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May 2010

ChartWatchers

Materials SPDR tests February low

by Arthur Hill

The Materials SPDR (XLB) was one of the hardest hit sector SPDRs over the last four weeks. After a 15+ percent decline, the ETF is testing support from the February low. A big bullish engulfing pattern formed on Friday as the ETF opened weak and closed strong. Notice how the long white candlestick completely engulfed the prior red candlestick. Indicator-wise, the Commodity Channel Index (CCI) has a positive divergence working and a cross above the zero line would turn momentum bullish again. Click this image for details The February low and reversal provide clues Read More 

ChartWatchers

LEARNING FROM HISTORY, NAVIGATING THE PRESENT

by Alexander Elder

The tremendous market volatility is stressing many traders. My approach to tense situations is to push back a bit, look at the big picture, and then return to shorter-term charts for making tactical decisions. I am a huge fan of the New High – New Low Index and invite you to take a look at its signals with me. Let us review the weekly chart of the previous bull market and apply those signals to current events. (Ed. Note: The NH-NL Index will be available on StockCharts.com very soon.  Watch for an announcement on our homepage.)  A bull market typically has three Read More 

ChartWatchers

BLOG ARTICLES WORTH READING

by Chip Anderson

Hello Fellow ChartWatchers! One of the more unexpected pieces of feedback that I've gotten as I have travelled around recently is that some people aren't reading our free Blog Articles because they associate blogs with rumor, innuendo, amateur writing, and lots of false information.   While that might be true of some blogs, rest assured that the free articles that we publish here at StockCharts.com in our "Blogs" section are not like that at all. 1.) Our Blog Articles are only written by staff members or people we have a very close working relationship with. 2.) Our Blog Read More 

ChartWatchers

S&P 500 AT A CRITICAL JUNCTION

by Richard Rhodes

The S&P 500 decline over the past several weeks has reached a critical junction point in the decline at the 380-day exponential moving average support level. There are several forward scenarios that can occur: 1) Prices are sufficiently oversold on a short-term basis to where the S&P can manage to move to new highs above the 1217 level. This would represent a rally of +12% or thereabouts. The question would then become whether significant and material negative divergences developed in the advance/decline and new highs/new lows indicators that would suggest a major top in the Read More 

ChartWatchers

THE PITFALLS OF INCREASING VOLATILITY

by Tom Bowley

Many traders look at volatility and think huge potential rewards.  I look at it and think huge potential risks.  I know I'm conservative, but it's two different ways of viewing the same market.  I concede that if you're on the right side of each extreme move, potential profits await - and big ones.  But good luck being on the right side each time it moves.  When the VIX rises as it's done the past two weeks, emotions rule the market.  Fundamentals?  Puh-lease!  Hewlett Packard (HPQ) beat its quarterly EPS estimates, then raised guidance.  It's Read More 

ChartWatchers

FOREIGN CURRENCIES TUMBLE

by John Murphy

In early April, I expressed the view that the rally in the U.S. Dollar Index was coming mainly from weaker European currencies which meant that the dollar rally wasn't as widespread as it appeared. To support that view, I showed three foreign currencies that were rallying strongly against the greenback that included the Australian and Canadian Dollars along with the Brazilian Real. It didn't hurt that those three currencies were tied to commodity-producing countries and showed that global traders were still willing to assume some risk. That situation has changed. The next three charts Read More 

ChartWatchers

WHERE'S THE SELL SIGNAL?

by Carl Swenlin

With the market in a dizzying decline, some of our subscribers are wondering why our market posture is only neutral. Where's the sell signal? The short answer is that the Thrust/Trend Model (T/TM) can only give a intermediate-term neutral signal if the long-term signal is still on a buy (the 50-EMA is above the 200-EMA). This decision is based upon the conservative assumption that bull market declines will be short-lived, and that a neutral signal eliminates market exposure during a correction, while at the same time addressing the lower probability outcome of a full bear market decline Read More 

ChartWatchers

EXTREME SENTIMENT VARIATIONS DRIVING VOLATILITY

by Tom Bowley

Global stock markets have been quite volatile of late and significant gap ups and gap downs are becoming the norm.  While trading gaps may seem impossible at times, there is good news technically from the market selloff that resulted from the debt crisis in Europe.  In recent articles, I've spoken about long-term negative divergences, overbought conditions and extreme complacency and how that would likely lead to short-term market weakness.  That weakness first appeared in the influential financials sector one day before the news of the alleged Goldman Sachs (GS) fraud by Read More 

