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January 2012

ChartWatchers

COMPLACENCY SCREAMS "GET OUT" SHORT-TERM

by Tom Bowley

Ok, I'll admit I'm being a little dramatic.  But everyone should know how I feel about my favorite sentiment indicator - Relative Complacency/Pessimism.  One month ago as the market was dropping, I wrote about how relative pessimism was building and how that could limit the downside action.  Well, today the reverse is true.  On Thursday, we printed .48 on the equity only put call ratio (EOPCR), the lowest reading in nearly one year.  I don't grow too concerned by one day's swing towards call buying, however.  I get concerned when it continues to happen and Read More 

ChartWatchers

DIGGING DEEPER INTO ELDER'S IMPULSE SYSTEM

by Chip Anderson

Hello Fellow ChartWatchers! Early last year, we added Dr. Alexander Elder's Impulse System to our SharpCharts charting package and it has proven to be quite popular.  This is the system that colors the price bars red, green or blue depending on two criteria that Elder feels are very important: 1.) Is the 13-day exponential moving average moving higher or lower? 2.) Is the MACD Histogram moving higher or lower? If both of those conditions are true, the corresponding price bar is colored green (indicating bullishness).  If both of those conditions are false, the Read More 

ChartWatchers

S&P 500 AND NASDAQ CLEAR FOURTH QUARTER RESISTANCE

by John Murphy

The U.S. stock market continues to lead the rest of the world higher. Charts 1 and 2 show the S&P 500 and Nasdaq Composite Indexes clearing their fourth quarter highs, which puts them in position to challenge the highs formed last summer and spring. The S&P is also clearing a eight-month down trendline (see circle). The fact that both indexes have been able to rise in the face of a rising dollar (falling Euro) is also impressive (see gray area in Figure 1). That raises a number of intermarket possibilities. One is that the market's "inverse" relationship to the dollar is changing Read More 

ChartWatchers

METALS STILL BULLISH

by Richard Rhodes

Since the beginning of the year, we've seen both Gold ($GOLD) and her sister metal Silver ($SILVER) rally; but we've seen Gold under-perform during this rally. This is exactly what should take place in a metals bull market. But that said, the Gold/Silver Ratio remains at a very critical area in our opinion, for up to this point - it has tested its overhead 600-day moving average and turned lower. Again, this supports a metals bull market, for silver is the leader; and history bears this out. But what if this changes,? Rightly or wrongly, we are concerned about whether this is simply a Read More 

ChartWatchers

HOUSING RECOVERY?

by Carl Swenlin

The market rally on Wednesday was driven in part by a surge in housing stocks, which was triggered by a favorable housing report. Since the fundamentals of the housing market are not too thrilling, regardless of short-term gains, my curiosity was piqued and I pulled up some charts. The daily chart of the Dow Jones US Home Construction Index, which is one of a set of 100 Dow Jones US sector indexes we track, shows that Wednesday's rally was a small extension of a +78% up move that began after the Index hit rock bottom in October 2011. This is good but how does this rally present in a Read More 

ChartWatchers

Treasury Yields Surge ahead of Fed Meeting

by Arthur Hill

The FOMC meets next Tuesday-Wednesday and will make its policy statement Wednesday afternoon. With stocks surging and recent economic reports buoyant, the bond market may be looking ahead to this meeting with trepidation.  The first chart shows the 10-year Treasury Yield ($TNX) rising sharply the last three day. Treasury bonds rise when treasury yields falls.  Overall, the chart shows $TNX forming a trough at 1.7% (17) in late September and surging in October, which is when the stock market surged. Note that long-term treasury yields and the stock market were positively Read More 

