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December 2010

ChartWatchers

HOUSING INDEXES TURN UP

by John Murphy

We have written several messages of late about the recent upturn in financial stocks that had been lagging behind the rest of the market since the spring. I expressed the view that a sustained upturn in the stock market was unlikely without some help from the financial sector. Fortunately, financial stocks have finally turned up and have actually shown market leadership during December. Another market group that's been weighing on the overall market has been housing. And even that sector is beginning to show some improvement. The first three charts show three measures of the housing Read More 

ChartWatchers

MARKET POISED TO CORRECT

by Richard Rhodes

Happy Holidays!The recent rally off the late-August low has begun to encounter sluggish internals, which leads one to believe that the market shall be poised correct in the weeks and perhaps even months ahead. To this end, we should note the CBOE Volatility index or VIX has moved sharply lower back to levels previously consistent with trading highs in the S&P 500. Moreover, the 20-week stochastic is at oversold level further consistent with a turn higher as it eventually always does. This leads us to believe that a 200-week moving average mean reversion exercise can't be too far in Read More 

ChartWatchers

TRADING RESOLUTIONS FOR 2011

by Tom Bowley

It's hard to believe another year is coming to an end.  Outside of a few scary weeks, the stock market performed well in 2010 and heads toward 2011 with a lot of bullish momentum.  Complacency is a short-term issue that we dealt with last week and will continue to have to deal with in the near-term, but history is on the side of the bulls.  During the last 10 days of the year, the NASDAQ has produced annualized returns of 68.29% since 1971.  68% of the days that fall within this 10 day period have been higher over the last 40 years.  Those are compelling numbers Read More 

ChartWatchers

2010 WAS A GREAT YEAR TO BE A STOCKCHARTS MEMBER

by Chip Anderson

Hello Fellow ChartWatchers! Another year has come and gone.  It seems like only yesterday that we were celebrating the start of the decade (heck, it seems like only yesterday we were celebrating the start of the new millennium!) This year one of the things we focused on here at StockCharts we to increase the value of a StockCharts.com membership.  In order to see how we did, consider the following mythical subscriber, Fred. Fred is an average investor who trades several times a month, owns about 10 stocks/funds, tracks about 200 different charts, and enjoys seeing real-time Read More 

ChartWatchers

RISING RATES KEEP US DOLLAR STRONG

by Arthur Hill

The US Dollar Index ($USD) remains within a long-term trading range, but the swing within that range is up after the November breakout. More importantly, the breakout is holding and rising rates are boosting the greenback. The first chart shows the US Dollar Index with resistance in the 88-89 area and support in the 74-76 area. There are also three big swings on this chart marked by the blue trendlines. With the recent surge above 80, the index broke the June trendline to start an upswing within this trading range. The indicator window shows the Dollar and the 10-year Treasury Yield Read More 

ChartWatchers

WHEN WILL BONDS BOTTOM?

by Carl Swenlin

Bonds are in a "waterfall" decline, and some people are beginning to wonder where the bottom will be. A subscriber comments: "I'm always anxious to see the reaction time of the DP Trend Model as compared to what I look for in the momentum of the primary trend. You're doing a fine job with equities explaining what you see when you look at the other indicators and would love to see you give a little more attention to the bonds. I'd be able to follow what indicators you use to evaluate the oversold point in this waterfall. Yes, I'm aware of the falling knife adage and would not go long but Read More 

ChartWatchers

DIVERGENCES INDICATE SLOWING MOMENTUM IN LEADING SECTORS

by Tom Bowley

Complacency was the big issue for stock market bulls as we entered the second week of November.  The market simply ran too far too fast and everyone began piling in on the equity calls as if the buying would never end.  Well, guess what?  The buying ended!  The market topped on November 9th, while complacency (which I define by our proprietary relative complacency ratio) peaked on November 10th.  The warning signs began to mount on November 5th.  This usually sends us into our trading shell, risking very little in terms of capital.  Individual trades on Read More 

ChartWatchers

SECTOR ROTATION SHOWS BULLISH ENTHUSIASM

by John Murphy

A way to determine whether or not investors are turning more optimistic on the economy (and stock market) is to study the trend of recent sector rotations. In an improving economy, investors tend to favor economically-sensitive stock groups. In a weakening economy, they favor defensive stock groups. The charts below reflect a much more upbeat mood on the American economy.  The first chart shows relative strength lines for four economically-sensitive stock groups since midyear, and show all four groups rising faster than the S&P 500 (flat black line). In order of strength, they're Read More 

ChartWatchers

FINANCIALS AND BANKS TO BE A "SURPRISE PERFORMER"?

by Richard Rhodes

The past several day market rally has caught many "flat-footed" to be sure as traders head into year-end. Moreover, the prospects for further gains are rather high; hence we're likely to see many traders attempt to play "catch-up". This begs the question as to what sector may be one of the "surprise performers" and offer both absolute and relative performance. To us, the Financials and the Banks in particular are "under-loved" and quite "under-owned" - hence they fit the bill for those traders looking for leverage. Technically speaking, the Banking Index is on the precipice of Read More 

ChartWatchers

OEX PUT/CALL RATIO - WHAT'S GOING ON?

by Carl Swenlin

Last week some subscribers asked me what was going on with the OEX Put/Call Ratio. You can see on the 10-Day Moving Average chart that it took a sharp dive off the November price top. (Actually the ratio reading went higher, but we reverse the scale to make oversold readings visually more intuitive.) I verified that the data were correct, but I drew a blank as to why the indicator was behaving as it was. In fact, I don't follow put/call ratios closely because I find they are hard to interpret, so I had to let it simmer on the back burner for a few days until it came to me. Now Read More 

ChartWatchers

IDENTIFYING SPY SUPPORTS WITH INTRADAY P&F CHARTS

by Arthur Hill

Point & Figure produce straight-forward charts that focus exclusively on price action. Columns of X’s appear during an advance. Columns of O’s appear during a decline. Nothing appears when prices are flat or move less than the box size or reversal amount. Point & Figure charts are especially good for identifying support and resistance levels. The chart below shows a 30 minute S&P 500 ETF (SPY) Point & Figure chart**. Each box represents 50 cents and this is a normal 3 box reversal chart. This intraday chart goes back to mid September. The red A signals the start of Read More