ChartWatchers

FTSE FORMS LARGE BEARISH BROADENING FORMATION

by Arthur Hill

The London FTSE ($FTSE) has an expanding right triangle working over the last 7-8 months. These are akin to broadening formations, which are also bearish reversal patterns. After an advance from 3500 in March-09 to 5250 in October-09, the index moved into a volatile consolidation period. Notice the higher highs and relatively equal lows. It was a volatility and uncertain period. The pattern would be confirmed with a break below support around 5000. Such a move would also break the 52-week moving average for the first time since July 2009. Upon a confirmation break, the downside target Read More 

ChartWatchers

DR. ALEXANDER ELDER JOINS CHARTWATCHERS

by Chip Anderson

Hello Fellow ChartWatchers! There is a TON of great stuff happening at StockCharts.com right now.  First off, I want to make sure that everyone is aware that our SPRING SPECIAL is going on right now.  Subscribe or extend your account for 12 months and we'll give you 2 additional months for free!  (Subscribe of extend by 6 months and we'll give you 1 month for free.)  But please do not delay because unlike previous specials, this one will only last for ONE WEEK!  That means that you have to act before May 8th or you'll miss out.  Why not click here right now Read More 

ChartWatchers

GOLD MINERS INDEX HITS THREE-MONTH HIGH

by John Murphy

Three Thursdays ago (April 8), I wrote about the upturn in the price of gold and gold stocks. At the time, gold was breaking through a bullish "neckline" in a head and shoulders bottom while the Gold Miners Index was breaking through its March high. On Tuesday, I showed the Gold ETF (GLD) reaching a new 2010 high after a successful retest of its neckline. Today I'm going to focus on mining stocks which are starting to emerge as new market leaders. Chart 1 shows the Market Vectors Gold Miners ETF (GDX) trading at the highest level since January. This week's upside breakout has also taken Read More 

ChartWatchers

NASDAQ AND RUSSELL 2000 CONFIRM BEARISH SIGNS

by Tom Bowley

In my last article I suggested the financials were topping and that would make any further advance in the market difficult.  Well this past week the action on the NASDAQ and Russell 2000, home of the high beta stocks, confirmed the bearish action.  We've seen several warning signs develop over the last several weeks.  These include extremely overbought conditions on both daily and weekly timeframes, negative divergences on the MACD on daily and weekly timeframes, outrageous relative complacency unlike anything we've seen since the CBOE began providing us equity only option Read More 

ChartWatchers

WHAT IS COPPER TELLING US?

by Richard Rhodes

We are rather interested in the manner Copper is trading at present, for Copper has shown itself in recent months to be a leading indicator of the path of the S&P 500. Perhaps this is due to it's economic sensitivity, or perhaps it is due to it's positive correlation with Chinese equities. In any case, the Copper/S&P 500 relationship is important to our trading regime. One cannot help but see that Copper bottomed in late December-2008 before the S&P 500 bottomed in March-2009, which we all know led to a rather material advance until January-2010. At that point, Copper topped Read More 

ChartWatchers

A SUPPORT TEST FOR THE DOW NEXT WEEK

by Arthur Hill

With the third long red candlestick in three weeks, the Dow Industrials is once again testing support in the 11000 area. The senior average first exceeded 11000 on April 14th and then moved into a trading range. While a support break would be short-term bearish, it would not be enough to affect the bigger uptrend. After a 1300 point advance in just 11 weeks, the Dow was overbought and ripe for a pullback or consolidation. Even the best athletes need to rest after long sprints. Should a correction unfold, we can turn to broken resistance and the Fibonacci Retracements Tool to estimate Read More 

ChartWatchers

6-MONTH SEASONALITY GOING NEGATIVE

by Carl Swenlin

SIX-MONTH SEASONALITY: Research published by Yale Hirsch in the Trader's Almanac shows that the market year is broken into two six-month seasonality periods. From May 1 through October 31 is seasonally unfavorable, and the market most often finishes lower than it was at the beginning of the period. From November 1 through April 30 is seasonally favorable, and the market most often finishes the period higher. (See Sy Harding's book Riding the Bear for extensive details on this subject.) While the statistical average results for these two periods are quite compelling, trying to ride the Read More