the end of each day by taking the number of stocks making New 52-week Highs on the NYSE and subtracting the number of stocks making New 52-week Lows. Those values are then plotted cumulatively to create the NYSE High-Low Line that Read More 

ChartWatchers

HISTORY REPEATS ITSELF AGAIN AND AGAIN AND AGAIN

by Chip Anderson

Previously, I've mentioned a favorite indicator of mine - The Bowley Trend. The Bowley Trend is an analysis of stock market history, dating back to 1950 on the S&P 500 and 1971 on the NASDAQ. It identifies discernible bullish and bearish trends that have emerged over time and provides additional clues as to the direction of equity prices. I use The Bowley Trend to corroborate technical signals. I mentioned in a July article the 2nd worst historical week of the year. We just experienced a major league beating during the absolute worst period. The most interesting aspect of October is Read More 

ChartWatchers

AIRLINES TAKE OFF

by Chip Anderson

The Amex Airline Index ($XAL) is leading the market higher with a break above two key moving averages this week. XAL produced one of the sharpest October recoveries with surge from 14 to 25 over the last three weeks. This surge carried the index above the 50-day moving average and 200-day moving average. Both moving averages are still moving lower, but this October surge shows extraordinary strength. Not too many indices are currently trading above their 200-day moving average. For example, the S&P 500 is some 30% below its 200-day moving average. In addition to Read More 

ChartWatchers

CHANGING WITH THE MARKET

by Chip Anderson

When the market changes, we must change our tactics, strategies, and analysis techniques to accommodate the new market conditions. This is not a new idea, but it is one that is not very widely recognized, particularly when applied to the long-term. In recent writings I have emphasized that we are in a bear market, and that we must play by bear market rules. Overbought conditions will usually signal a price tops, and oversold conditions can often see prices slip lower to even more oversold conditions. When making these comments, my focus has been on the cyclical bull and bear markets. What Read More 

ChartWatchers

WILL OIL SERVICES RETEST RECENT LOWS?

by Chip Anderson

The world stock markets remain rather "volatile" as the credit crisis continues to unfold, while this volatility pendulum continues to create some very unique and interesting value propositions we haven't seen in quite some time. Our focus at present is the relative relationship of the Oil Service Index (OSX) to Crude Oil futures; and the fact that this relative ratio is just off its lowest point in over a decade - having fallen from its high above 8.0 in 1998 to its 2008 low near 1.70. The current course of de-levering by the world's hedge funds has pushed this ratio from 4.0 to its Read More 

ChartWatchers

LIBOR DROP ENCOURAGES MARKETS

by Chip Anderson

One of the recent positive trends is the continuing drop in the three-month London Interbank Overnight Lending Rate (LIBOR). That rate determines what banks charge each other for loans. During the credit freeze that started in mid-September, the LIBOR jumped from 2.8% to 4.8% as stocks fell sharply. Since mid-October, however, the LIBOR has been dropping. It fell another 16 basis points today to 3.03 (see arrow) which is the lowest level in six weeks. That's helping to stabilize global stock markets. Subscribe to John Read More 

ChartWatchers

HISTORY REPEATS ITSELF... AGAIN AND AGAIN

by Chip Anderson

Hello Fellow ChartWatchers, As you (hopefully) know already, StockCharts.com also has an online bookstore that is dedicated to providing great investment-oriented books at great prices. (We work hard to keep the prices as low as possible. No, seriously! From a business perspective we just want to break even on our books.) But there is one book in particular that we look forward to selling each year. Year after year it is our biggest seller mostly because it gives out great information that everyone can use to make better investments. If you haven't guessed already, I'm talking Read More