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April 2011

ChartWatchers

TOP TEN THINGS YOU PROBABLY DIDN'T KNOW ABOUT STOCKCHARTS.COM

by Chip Anderson

Hello Fellow ChartWatchers! We get lots of great feedback from our users and I review much of it.  Over the years, certain patterns emerge from the messages we get.  Whenever possible we try to update our website to make things as easy to use as possible, but there are limits to what we can do.  Here's a list (in no particular order) of ten things that our customer support team wants everyone to know: 1.) We aren't for commodity traders -  Sorry, you'll need to go elsewhere for real-time, intraday commodity charts.  The commodity indexes that we have are Read More 

ChartWatchers

THE SECTOR ROTATION MODEL

by John Murphy

My Tuesday message talked about how sectors rotate near market tops. I explained that market leadership by materials and energy (which carries inflationary expectations) is often a sign of market that's in need of a correction or a consolidation. I also explained that money coming out of those two leading sectors usually rotates into defensive sectors like consumer staples and healthcare. Chart 1 is a visual representation of how that happens. The red line plots the stock market while the green line tracks the economy. Our main interest here is with sectors which are plotted along the top Read More 

ChartWatchers

USING THE PPO INDICATOR

by Tom Bowley

If you plot the Percentage Price Oscillator (PPO - 12,26,9) on an index or individual stock chart next to the MACD (12,26,9), you'll find that they appear to be identical.  Let's use Wynn Resorts (WYNN) as an example.  Below I show how both the PPO and MACD are calculated:  At first glance, both the MACD and PPO look the same.  The primary difference in these two indicators is that the MACD is based on the difference between the 12 day EMA and the 26 day EMA expressed in DOLLARS, while the PPO expresses this difference in PERCENTAGES.  It's impossible Read More 

ChartWatchers

GOLD STOCKS ETF (GDX) POISED FOR SHARP MOVE UP?

by Richard Rhodes

The recent gold price rally to new highs has paled in comparison with silver's seemingly parabolic move higher. While many "johnny come latelys" play in the silver pit, we are rather interested in the manner in which the Gold Stocks ETF (GDX) has performed relative to Gold itself. And we what we see is that GDX has lagged the gold rally badly. However, we believe this is about to change and perhaps on a very material manner. The GDX:GOLD ratio chart is very instructive, for this weekly chart shows a very well built and very bullish "pennant formation", which generally resolves itself in Read More 

ChartWatchers

AGING BULL

by Carl Swenlin

It is a rule-of-thumb that the average bull/bear cycle lasts about four years trough to trough -- 2.5 years of bull market followed by 1.5 years of bear market. Like most of these kinds of rules, it is good to keep them in mind, but don't try to set your watch by them. For example, the last bull market lasted five years, and the bear market that preceded it lasted two years. As it so happens, the last bear market lasted almost 18 months, which makes it fit the template almost exactly. That doesn't mean the current bull market will also come in on the average, but we must take Read More 

ChartWatchers

INFLATION-INDEXED BONDS AND GOLD SURGE

by Arthur Hill

The positive relationship between the Inflation Indexed Bond ETF (TIP) and the Gold SPDR (GLD) went through a rough patch in December-January, but got back on track the last two month. First, note that both remain in clear uptrends. The chart below shows TIP (red) and GLD (black) surging to new 52-week highs in October-November. Both then underwent corrections the next few months. GLD traced out a flat correction and bottomed in late January. TIP underwent a deep correction with a dip below its December low in mid February. Both resumed their positive relationship with a surge over the Read More 

ChartWatchers

INTERMARKET PICTURE POINTS TO CHANGE IN MARKET DIRECTIONS

by Chip Anderson

John Murphy has written extensively about Intermarket Analysis - the study of the key relationships between the four major financial markets and how those markets affect each other in the long run.  To study Intermarket relationships we use our Intermarket PerfChart that displays the percent performance of the major index for each of the four markets - $SPX for stocks, $CRB for commodities, $USB for bonds, and $USD for the US Dollar. According to John's book, the "Normal" relationships between the four financial markets are: Stocks vs. Bonds: POSITIVEStocks vs Read More 

ChartWatchers

BANK INDEX - THE "CANARY IN THE COAL MINE"?

by Richard Rhodes

Questions about regarding the quick/sharp rally off the March 16th low. They are numerous, and they consist of a number of troubling circumstances that call into question the veracity of the rally. One of the areas that is troublesome is the Banking Index ($BKX), for any rally worth its salt much have the banks/financials as a strong backdrop. Therefore, we must consider whether the BKX will prove to be the "canary in the coal mine" for impending broader market weakness, or whether BKX is simply lagging at this point and will play catch up and outperform. We view the former as the more Read More 

ChartWatchers

LONG-TERM TECHNICALS AND RISING PESSIMISM TRUMPS SHORT-TERM BREAKDOWN

by Tom Bowley

Let's face it.  Two weeks ago, the market looked cooked.  There didn't appear to be a single drop of gas left in the bulls' tank.  We saw impulsive selling.  The volume surged on the selling.  Daily charts had already printed long-term negative divergences across our major indices, indicative of slowing bullish momentum.  Then came the dreaded "death cross", with our shorter-term 20 day EMA crossing below the longer-term 50 day SMA.  There was little hope of a recovery.or was there?  Shortly after the last article, I hosted one of our Online Read More 

ChartWatchers

DOW TRANSPORTS SURGE TO NEW TO NEW 52-WEEK HIGH

by Arthur Hill

Despite relative weakness in airlines and $108 oil, the Dow Transports surged to a fresh 52-week high on Friday. The chart below shows the Average finding support around 4900 from late February to mid March and then surging around 10% the last 2-3 weeks. Admittedly, there is an outside chance that a broadening formation is taking shape, but the Average shows no signs of significant selling pressure at the moment. n the first indicator window, we see the Dow Transports relative to the Dow Industrials. This indicator is the Price Relative, which is a ratio chart of the two Averages Read More 

ChartWatchers

BOND YIELDS JUMP

by John Murphy

This morning's March jobs numbers reported U.S. payrolls jumping by 218,000 which was higher than estimates. In addition, the unemployment rate declined to a two-year low of 8.8%. The result is a jump in stock futures which points to a higher open today. Bond yields are also climbing on the jobs report. Chart 1 shows the 10-Year T-Note Yield hitting a one-month high after clearing its 50-day line earlier in the week. Rising bond yields are bad for bond prices (which trend in the opposite direction of yields) but are generally good for stocks. That's because rising bond yields are Read More 

ChartWatchers

GLOBAL MARKETS ENHANCE PERSPECTIVE

by Carl Swenlin

(This is an excerpt from Friday's blog for Decision Point subscribers.) If nature abhors a vacuum, technicians abhor "V" bottoms. Once prices bounced out of the March lows, the technical expectation was that, after a week or two of rally, prices would turn down again and the March lows would be retested. At this point, those expectations seem to be a fading dream. Looking at global markets we can see that "V" bottoms abound, and that in some cases the February highs have already been exceeded. There could be some doubt that the rally can be sustained, and that Read More