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January 2011

ChartWatchers

VIX STARTS TO BOUNCE

by John Murphy

Two Thursday's ago (January 6), I showed the CBOE Volatility (VIX) Index having reached a potential support level at last spring's low near 15, and warned that a bounce off that level could cause a stock market pullback. That's because the VIX and stocks usually trend in opposite directions as shown in Chart 1. The reason I'm coming back to the VIX today is because it's climbing 8% and beginning to look like it's short-term trend is turning up. Chart 2 shows the VIX action more closely. After bouncing twice off support near 15 since mid-December, the VIX is challenging its early January Read More 

ChartWatchers

WHY THE MARKET IS WRONG

by Carl Swenlin

In my business I am exposed to the writings of a lot of really smart people, and it is never hard to find a few who are trying to explain to us why the market is wrong. The market is wrong, of course, because it has blithely gone its merry way without any regard for the brilliant analysis, presented by the writers -- analysis that explains with exquisite detail and flawless logic why the market should be doing the exact opposite of what it is doing. Fundamental analysts are most prone to this kind of error -- writing reams of research, and then, by god, sticking to their guns as the Read More 

ChartWatchers

RALLY TIME!

by Richard Rhodes

The recent rally in the broader stock market has begun to correct; and it shall likely correct for the next several weeks. We view this decline much in the same manner as the Jan-2010 to early Feb-2010 decline, which the S&P lost roughly 106 points or nearly -10%. Certainly our momentum models are turning lower, and now we view the VIX as a confirming indicator that perhaps has higher prices in mind than anyone is prepared for at this juncture. But at this point, we view any decline in stocks as transitory prior to perhaps a larger high in the 2nd quarter. To Read More 

ChartWatchers

TRADERS ARE ALL IN

by Tom Bowley

Complacency in the market was setting records this past week.  The technicals?  They look great.  But can the market keep moving higher short -term when options traders are betting on it en masse?  Well, maybe, but if you enter stocks on the long side at this level, please understand the risk bar has been raised significantly.  Don't misunderstand my message.  I'm intermediate-term to long-term bullish and have been that way since shortly after the bottom formed in March 2009.  There have been short-term periods, however, when it's made sense to take a Read More 

ChartWatchers

DIA MOVE TO NEW HIGH WITHOUT SUPPORT CAST

by Arthur Hill

The Dow Industrials SPDR (DIA) led the market this week with a new 52-week high on Friday. Not bad considering the Russell 2000 ETF (IWM) suffered its biggest weekly loss since early August. Overall, the up trends for the major index ETFs remain in place as they recorded new 52-week highs this week. The Russell 2000 ETF (IWM), S&P 500 ETF (SPY), S&P MidCap 400 SPDR (MDY) and Nasdaq 100 ETF (QQQQ) recorded their new highs at the beginning of the week, but peaked on Wednesday and were down for the week. Led the strength in IBM on Wednesday on General Electric on Friday, DIA finished Read More 

ChartWatchers

RISING DOLLAR THREATENS GOLD UPTREND

by John Murphy

Tuesday's message wrote about an overbought condition in stocks and commodities, and showed gold in particular starting to roll over to the downside. Although some have questioned the viability of the dollar/commodity link, my view is that it's alive and well. Intermarket relationships aren't perfect and do get out of line on occasion. My experience, however, it that sooner or later they snap back into place. This may one of those times. Chart 1 shows the PS Dollar Bullish ETF (UUP) bouncing sharply this week (after bottoming in November). Gold is the market most sensitive to dollar Read More 

ChartWatchers

Financials: A Home Run, But Avoid The "Triple" Play

by Tom Bowley

Happy New Year!!! The financial sector looks superb as we bring in a new year.  I am of the opinion, at least based on current technicals, that 2011 will be a solid stock market year and financials will be a primary reason.  I'm looking for solid quarterly earnings reports from this group over the next few weeks - much better than expected and with guidance raised in many instances.  I've written articles in the past about the performance of financials and the relative performance of financials vs. the S&P 500, and how that correlates to overall stock market Read More 

ChartWatchers

Cons. Discrectionary/Retail In Decline?

by Richard Rhodes

As the 2011 trading year unfolds, it is rather clear that the consumer discretionary sector and retail in particular are showing a tendency towards declining rather than rallying with the overall broader market. This is change from the past 2-years, where the consumer discretionary names have out-performed rather than handily. Therefore, this interests us from a trading perspective, for although we may not want to outright short these names, then we certainly want to be under-weight them and/or short them versus another sector such as Energy.To this end, we've illustrated the S&P Read More 

ChartWatchers

NYSE Common Stock Only Indicators

by Carl Swenlin

QUESTION FROM READER: I’ve been noticing some anomalous behavior in the NYSE Advance-Decline data and other indicators based on NYSE data that does not match up with other measures of breadth.  I’ve read comments from other authors on numerous occasions that refer to the same problem and it seems to stem from the fact that a high percentage of the issues on NYSE are fixed income and closed end funds, not real equity issues.  Of late this has been, I believe, seriously skewing the data since stocks have been rising and fixed income is getting killed. This is Read More 

ChartWatchers

Technology SPDR Leads Sectors in 2011- Intel Lags

by Arthur Hill

Even though 2011 has just begun, there are clear leaders and laggards among the nine sectors. In particular, the technology sector is getting off to a great start. The Sector PerfChart shows the nine sector SPDRs and the S&P 500. The black dotted line marks the performance for the S&P 500 at 1.1%. Sectors extending above this line are outperforming. Those falling short are underperforming. Technology, healthcare and finance are outperforming so far in 2011. Consumer discretionary is up for the year, but underperforming the S&P 500. While it is quite positive to see relative Read More