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November 2012

ChartWatchers

SCANNING FOR DIVERGENCES

by Chip Anderson

Hello Fellow ChartWatchers! With the market fluctuating significantly right now, the ability to spot trend changes early is critical.  Here's an updated re-print of an article I wrote back in 2003 that is still very relevant almost 10 years later.  It's about using our Scan Engine to find divergences - situations where one stock is going up and another is going down (or vice versa).  Enjoy!  - Chip Scanning for Emerging Divergences One of the most important technical signals to watch for on any chart is a divergence. Simply stated, a divergence occurs when Read More 

ChartWatchers

GOLD RESUMING LONG-TERM UP TREND?

by Carl Swenlin

On the weekly chart below, we can see that, after making a new, all-time high back in August of 2011, gold went into a correction/consolidation mode, ultimately forming a descending triangle. While this formation suggests lower prices (the flat line is the weakest), price broke up through the top of the triangle. After a breakout the technical expectation is for price to pull back toward the line, which it did enthusiastically. After testing that support, price has reversed upward, and this week made a strong move upward, signalling that the rally that began this summer is probably Read More 

ChartWatchers

CHANGE CAN BE GOOD

by Greg Schnell

Overall, the world couldn't be more of a sovereign wild card. But at its weakest point, sometimes the strongest investment time is at the point of most change. While I don't forecast a quick turn, what can each investor watch for to see a global improvement? I'd like to propose the following chart could really help us.The USA just elected a president. China just elected a new leader. Europe appointed a new ECB chairman.   Japan has an election coming soon with a new leader trying to push for a plunge in the Yen.  That is usually bullish for the stocks there. Germany and Read More 

ChartWatchers

RYDEX CASH FLOW SHOWS TIMID BEARS

by Carl Swenlin

The Rydex Cash Flow Ratio gives a view of sentiment extremes by using cumulative cash flow (CCFL) into Rydex mutual funds. It is calculated by dividing Money Market plus Bear Funds CCFL by Bull Funds plus Sector Funds CCFL. (To read more click here.) While the Ratio shows that Rydex investors are becoming more cautious, deeper analysis of CCFL components shows that the bears are still reluctant to engage. The following chart of the Ratio shows that sentiment has been becoming less bullish, and the Ratio has reached a level that marked an important market bottom in June Read More 

ChartWatchers

ARE CONSUMER DISCRETIONARY STOCKS ABOUT TO CLIFF DIVE?

by Richard Rhodes

There is quite a bit of newsprint lately regarding the US "fiscal cliff"; and the impact of whether it goes through or not. Regardless or not of whether it is extended or not, we think it instructive to analyze the consumer discretionary stocks as they will be inordinately impacted. First, let us state that since the 2009 bottom, consumer discretionary stocks have rallied rather strongly through the halcyon days of the mortgage "cash out" period in which money were flowing towards all sorts of goodies. Thus, we were rather surprised at the veracity of this rally given the end of the Read More 

ChartWatchers

SHORT-TERM "TECHNICAL CLIFF"

by Tom Bowley

All the recent talk has centered around the effect of a potential fiscal cliff.  While we may or may not be subject to a fiscal cliff, each and every one of us has been subject to the recent technical cliff, especially the one since election day.  Things have gone from bad to worse in the past couple weeks.  We did see a series of potential reversing candlesticks print on Friday across our major indices, sectors, industry groups and leading individual stocks, however.  Will that be enough to turn the table on the bears?  Or will this simply turn out to be a Read More 

ChartWatchers

Healthcare SPDR Hits Support Zone

by Arthur Hill

All sectors are down over the last two months, but some are down less than others. Of the nine sector SPDRs, the Consumer Staples SPDR (XLP) and the Healthcare SPDR (XLV) are holding up the best. Relative strength in these two defensive sectors confirms that the market is currently in risk-averse mode. The chart below shows the Healthcare SPDR declining the last five weeks with a falling channel. This channel defines the downtrend and prices need to break the channel to reverse the downtrend. Even though we have yet to see a reversal, there are signs of support as the ETF nears the August Read More 

ChartWatchers

A Bearish Bullish Percent Index

by Chip Anderson

Hello Fellow ChartWatchers! It's a question I get everywhere I go.  After every talk I give, someone comes up and asks "What's the one market indicator I should watch to see where things are headed?"  Many years ago that question gave me fits.  In my brain I'd immediately have 1,000 thoughts:  "There are so many indicators to choose from" and "Each indicator is interpreted differently" and "What if there are conflicting signals?" and "What if the NYSE changes its membership?" and  You get the picture.  Needless to say, the answer that came out of my mouth Read More 

ChartWatchers

IS IT TIME TO RE-ENTER GOLD?

by Tom Bowley

One month ago, I discussed the increased risk of holding gold as key price resistance was being tested with a long-term negative divergence on the MACD present.  That was a sign of slowing momentum and that, combined with price resistance, simply tells us to grab profits and respect the resistance - at least until gold makes the breakout.  Well, the breakout was never made.  In fact, take a look at the following two charts.   The first chart is how gold looked one month ago:   Now let's fast forward to show that resistance did, in Read More 

ChartWatchers

 LUMBER NEARS MAJOR UPSIDE BREAKOUT

by John Murphy

Lumber prices surged Wednesday after the devastation on the east coast. [I live in New Jersey which was hit especially hard]. There's a lot of rebuilding that's going to be needed as a result And that's going to require a lot of lumber. Lumber has in fact been rising over the last year as the housing industry has recovered. The chart below shows a positive correlation between the price of lumber and Dow Jones Home Construction iShares (green area) over the last four years. The homebuilding index bottomed last October and has since risen to the highest level in four years. That also began Read More 

ChartWatchers

Russell 2000 Gets Cold Feet at Channel Resistance

by Arthur Hill

Stocks surged on Thursday and even followed through on Friday morning, but strength did not last long as selling pressure kicked in after the initial pop. Perhaps some pre-election jitters produced this classic pop and drop. Whatever the case, the Russell 2000 hit stiff resistance near its channel trend line and remains in a short-term downtrend. The chart below shows the index zigzagging lower since mid September. $RUT found support at the 200-day moving average and the late August consolidation (yellow area). Thursday’s surge off support was impressive, but follow through is what Read More