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February 2010

ChartWatchers

ON DATA ACCURACY AT STOCKCHARTS.COM

by Chip Anderson

Hello Fellow ChartWatchers! Last time I talked about the great lengths that we go to here at StockCharts.com to make sure that our indicator values are calculated correctly.  This time I want to talk about how we work hard to make sure that the data used in those calculations is as accurate as possible. First off, I want to talk about the differences between intraday data and daily data with respect to accuracy.  The key thing to keep in mind here is that after the stock markets close, the daily quote (open, high, low, close and volume) for each stock is audited by the Read More 

ChartWatchers

TRANSPORTATION STOCKS LAGGING - MORE TURBULENCE AHEAD?

by Tom Bowley

History is a valuable tool in the stock market as we witness cycles repeating themselves all the time.  Our major indices and the various sectors and industries rotate back and forth as our economy moves from strength to weakness and back to strength again.  Certain sectors perform better during strong economic times while others outperform as our economy stumbles.  I like to use this knowledge as the market makes its moves up and down to determine "staying power".  For instance, transportation stocks tend to lead the economy out of recession and it makes sense because Read More 

ChartWatchers

DOES FALLING 50-DAY LINE MEAN ANYTHING?

by John Murphy

One of our readers recently pointed out that the blue 50-day moving average is declining for the first time since last March, and asked if that makes it more of a resistance barrier. The short answer is probably. Although most attention is paid to "crossings" above and below a moving average, the "direction" of the line itself is also important. Near the end of October, the SPX fell below its rising 50-day line briefly before moving back above it within a week (see circle). Last July, the SPX also fell below its 50-day line for eight days before turning back up again (see box in Chart 2) Read More 

ChartWatchers

GOLD MINERS VS. GOLD FUTURES

by Richard Rhodes

The Gold Futures ($GOLD) market has begun to capture traders' attention once again, for the developing technical patterns would suggest new highs above $1225/oz will materialize in the months ahead. Unfortunately, we haven't included a Gold Futures price here, but take our word for it: a rather bullish consolidation is confirmed, with prices having broken above the 20-day and 50-day moving averages. This obviously would presume that we become buyers of the Gold Futures. However, that isn't the case when one considers the relative chart pattern of the Gold Miners ETF / Gold Futures Ratio Read More 

ChartWatchers

POSSIBLE BULL TRAP

by Carl Swenlin

Last week we were looking at a bearish reverse flag formation, but this week prices broke above a short-term declining trend line, effecting a bullish resolution of the flag and changing the short-term outlook to bullish. This was confirmed by a PMO (Price Momentum Oscillator) buy signal, generated as the PMO crossed up through its 10-EMA. The negative side of the picture is that volume accompanying the breakout and subsequent advance only has been averaging about 85% of the 250-EMA of daily volume, which does not reflect broad confidence in the move. This, plus other evidence we will Read More 

ChartWatchers

Short-term rates move ahead of Fed

by Arthur Hill

With a quarter point hike in the discount rate, the Fed surprised some in the media, but few in the bond market. As one of the most interest rate sensitive asset classes, the bond market often moves before an actual Fed move. First, the Fed has been jawboning about the end of quantitative easing for some time now. Second, the Fed specifically mentioned the possibility of future rate increases last week, which was noted in the Market Message on Wednesday, February 10th. Third, short-term interest rates have been moving higher since November. Yes, the bond market has been pricing in some Read More 

ChartWatchers

ON ACCURACY AND EMAs - 2010 UPDATE

by Chip Anderson

Hello Fellow ChartWatchers! Here at StockCharts we are fanatical about accuracy.  Without accuracy, there would be no reason to use our website.  We work hard at it every day.  There are two key factors in creating the "cult of accuracy" we have here - first, you need accurate data; then you need accurate calculations.  If we get either of those things wrong, our charts suffer and your trust in us diminishes. Data accuracy is a huge can of worms that I'm not going to address today.  I want to spend some time however on Calculation Accuracy because I can show you Read More 

ChartWatchers

WHO DAT GONNA GET DEM BEARS?

by Tom Bowley

Relax Chicago.  You're not in the Super Bowl this year.  I'm just applying a little Super Bowl-mania to the current state of the stock market.  The bears are calling the plays. From a sentiment and technical perspective, this market is really making sense right now.  The top was identified in early January by analyzing the relative complacency in the market.  This was discussed in great detail in my previous article, "It All Comes Down to Defense".  At the time that signals suggest a top is imminent, I never know what kind of downtrend or consolidation may Read More 

ChartWatchers

MATERIALS AND FINANCIALS BOUNCE OFF 200-DAY LINES

by John Murphy

The stock market remains in a downside correction as evidenced by the breaking of initial support levels and negative turns in several longer-term technical indicators (more on that later). Friday's heavy-volume upside reversal, however, suggests that a short-term bottom may have formed from an oversold condition. That's especially true of two sector ETFs that bounced off their 200-day moving averages. Material stocks have been among the hardest hit because of the sharp selloff in commodity markets. Chart 1, however, shows the Materials Sector SPDR (XLB) reversing upward on Friday (on Read More 

ChartWatchers

CHANGED TO NEUTRAL POSTURE

by Carl Swenlin

On Thursday our mechanical Thrust/Trend Model changed from a buy to neutral, based upon the 20-EMA crossing down through the 50-EMA. Now our hope is that there will be enough continuing decline to cover what may turn out to be a whipsaw signal. No guarantees in that regard, but bull markets typically do not end this cleanly. The market sold off deeply on Friday, but in the end it rallied and closed up by a small amount. This looks like the beginning of a bounce of at least short-term duration. The weekly-based chart of the S&P 500 shows that the PMO is very overbought and has Read More 

ChartWatchers

AN INFLECTION POINT IS UPON US

by Richard Rhodes

Last week's S&P decline reached a crescendo on Friday around mid-day at 1044.50, which brings the decline to roughly 106 S&P points from the January 19th high at 1150.42. Pencil to paper, and the decline stands at -9.2%, which is just about a normal -10% correction that many like to speak of in a bull market. This obviously begs the question as to whether a more normal correction has just occurred - which would mean new highs above the 19th's highs; or whether the 19th's highs represent the resumption of the bear market, with rallies being sold. We honestly don't have any concrete Read More 

ChartWatchers

Commodities weighed down by Dollar and stocks

by Arthur Hill

In addition to stock markets around the world, we have seen a rout in various commodity groups over the last 3-4 weeks. Strength in the Dollar is partly to blame. Weakness in global equities also bodes ill for the commodities. A downturn in global equities would imply a future downturn in the global economy that would dampen demand for commodities. In Thursday's Market Message, John Murphy showed the DB Commodity Index Tracking ETF (DBC) breaking below its 200-day moving average. The PerfChart below shows six commodity related ETFs with the S&P 500 ETF (SPY) and the DB Dollar Bullish Read More