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July 2011

ChartWatchers

WILL RISING COMMODITIES BOOST STOCKS?

by John Murphy

The positive link between stocks and commodities doesn't always exist as shown in Chart 1. There have been periods in the past when they've trended in opposite directions like the second half of 2006 (see box). Stocks also have a history of peaking before commodities. Chart 1, for example, shows commodities rallying throughout the first half of 2008 as stocks started to tumble. Commodities eventually peaked in the middle of 2008. Since then, however, stocks and commodities have been closely linked. That's been especially true since the spring of 2009 when both bottomed together (see Read More 

ChartWatchers

MAJOR INDICATORS FLASHING "CAUTION" FOR RUSSELL 2000

by Richard Rhodes

At times, it is best to step back and take a longer-term viewpoint of the markets; and today we'll examine the Russell 2000 Small Caps (RUT). Quite simply, RUT has having difficulty moving past its all-time highs forged in October 2007; and in the process - have caused the major indicators to flash "caution" as the 9-month RSI hit above the 70-level, while the distance above the 30-month moving average rose to above 20%. In the past, these types of indicator readings have allowed for "mean reversion" lower processes to take place back to the 30-month moving average, while the RSI trades Read More 

ChartWatchers

BULL MARKET HAS WEAK LEADERSHIP

by Carl Swenlin

While this bull market has rallied +105% from the 2009 low (basis the S&P 500), I have had a sense that there was something "squishy" about it. One thing was the absence of convincing volume, something analysts have been complaining about since the bull market began. Recently, when looking at our Blue Chip 152 Top 10 Index, I found some surprising evidence of just how dysfunctional this bull has been. The Blue Chip 152 is a list of stocks that includes the stocks in the S&P 100, the Dow 65, and some Nasdaq favorites. Some years ago I got the idea to track the top 10 relative Read More 

ChartWatchers

FUTURES SO BRIGHT, YOU GOTTA WEAR SHADES!

by Chip Anderson

Hello Fellow ChartWatchers! Today I'm pleased to announce another major upgrade to StockCharts.com.  We've just added end-of-day data for US futures contracts as well as end-of-day spot prices to our system.  The data is available for free to everyone.  When you combine that with our recent addition of London, Euronext, and German stock data, you'll discover that over the course of the past two months, we added over 2,500 new, free symbols to our database - the largest expansion we've ever had (and we're still not done)  Here are more details on each of these two Read More 

ChartWatchers

MACD DIVERGENCES

by Tom Bowley

Gerald Appel created the MACD in the late 1970s. It's a momentum oscillator that serves to gauge the strength and direction of a trend, but what I find most useful is its ability to predict a reversal. If you like to short weak stocks, I can't blame you. Beware, however, the long-term positive divergence on the MACD when it appears. Before I provide a couple examples of how the MACD predicts reversals, let me briefly explain how the MACD is calculated. I'm a numbers geek, so I NEVER blindly follow an indicator. I need to know how an indicator is calculated and why it works. Then I have to Read More 

ChartWatchers

TA 101 RETURNS (FINALLY!) - PART 17

by Chip Anderson

Many months ago, we began a series of articles that we called "TA 101."  The articles covered the basics of stock charting.  The most recent article in the series was published in January of 2010.  (If you have time on this long holiday weekend, I strongly urge you to read the entire series.  Here's a link to all the articles - just scroll to the bottom to find the first one.)  Well after much delay, here's the next article in the series!  - Chip Comparison Charting Comparison charting allows the analyst to study individual price Read More 

ChartWatchers

QUESTION ABOUT DISTRIBUTIONS AND THE TREND MODEL

by Carl Swenlin

QUESTION: Carl, is it okay to use the Trend Model on bond fund NAV's to manage risk, or is it inappropriate because you can't factor in monthly payouts? I own PTSAX, Bill Gross' total return investor class bond fund, and it looks like the 20-EMA is ready to cross down through the 50-EMA. I don't want to sell it if I can help, but I will if I have to. Gross is probably the best out there but the fund has been seeing some noticeable weakness of late. ANSWER:  Distributions occur with stocks and mutual funds, and it is important for investors to understand what they are and how they Read More 

ChartWatchers

FALLING DOLLAR BOOSTS COMMODITIES

by John Murphy

It was a good week for commodities and an even better week for stocks. But it all started with the dollar. We explained earlier in the week that the Dollar Index (UUP) appeared to be in a bearish consolidation pattern within a major downtrend. That view favored a lower greenback and higher foreign currencies (along with higher commodities). Chart 1 shows the UUP ending the week on the downside. Dollar selling came just in time for commodities. Chart 2 shows the DB Commodities Tracking Fund (DBC) bouncing off its 200-day moving average from an oversold condition. The commodity gains would Read More 

ChartWatchers

DON'T GOT TO WAR WITH WALL STREET WITH A WATER PISTOL

by Tom Bowley

I was certainly looking for a bounce last week, but if I'm being honest, I wasn't looking for THAT kind of bounce.  Our major indices all gained over 5% in just one week.  That's not a bad return for a YEAR!!! There were definitely signs of a bounce on the horizon.  We approached or tested critical price support on the S&P 500, NASDAQ and Russell 2000 at a time when pessimism - as I measure it - was OFF THE CHARTS!  I favored shorts in the first half of June, but it became clear to me that the risk of being on the short side simply became too great. When Read More