ChartWatchers

NASDAQ INDEXES TEST OVERHEAD RESISTANCE

by John Murphy

The Dow Industrials and S&P 500 indexes have already cleared overhead resistance barriers. The Nasdaq market may be next. Chart 1 shows the Nasdaq Composite Index trying to close above its 200-day moving average. That would be a positive development for it and the rest of the market. Chart 2 shows the PowerShares QQQ Trust (QQQ) challenging its early December intra-day peak at 57.45. The Nasdaq market has underperformed the rest of market since October as reflected in their falling relative strength ratios (below charts). The market usually does better when the Nasdaq is in a Read More 

ChartWatchers

DOWNSIDE VIOLENCE IN THE GOLD MARKET

by Richard Rhodes

The downside violence in the Gold market as abated for the the time being given the reallocation and repositioning for the New Year. There are many the recent drop is sufficiently of the cathartic-type that will send prices to all-time highs, for we all know that "all the current roads lead to inflation - at some point" as the worlds' central bankers continue to print money. However, we are of the opinion that gold prices have further downside work to do before a strong bottom is formed that will indeed be sufficient for higher highs. Our opinion stems from the gold chart, and the fact Read More 

ChartWatchers

VOLATILITY HITS SUPPORT WHILE THE S&P 500 AND BANKS HIT RESISTANCE

by Tom Bowley

High volatility is generally associated with declining equity prices.  The inverse is true as a declining level of volatility emboldens the bulls.  Therefore, I follow the VIX continually to get a sense of DIRECTION.  Clearly, the volatility index (VIX) has been trending lower over the past few months.  So it should come as no shock that the fourth quarter of 2011 produced the best quarterly results on the Dow Jones in more than a decade.  But one week into 2012, the VIX is hitting support.  Check out the chart below: A rising VIX is bad news for bulls.  Read More 

ChartWatchers

A TIMELY BOUNCE FOR GOLD

by Carl Swenlin

After reaching an all-time high in August, gold has corrected about -18%, but a recent bounce prompts us to take a closer look to see if the correction could be over. The most encouraging technical evidence is on the weekly chart. Note how the recent low occurred just above the long-term rising trend line. From the beginning of the correction I thought that this trend line was a logical downside target. Whether or not the bounce off this line is the beginning of a new up leg destined to take out the August highs, has yet to be determined. The fact that the support Read More 

ChartWatchers

NEW eBOOK FROM ALEXANDER ELDER, EUROPEAN COVERAGE ENDING MARCH 1st

by Chip Anderson

NEW eBOOK FROM ALEXANDER ELDER AVAILABLE EXCLUSIVELY FOR STOCKCHARTS USERS - Dr. Alexander Elder has just published a new eBook called "To Trade or Not to Trade, A Beginner's Guide".  It is now available for instant download in the StockCharts Store for only $8.00.  This version contains information that is specific to the use of StockCharts.com and is only available here.  Dr. Elder has written several classic books on how to trade succesfully including Come Into My Trading Room and Trading for a Living.  This latest eBook can help anyone become a better trader and Read More 

ChartWatchers

SECTOR ROTATION REVIEW 2011

by Chip Anderson

Hello Fellow ChartWatchers! Happy 2012!  During his ChartCon 2011 presentation on Intermarket Analysis, John Murphy presented a great chart showing the state of Sam Stovall's Sector Rotation model as of July 2011.  Let's take an interactive look at how things have changed since that time. First off, a quick review:  Stovall's model says that the stock market tries to anticipate the business cycle which results in certain sectors outperforming the market at different points of that cycle.  By reversing that process, we can determine where we are in the two cycles by Read More 

ChartWatchers

QQQ Starts the Year Showing Relative Strength

by Arthur Hill

The Nasdaq 100 ETF (QQQ) is showing relative strength this year with a triangle breakout and surge above its early December high. On the daily candlestick chart below, QQQ surged in October and then consolidated in November-December. This consolidation started wide in November and then narrowed in December as a lower high and higher low formed. This year’s triangle breakout signals a continuation of the October surge with the 2011 highs in the 59-59.5 area marking the next resistance zone. The gap and the lower trendline of the triangle mark support in the 55-55.5 area. Read More