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July 2009

ChartWatchers

McClellan Oscillators Remain Bullish

by Arthur Hill

The McClellan Oscillators moved from bearish to bullish with the July surge in stocks. Basically, the McClellan Oscillator is the 19-day EMA of Net Advances less the 39-day EMA of Net Advances (advances less declines). As the difference of two moving averages, this indicator oscillates above/below the zero line like MACD. Based on recent observations, a thrust above 50 is viewed as bullish for the stock market, while a thrust below -50 is viewed as bearish. Even though this breadth indicator is not perfect, it's level can help determine overall market direction and underlying strength Read More 

ChartWatchers

DOLLAR SELLS OFF AS EURO HOLDS SUPPORT

by John Murphy

It looks like you can throw out most of what I wrote last Friday. I was expecting a deeper market correction after most market indexes broke short-term head and shoulder "necklines" (and daily EMA lines turned negative). I also wrote about the possible threat from a rally in the CBOE Volatility (VIX) Index. It turns out I was wrong on both counts.  Stocks rallied strongly and the VIX touched a new low. Although some readers have asked if the current rally could be just another "right shoulder", I'm somewhat doubtful. A retest of the June high at 956 looks more likely. The fact that Read More 

ChartWatchers

BREAKDOWN BECOMES BEAR TRAP

by Carl Swenlin

Last week I presented an alternate scenario to the head and shoulders breakdown and projected decline: "While the bearish case seems strongest at this point, a bullish outcome is not impossible. Bullish forces have weakened, but it is not at all clear that the bear market has resumed. A more positive analysis of the situation could be that there has been a two-month rally from the March lows, followed by a two-month correction/consolidation. The neckline violation could be the end of the correction and a bear trap. I present this outcome because I have seen it happen before, and it is Read More 

ChartWatchers

Riding Out the Summer Doldrums

by Richard Rhodes

As the summer doldrums set in, we've seen quite a bit of back and forth in the various capital markets, with prices not moving far from where they were just 2-months prior. However, last week was important for the Gold Miners (GDX) we believe, for a very simple, yet elegant weekly "key reversal" higher has formed. Moreover, this pattern occurred from the 60-week moving average, which in the past has provided reasonable resistance and support. However, the 14-week stochastic has yet to turn up in confirmation; but we would expect it to do so from roughly neutral levels - which would posit Read More 

ChartWatchers

Semiconductors Continue As Relative Leaders

by Tom Bowley

This first chart really says it all:  Semiconductors are trying to break out on a relative basis.  They're trying to do it at a time when the major indices are attempting breakouts of their own.  A combination of a relative price breakout in semiconductors while at the same time breaking out across our major indices would be very bullish for equities, arguing for much higher prices.  Will the breakouts occur?  Tough question.  We'll need a catalyst.  Intel Corp (INTC) provided the boost necessary to jumpstart the SOX and send it to test previous Read More 

ChartWatchers

Majority of Stocks Still Above their 200-day SMAs

by Arthur Hill

It is hard to argue with the bulls when the vast majority of Nasdaq and NYSE stocks are trading above their 200-day SMAs. Over 66% of Nasdaq stocks are trading above their 200-day moving averages, while over 77% of NYSE stocks are trading above their 200-day moving averages. There are two important parts to this indicator: absolute level and direction. Despite some stalling over the last 6 weeks, the overall direction is up for both breadth indicators. There have been pullbacks along the way, but the overall trend since late March is up. The bulls are in control as long as this uptrend Read More 

ChartWatchers

Consumer Discretionary Stocks Get Rocked

by Arthur Hill

Non-farm payrolls declined 467,000 for June, which was worse than expected. Stocks took the news hard with a broad based decline on Thursday. The major indices were down 2-4% on the day, while all sector ETFs were down over 2% with the Consumer Discretionary SPDR (XLY) leading the way lower. On the chart, XLY is on the verge of breaking support from its mid-May lows. With a double top taking shape, a break below this support level would target further weakness towards 19. The height of the pattern is subtracted from the support break for a target. As the most economically sensitive Read More 

ChartWatchers

CORRECTIVE MOVE OR SIGNIFICANT DOWNTREND?

by Tom Bowley

I believe it's the former.  Thursday's selloff after the June Employment report was a bit scary, particularly if you're only looking at the magnitude of the point losses.  But, in my opinion, no key support levels have been violated.  That means the beginning of next week will be worth watching.  We have been in the midst of an uptrend for the last few months and we are still in it.  We have a series of higher highs and higher lows off the March lows that has not been broken - yet.  Therefore, I say we play the trend at hand, which still is higher. Read More 

ChartWatchers

TECHNICAL ANALYSIS 101 - PART 10

by Chip Anderson

This is the tenth 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 beginning of this series.) Volume Confirmation In an uptrend, volume should expand as the prices move higher and contract as the prices pull back.  As long as this pattern continues, volume is confirming the Read More 

ChartWatchers

DEFENSIVE ROTATIONS DURING JUNE

by John Murphy

A sign that investors have turned more negative over the last month is the rotation out of economically-sensitive groups (like consumer discretionary and energy stocks) and into defensive groups (like utilities, consumer staples, and healthcare). Chart 3 shows relative strength lines for those five groups (versus a flat S&P 500) since the start of June. The downturn in the Discretionary SPDR (XLY) performance in early June is consistent with views that retail spending is being held hostage by rising unemployment numbers (which were borne out yesterday). The downturn in energy (XLE) is Read More 

ChartWatchers

GOLDEN CROSS

by Carl Swenlin

About a week ago the S&P 500 50-SMA (simple moving average) crossed up through the 200-SMA. (See chart below.) This is known as a "Golden Cross" because it is interpreted by many as a sign that the market is turning long-term bullish. Of course, this generated enormous optimism among the market cheerleader crowd, most of whom do not use technical analysis unless it supports their position. On the other hand, a highly regarded economist/market analyst blew his stack that anyone could be so lame-brained to use such a simple event to imply that the market was about to go ballistic. Since Read More