ChartWatchers Newsletter logo

February 2009

ChartWatchers

BE PREPARED

by Richard Rhodes

In our last commentary, we noted that the S&P Energy ETF (XLE) was in the process of forming a bearish consolidation that argues for sharply lower prices. And since then, prices have consolidated further, butare now poised to breakdown below trendline support and the October-2008 lows. However, this sector remains a favorite of both fundamental and momentum traders as perceived safety plays. However,we would argue that while they may be so now; they will not be in the future, and in fact - if the market does indeed rally at some point soon - they shall not lead the rally. Read More 

ChartWatchers

MASTERING OUR BLOGS

by Chip Anderson

In case you missed it, we are now publishing a ton of new content about charting and technical analysis on our seven(!) different blogs.  One of the great things about blogs is that you can "subscribe" to a blog and then get notified as soon as anything new is posted.  Each one of our blogs has a "Subscribe" button up top and I encourage you to click on them and set up a subscription in order to stay up-to-date with the latest info from us. If you are new to using blog subscriptions (also called "RSS Feeds"), then just click on the "View Feed XML" link that appears Read More 

ChartWatchers

JUICING UP YOUR RETURNS

by Tom Bowley

I receive a lot of questions regarding the "ultra" shares and "ultrashort" shares and how to effectively trade them.  In particular, there are always questions asking why those "juiced" ETF returns don't correspond to the indices they're supposed to track over time.  Let me give you an example.  Take a look at the two charts below.  The first is a five month chart of the Dow Jones U.S. Financial Index ($DJUSFN), while the second reflects the ProShares UltraShort Financial (SKF) during that same timeframe.  The SKF is designed to inversely track the $DJUSFN at a Read More 

ChartWatchers

TECHS TAKE A PUNCH

by Arthur Hill

Two weeks ago I featured the Nasdaq 100 ETF (QQQQ) with a triangle breakout, strong OBV and relative strength. The ETF surged to resistance from the early January high, but ultimately failed to break above this key level. With a sharp decline over the last eight trading days, the trading bias has quickly shifted back to the bears. The failure at resistance, gap down, trendline break and MACD crossover are all bearish until proven otherwise. At the very least, QQQQ needs to fill Tuesday's gap to merit a reassessment. Read More 

ChartWatchers

A LOT OF MARKETS ARE AT CRITICAL CHART JUNCTURES...

by John Murphy

GOLD TOUCHES $1000 FOR FIRST TIME IN A YEAR A number of financial markets are testing important chart points. Let's start with gold. Bullion touched $1,000 today for the first time since last March. Chart 1 shows the streetTracks Gold Trust (GLD) very close to touching its March 2008 high at 100. On a short-term basis, however, the price of gold looks overbought. Some profit-taking from this level wouldn't be surprising. If that's true, some counter-trend moves may be seen in some other markets. The dollar may have also started one. Read More 

ChartWatchers

RETEST

by Carl Swenlin

The long-awaited retest of the November lows has finally arrived. The S&P 500 is still slightly above that support, but the Dow has penetrated it. Even though every rally since November has been greeted with intense hope of a new advance that would end the bear market, the market gradually rolled over into a declining trend after the January top. The November bottom was also a 9-Month Cycle bottom. In a bull market we would expect the market to rally for several months. The fact that the rally failed so quickly, is a very bearish sign.   The Read More 

ChartWatchers

TECHNICAL ANALYSIS 101 - PART 2

by Chip Anderson

This is the second part of a series of articles about Technical Analysis from a new course we're developing. If you are new to charting, these articles will give you the "big picture" behind the charts on our site. if you are an "old hand", these articles will help ensure you haven't "strayed too far" from the basics. Enjoy!  (Click here to see the first part of this series.) The Value of Technical Analysis The reason technical analysis has value is that directional price moves are often sustained for a period of time allowing analysts to detect and profit from the change Read More 

ChartWatchers

NEW BLOGS, NEW CHARTWATCHERS, NEW BOOK FROM JOHN MURPHY!

by Chip Anderson

Hello Fellow ChartWatchers! This week is the start of big changes here at StockCharts.com.  We are moving much of our free content over into a new set of Blogs.  ("Blogs" are Web Logs - collections of articles on a particular topic.)  Things like, well, this newsletter are actually perfect for the Blog format.  And so, this is the first blog-based version of ChartWatchers! What does that mean?  If you only read ChartWatchers as email in your mailbox, it doesn't mean much.  But if you look at ChartWatchers on the web, it means that you can now read many of the Read More 

ChartWatchers

MACD LINES SHOW SOME PROMISE

by John Murphy

A reader complained this week that we failed to point out the "negative divergence" in the daily MACD lines during January prior to the latest downturn. The reason I didn't point it out was because none existed. In fact, it may be the other way around. At the moment, the daily MACD lines look more positive than negative. Chart 1 overlays the MACD lines (and MACD histogram) over daily bars for the S&P 500. The chart shows that the MACD lines bottomed during October and gave a positive divergence during November (rising trendline) before rallying into the start of January. No negative Read More 

ChartWatchers

OBV AND RELATIVE STRENGTH DRIVE QQQQ

by Arthur Hill

The Nasdaq 100 ETF (QQQQ) is breaking out of its trading range. The chart below shows QQQQ stuck in a trading since 10-Oct. Focusing on the blue dotted line marking the mid October lows, we can see that QQQQ traded above and below this line numerous times the last four months. In essence, QQQQ went nowhere from 10-Oct until early February. A triangle formed from early November as the trading range narrowed over the last two months. QQQQ could be finding direction now. With an advance over the last five days, QQQQ broke the triangle trendline and is closing in on resistance from the early Read More 

ChartWatchers

JANUARY FORECASTS A DOWN YEAR

by Carl Swenlin

Research published by Yale Hirsch in the "Trader's Almanac" shows that market performance during the month of January often predicts market performance for the entire year. The January "barometer" has been particularly prescient in odd years (the first year of a new Congress), with only two misses in 69 years (as of 12/31/2008). While the January barometer has a good record of prediction, I still put it in the "for what its worth" column, because I can't think of any sound reason why it should work, and in many years it seems that a correct forecast is simply serendipity. Read More 

ChartWatchers

FOCUSING ON THE ENERGY SECTOR

by Richard Rhodes

Our focus today is upon the Energy Sector (XLE) and its relative valuation to the S&P 500 Spyders (SPY). Given the current bear market, we've found recently that market participants are once again willingto return aggressively to what they know worked rather well in the last bull market - buying energy stocks as the dwindling world energy supply story continues to get quite a bit of play. We think this iswrong-headed, for Energy is a "late cycle mover" rather than an "early cycle mover" out of recessions. Perhaps it is different this time; but we think not. Hence, we believe it wise Read More 

ChartWatchers

BERMUDA TRIANGLE - WALL STREET STYLE

by Tom Bowley

We've seen this all before.  The sure-fire short setups get waxed as trendline support holds.  Then the bulls grow confident as the market soars only to get turned back by trendline resistance.  The cycle continues to repeat itself until we get resolution.  If you time your entries perfectly, the triangle formations can be powerful trading patterns, but patience and extreme discipline is required. Right now, the market is faced with exactly that triangle mentality.  The triangle keeps squeezing with each high moving lower and every low moving higher.  At some Read More