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September 2009

ChartWatchers

As Risks Rise, Discipline and Stock Selection are Critical

by Tom Bowley

In a perfect world, we'd all invest every dime in winning stocks each and every trading day.  Unfortunately, I haven't seen that kind of trading world yet.  So as we approach each day, we must assess the risks in the market and determine an appropriate trading strategy.  At times, it makes good sense to go "all in".  But most of the time, the nature and size of our trades should be based on the risks inherent in the market.  I've discussed some caution of late and I maintain it.  It doesn't mean the market cannot go higher and that you cannot trade on the Read More 

ChartWatchers

LOWER PRICES AHEAD FOR XLY?

by Richard Rhodes

The insatiable need to own stocks has manifested itself in most S&P sectors, in which the Consumer Discretionary sector is doing far better than anyone can believe. Most, if not all of the clients we speak with on a daily basis do not understand why this is so; they note that they and and their friends and neighbors have pulled back, as well as deleveraging is the order of the day. Therefore, why then, have we seen 75% move off the low in the Consumer Discretionary ETF (XLY)? Quite simplyliquidity. But having said this, we think the liquidity is going to slowly, but surely dry up Read More 

ChartWatchers

FALLING DOLLAR FAVORS FOREIGN STOCKS

by John Murphy

Arthur Hill reviewed some standard intermarket relationships on Thursday. One of the best known is the inverse relationship between the U.S. Dollar and commodity prices. That's why a falling dollar has had a bullish impact on commodity prices since the spring. The falling dollar has also boosted global stocks as money moved out of that safe-haven currency into riskier assets like stocks. But not all stocks rise equally at such times. A falling dollar has a much more bullish impact on foreign stocks. Since the March top in the dollar, for example, the S&P 500 has risen 56%. Foreign Read More 

ChartWatchers

TRIALS AND TRIBULATIONS

by Chip Anderson

Hello Fellow ChartWatchers, We're taking a break from our on-going Technical Analysis 101 series to give you an update on the two disruptions that happened last week.  I want to make sure everyone understands what happened and what we are doing to prevent it from happening again. In case you missed it, on Wednesday, September 9th, our main connection to the Internet was cut.  Around 4:45pm Eastern, "some guys" working in a manhole cover outside our offices damaged our fiber cable which knocked us off the air.  (I actually spotted those workers as soon as the problem Read More 

ChartWatchers

Breadth Remains Bullish

by Arthur Hill

With a surge over the last two weeks, the AD Line and AD Volume Line for the NYSE hit new reaction highs. The first chart shows the NYSE AD Line moving above its August highs with a sharp advance this month. The AD Line is a cumulative measure of Net Advances (advances less declines). This indicator rises when there are more advancing stocks and falls when there are more declining stocks. It is one of the simplest, and purest, breadth indicators. With a new high this month, there is no sign of weakness right now. If anything, the AD Line looks overextended and ripe for a rest. Read More 

ChartWatchers

BULL MARKET RULES STILL APPLY

by Carl Swenlin

For weeks we have been looking for a correction, and a time or two we experienced some trepidation that the bull market might be over, but all the market has done is produce a series of minor pullbacks. At the present it is trying to break out of a rising wedge formation, the opposite of what we normally expect with a bearish formation. This kind of behavior continues to supply us with evidence that bull market rules still apply. That means that we should continue to expect bullish resolutions rather than bearish ones. Market internals have continued to remain overbought. For example, the Read More 

ChartWatchers

GOLD AND SILVER HAVE BIG WEEK

by John Murphy

GOLD TESTING ALL-TIME HIGH Last Friday I wrote about the bullish potential in gold and gold shares. That optimism was based on two bullish chart patterns which are shown below. The first is the bullish symmetrical triangle shown in Chart 1 for the Gold Trust ETF (GLD). This week's upside break of the upper resistance line (on heavy volume) is bullish and signals a test of its February high near 100 (which corresponds to $1,000 in bullion). Chart 2 shows why that's an important resistance level of its own. Chart 2 (based on the price of bullion) shows an inverse (or continuation) head Read More 

ChartWatchers

TECHNICAL ANALYSIS 101 - PART 12

by Chip Anderson

This is the next 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 of Price Patterns When identifying potential price patterns on a chart, it is crucial to try and verify that the market psychology behind the price pattern is Read More 

ChartWatchers

ON HIATUS THIS WEEK

by Richard Rhodes

Richard will return for our next issue. Read More 

ChartWatchers

CHINA MAY HOLD SOME CLUES

by Tom Bowley

China's Shanghai Composite index is swinging wildly in both directions, reminiscent of the 1999-2002 moves by the NASDAQ.  From a long-term perspective, you can clearly see that trends in both directions have been exaggerated.  Any time that we've seen impulsive moves in one direction or the other, we have seen follow through in that same direction.  From the mid-2005 to mid-2007, the impulsive moves were up while the corrective moves were down.  From the peak in 2007, just the opposite occurred with impulsive moves lower.  Take a look at the chart below and study Read More 

ChartWatchers

LOOKING BACK

by Carl Swenlin

I continue to get mail from people who question how it is possible to be bullish in the face of the worst fundamentals since the Great Depression, so I thought it would be useful to look at a chart of the 1929 Crash and the decade that followed it. Squeezed on the left side of the chart you can see the initial Crash and the rally that followed it into mid-1930. That was a bear market rally, and it advanced about 50% from the Crash low. While all our current signals are bullish, I still have no problem imagining our current rally ultimately resolving in this manner. The point, however, is Read More 

ChartWatchers

BONDS AND GOLD LEAD THE WAY HIGHER

by Arthur Hill

Intermarket analysis shows strength in bonds and gold, but weakness in the Dollar and oil. Strange days indeed. The Intermarket Perfchart below shows performance over the last sixty days, from June 11th to September 3rd. Relative strength in bonds is the first thing that jumps out. Performance for the 20+ Year Treasury ETF (TLT) has been positive the entire time (60 days). In contrast to bonds, oil is the weakest of the intermarket players. Except for a positive blip in early June, performance for the US Oil Fund ETF (light blue) has been negative since mid June. While bonds are up over Read More