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April 2012

ChartWatchers

DENSE GRID SETTINGS CONSIDERED HARMFUL

by Chip Anderson

Hello Fellow ChartWatchers! Spring has finally sprung here in the Pacific Northwest and we are very glad that it has.  I hope the weather is as nice where you are as it is here.  This edition of ChartWatchers contains some great articles - not all of them quite so sunny.  John Murphy points out that the sector rotation picture is changing and may have "regressed" somewhat in recent weeks.  Arthur Hill looks at the picture for Energy stocks, Carl Swenlin talks about the differences between SPY and $SPX, and Tom Bowley examines the influence that Market Makers have on Read More 

ChartWatchers

"THE TRADING JOURNAL" - SECTOR SUMMARY IMPROVEMENTS - PUBLIC CHARTLIST NOTIFICATIONS

by Chip Anderson

WELCOME GATIS ROZE AND "THE TRADING JOURNAL" BLOG - In case you missed it, we've added another great author to our collection.  Gatis Roze is not writing articles in our free Blogs area for "The Trading Journal" blog.  His first article, titled "Double Your Money - Buy on Rumors" was very well received and this latest effort, "Talk to Your EGO Before You Trade!", is also generating lots of buzz.  Be sure to check them out. OUR NEW SECTOR SUMMARY AREA CONTINUES TO IMPROVE - Our new Sector Summary area lets you drill down into the various sectors and Read More 

ChartWatchers

MARKET MAKERS SCORE AN EMPTY NET GOAL

by Tom Bowley

Once a month, the stock market provides us a unique opportunity.  In basketball terms, it's like the market makers have the ball with time running out in the quarter - or the game - and they nearly always bury that critical three-pointer.  For those more predisposed to hockey, think about the "empty net" goal to close out the game.  That's probably more fitting because the retail trader is mostly defenseless as the market puck sails into the net.Options expire the third Friday of every month.  It's a day of reckoning for options traders.  When the option trader Read More 

ChartWatchers

DEFENSIVE SECTOR ROTATION

by John Murphy

One of the ways to measure the mood of the stock market is to see what sector rotations are taking place beneath the surface. Chart 1 shows that sector rotations over the past month reflect a market mood that is turning more defensive. The four sector lines are plotted "relative" to the S&P 500 which is the flat black line. In other words, the four sector lines are relative strength ratios that measure their performance "relative" to the S&P 500. The blue line shows the Technology SPDR (XLK) leading the market higher since the beginning of the year. Technology leadership is a good Read More 

ChartWatchers

SPY VERSUS SPX

by Carl Swenlin

A subscriber brought something to my attention that I wish I had thought of before. We think (at least I did) that the SPY (ETF) and SPX (S&P 500 Index) perform pretty much the same except for some minor tracking error. However, this is not the case because the SPY historical data is adjusted for dividends, whereas the SPX is not. For all practical purposes, the SPY is a stock, and when the SPY pays a divdend, its historical data must be adjusted so that it maintains the correct relationship with the current dividend adjusted price. This happens on all stock, ETF, and mutual fund Read More 

ChartWatchers

ENERGY SECTOR IS THE WEAKEST OF THE NINE

by Arthur Hill

The Energy SPDR (XLE) broke key support in late March with a sharp decline and has yet to reach the next key support level. The chart below shows XLE consolidating in the 69 area over the last two weeks. This consolidation looks like a rest within the downtrend. A break below 68 would signal a continuation lower and target further weakness towards the next support zone in the 64 area. Support here stems from the lows in late November and mid December. Three indicators confirm relative weakness in XLE. The price relative, XLE:SPY ratio, has been trending lower the last six months and the Read More 

ChartWatchers

SPRING INTO SMALL CAPS

by Tom Bowley

I'm not quite sure why, but there definitely is a positive bias towards small cap stocks as we approach the Spring season.  April and May are the 2nd and 3rd best calendar months in terms of annualized returns on the Russell 2000.  Only December boasts a better monthly record since 1988.  Over the past five years, the absolute performance of the Russell 2000 during April and May are as follows:2011:  +0.6%2010:  -2.5%2009:  +18.6%2008:  +8.8%2007:  +5.8%2007 through 2011 has been a tumultuous period, but the action in small caps has been mostly Read More 

ChartWatchers

MIDCAPS STALL AT OLD HIGH - NYSE WEAKENS

by John Murphy

Although I generally look at the S&P 500 to get a feel for the market's trend, it's a good idea to see what other stock indexes are doing. Two of them are giving warning signals. Chart 1 shows the S&P 400 Mid Cap Index (MID) starting to meet resistance along its 2011 highs. That's a logical spot to expect some profit-taking to develop. Chart 2 shows the NYSE Composite Index which has also yet to clear its 2011 high. I suspect that's because of its heavier weight in commodity-related stocks which have been market laggards. Chart 2 shows the NYSE slipping below its 50-day average Read More 

ChartWatchers

4-YEAR CYCLE APPROACHING CREST?

by Carl Swenlin

We don't look at the 4-Year Cycle chart very often, but a subscriber's comments reminded me that now would be an excellent time to view the progress of this important cycle. On the chart below the vertical lines show the location of all nominal 4-Year Cycle troughs since 1948. The normal expectation is that the price index will arc from trough to trough, but sometimes other forces override normal cycle pressures, and the magnitude of price lows associated with the troughs are not always as pronounced as we would expect. To me, the most obvious feature on Read More 

ChartWatchers

ARE BATS REALTIME CHARTS RIGHT FOR YOU?

by Chip Anderson

Hello Fellow ChartWatchers! Having the right subscription level can save you a significant amount of money OR depending on how you use it, it can cost you a lot of money in the form of bad trades.  At StockCharts, we offer several different membership levels - Free, Basic, Extra, ExtraRT and PRO.  I want to make sure everyone knows the difference between those levels. Our ExtraRT and PRO services provide you with charts based on complete, realtime data from the NYSE, NASDAQ and TSX exchanges.  Unfortunately, those plans are also our most expensive - partly because those Read More 

ChartWatchers

Regional Banks and Housing Stocks Maintain Strong Correlation

by Arthur Hill

The Regional Bank SPDR (KRE)  and the Home Construction iShares (ITB) have led the market higher since October. ITB is up over 50% since early October and KRE is up over 40%. The chart below shows ITB in black and KRE in red. Notice how these two moved step-for-step over the last 18 months. Both peaked in January 2011 and then bottomed in early October. Both ETFs recently recorded new 52-week highs when they exceeded their 2011 highs in February and again in March. While the trend since October is clearly up, these two are overbought and ripe for some sort of corrective period, which Read More