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October 2010

ChartWatchers

TRANSPORTATION ISHARES REACH MAY HIGH

by John Murphy

Previous messages showed the upside breakout in the Dow Transports (over their summer high) which confirmed a previous upside breakout in the Dow Industrials and constituted a Dow Theory buy signal (see circle). Both Dow averages are approaching another test at their spring highs. Needless to say, the ability of both Dow averages to clear their spring highs is necessary to keep the new uptrend going. I'm going to focus today on what I consider to be the most economically-sensitive part of the transports which are the rails. Chart 1 shows the DJTA iShares (IYT) testing its May high near Read More 

ChartWatchers

A LOOK AT THE FINANCIALS

by Tom Bowley

I spend a great deal of time evaluating the financial sector because I believe it's the most influential group in terms of leading the market.  Financials underperformed miserably in 2007 and 2008 and overall market performance followed suit.  In 2009, financials outperformed and the market recovered a lot of its prior losses.  But in 2010, the market doesn't quite seem to know what to do about the lagging financial sector.  Year-to-date, our major indices are up as follows: Dow Jones: +6.09%S&P 500: +5.48%NASDAQ: +8.80%Russell 2000:  +12.44% The Read More 

ChartWatchers

PERCENT BUY INDEX VS. BULLISH PERCENT INDEX

by Carl Swenlin

A subscriber had some questions about the Percent Buy Index (PBI) versus the Bullish Percent Index (BPI). The PBI is my creation, and it tracks the percentage of Price Momentum Model (PMM) buy signals for the components in a given index. (In the case of this discussion we will be looking at the PBI for the S&P 500 Index.) The BPI was, I believe, created by Tom Dorsey, who is a highly regarded expert on point and figure (P&F) charting. The BPI tracks the percentage of P&F buy signals in an index. To clarify, as far As I know the BPI was introduced long Read More 

ChartWatchers

"WHERE DO I START?" HERE - YOU START HERE...

by Chip Anderson

Hello Fellow ChartWatchers! Today I want to answer a question that we get frequently - "Where do I start?  This is all so overwhelming!" The answer is, you start with John Murphy's 10 Laws of Technical Trading. In anticipation of your next question, here and now I present to you <fanfare> "John Murphy's Ten Law's of Technical Trading" with my strong recommendation that you read (or re-read) them and take everything in them to heart. - Chip John Murphy's Ten Laws of Technical Trading 1. Map the Trends Study long-term Read More 

ChartWatchers

THE SMOOTHER COUSINS OF THE MCCLELLAN OSCILLATOR REMAIN BULLISH

by Arthur Hill

Even though stocks are overextended after a massive seven week run, we have yet to seen any evidence of weakness that would signal the start of a correction or pullback. Many momentum oscillators are also at or near overbought levels, but cumulative indicators, such as the McClellan Summation Index, continue moving higher to capture the current uptrend. Think of the Summation Index as the smoother cousin of the McClellan Oscillator. Basically, the McClellan Oscillator equals the 19-day EMA of Net Advances less the 39-day EMA of Net Advances. Like MACD, it captures momentum by taking the Read More 

ChartWatchers

CHARTING PERCENTAGE ABOVE/BELOW A MOVING AVERAGE

by Chip Anderson

Hello Fellow ChartWatchers! (Here's an article I wrote back in 2007.  We've gotten several questions about this topic recently, so I thought I'd re-print this now.  Enjoy!  - Chip) Mary W. writes "I'd like to see how much above or below the 200-day moving average a stock currently is. Does your charting system show that?" While we don't have a specific indicator for "Percentage above/below the Moving Average", clever chartists that understand how the "Price Oscillator (PPO)" works can create such an indicator easily. The PPO is very similar to the well-known MACD Read More 

ChartWatchers

IS THIS RALLY SUSTAINABLE?

by Tom Bowley

Great question.  There are as many arguments saying "no" as there are those saying "yes".  Who do you believe?  In August, our major indices were tumbling and it seemed like every media outlet was touting our doom and gloom.  By the end of September, psychologically it seemed like a completely different market.  There are a ton of reasons to like the market to keep doing what it's been doing.  Price action has been superb.  The Moving Average Convergence Divergence (MACD) is based on price and the divergences are solid across all timeframes.  Those Read More 

ChartWatchers

CLOUDS ON THE HORIZON

by Richard Rhodes

The S&P 500 rally off the late-August lows continues apace, although it would appear that it is stalling and a correction at a minimum is warranted. There are many who point to the 200-day moving average breakout and the "head & shoulders" neckline being pierced to the upside as being sufficient to call for higher and higher targets - a new bull market in full bloom. However, while these are major technical pattern breakouts to be sure, but they come under less-than-ideal circumstances as they haven't been confirmed by the OBV "on-balance-volume". We would look to this indicator Read More 

ChartWatchers

RISK TOLERANCE STILL DOWN

by Carl Swenlin

According to the Investment Company Institute Annual Mutual Fund Shareholder Tracking Survey, shareholders' willingness to take "substantial or above average risk" has not recovered since the beginning of the financial crisis started in 2008. (Click here to read the entire article.) The chart below shows that there has been marginal recovery in two age groups, but overall risk tolerance is unchanged from last year, which was down from 2008. Source: ICI Annual Mutual Fund Shareholder Tracking Survey Faded risk tolerance, of course explains why mutual Read More 

ChartWatchers

OIL AND GASOLINE ETFs BREAK RESISTANCE

by Arthur Hill

Oil finally started making up for lost time. Despite strength in stocks and weakness in the Dollar throughout September, oil remained below its mid September high the latter part of the month. Broken support around 34 turned into resistance and was holding. Things suddenly changed as the USO Oil Fund (USO) broke out with the biggest weekly gain since March. USO also broke above the May trendline. Broken support and the August high combine to mark the next resistance zone around 37-38. The second chart shows the US Gasoline Fund (UGA) following oil higher with a breakout as well. Broken Read More