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April 2013

ChartWatchers

Trading Using A Black Belt

by Greg Schnell

One of the hardest trades to make is the one you don't put on. Just sit. The martial arts practice Defence and Offence.The 40 WMA (Weekly Moving Average) is roughly equivalent to the 200 DMA (Daily).  Lets call it the Black belt for today.  Many technicians employ a simple strategy of the price action being above or below the 40 WMA. If it is above they are bullish and below they are bearish.Depending on your investment strategy depends on how short or how long the timeline is for your long term MA.John Murphy reviewed 2008 and remarked that the $SPX never spent 1 day above the Read More 

ChartWatchers

Copper Plunges To 18-Month Low-- FCX Tumbles With It

by John Murphy

Of all the commodity markets, copper is viewed as the most closely aligned with trends in the global economy. Copper and other commodities have been lagging behind global stocks over the past year (largely owing to a stronger dollar and weakness in Chinese stocks). This week's plunge in copper, however, finally caught the world's attention, and not in a good way. Chart 1 shows the price of spot copper plunging this week to the lowest level since October 2011. It had already fallen below the lower line of a long-term "symmetrical triangle" which signaled that its trend was weakening. One Read More 

ChartWatchers

VIX Soars But Remains Postured in Downtrend

by Tom Bowley

At its highest level last week (Thursday afternoon), the VIX was up 50% from its prior Friday close.  That's a HUGE spike in volatility.   Volatility, as measured by the CBOE Volatility Index (VIX), provides us a gauge of fear in the stock market.  The VIX measures the market's expectation of stock market volatility over the next month.  It represents a weighted blend of prices for a range of options on the S&P 500 index.  As the market begins to price in higher volatility, premiums on S&P 500 options rise.  Theoretically, as S&P 500 prices show Read More 

ChartWatchers

Swinging from the Chandeliers

by Chip Anderson

Hello Fellow ChartWatchers! I'm very happy to announce that we've just added a new overlay to our system - the Chandelier Exit.  This overlay is a favorite of our good friend Dr. Alexander Elder.  He discusses it extensively in his books.  It is a trailing stop overlay meaning that it tries to determine a good price level for exiting an existing position.  In that regard, it is similar to Welles Wilder's Parabolic SAR overlay.  Here's what it looks like in action: Notice that the red line on this chart could have been used effectively as a trailing Read More 

ChartWatchers

A Technical View for Gold

by Carl Swenlin

In the last few weeks gold has experienced a major breakdown, and, of course, there are many opinions as to what will happen next. Let's take a broad look at the technicals, so that we have some context for making decisions. The daily chart shows the critical break below long-term support at about 1540. The bounce off the low is unlikely to be the beginning of a new rally, rather we think it is a short-term consolidation, like a reverse flag or pennant. The weekly chart gives the best view of the trading range that has kept prices contained for over a year and a half. We Read More 

ChartWatchers

Sharp Correction Ahead for Crude Oil?

by Richard Rhodes

Our attention has turned to the crude oil market, where a rather large "head & shoulders" top pattern is in development. The focus is upon how prices challenge and hold the 300-week moving average, and if notwhether neckline support is violated. A breakdown of these levels would lead to a virtual free-fall in prices towards the $51 target level. Of course we are ones to wonder what the world economy and the world's stock markets would look like under such a scenario. If past is prelude, then we should expect a rather nasty correctionand it very well may be quick and sharp Read More 

ChartWatchers

Strength in Treasury Bonds could Haunt the Stock Market

by Arthur Hill

The 7-10 YR Treasury Bond ETF (IEF) is challenging resistance and a breakout would have negative consequences for stocks. Stocks and Treasury bonds are negatively correlated because they march to the beat of different drummers. Treasury bonds move higher because of deflationary pressures, signs of economic weakness or both. We could be getting a little of both recently. Gold, oil and copper fell sharply in April and this is more deflationary than inflationary. Economic reports have been soft over the last few weeks and first quarter earnings have largely disappointed. After earnings Read More 

ChartWatchers

Earnings Season Brings New Opportunities

by Tom Bowley

This is my favorite time of the quarter.  Being a "technifundamentalist", I like finding companies that look solid both technically and fundamentally and concentrate my trading efforts there.  For me, it all begins with volume.  If a company reports earnings and receives a ho-hum response in terms of volume, I'm not interested.  High volume is still a necessity during any "accumulation phase".  Therefore, consider narrowing your trading choices down to stocks that report earnings and produce extremely heavy volume that accompanies a surge higher.  A maribozu Read More 

ChartWatchers

Upgrades Galore: Stocks & Commodities Articles, Economic Data, UDI for Extra Members

by Chip Anderson

Hello Fellow ChartWatchers! StockCharts continues to grow and expand, providing more value for its users (hey! that's you!) for free.  Here are three great improvements we rolled out last week: 1.) Stocks & Commodities Articles for StockCharts Members Our "Search" feature now automatically includes results from the complete archives of Stocks & Commodities magazine.  Members can click on any of those results to see a PDF version of the article in question.  Some of these go back as far as 1982! In addition, members can now click on the "Stocks & Read More 

ChartWatchers

Weak Commodities Hurt Producers

by John Murphy

This is the same headline used in my March 21 message which showed how falling commodities were hurting stocks of countries that produced commodities. A rising dollar causes foreign stocks to underperform U.S. stocks, which has been the case since the dollar bottomed during 2008. A rising dollar hurts commodity prices. As a result, foreign countries that produce and export commodities take a double hit. The March 21 message showed the close positive correlation between commodity prices and Brazil and Canada. Today, I'm adding Russia to the mix. Chart 1 compares the trend in the CRB Index Read More 

ChartWatchers

Made in Manhattan

by Richard Rhodes

April has not thus far been very kind to the economic bulls. The various world and US PMI reports have been "less-than-anticipated", while employment is showing weaker-than-expected figures via the weekly jobless claims, ADP private payroll and non-farm payrolls. This economic deceleration is simply part and parcel of the lagged effects of the payroll tax and the sequester. Moreover, this weakness has pushed down  10-year yields down to 1.69% from its recent highs of 2.06%, a rather large percentage move to be sure, and not far off the lows at 1.394%. Ultimately, 10-year note yields Read More 

ChartWatchers

Same Planet, Two Different Markets

by Greg Schnell

We have a few wonderful indicators we can use to judge the overall health of the market. The problem for the technician is when to say, "I'm Out!"Lets compare the $TSX to the $SPX using these two charts to analyze the broader picture. Here are the links. $TSX, $SPX The blue vertical lines are placed when the index fell below the 10 week or approximately the 50 DMA line.  The $TSX looks like it is ready to breakdown here, with the exception of the stocks above the 200 DMA.   That still looks strong as does the Bullish percent. But both are at levels Read More 

ChartWatchers

DIA Tests Support as Directional Indicators Converge

by Arthur Hill

The Directional Movement Indicators have equalized as trading turns flat for the Dow SPDR (DIA), but the overall trend remains up as the ETF tests its first support zone. Let's look at support first. DIA hit 144 on March 11th and then traded flat the last few weeks with several crosses of this level. DIA dipped to 144.05 in early trading on Friday, but rallied after the weak open and closed above 145. Support in the 144 area extends from the mid March consolidation. A move below the consolidation lows would break support and argue for a deeper correction, perhaps to the 138-140 Read More 

ChartWatchers

Gold Mining Stocks Still Negative

by Carl Swenlin

While gold is still maintaining a long-term consolidation, gold mining stocks have signalled still lower prices to come. A quick look at the weekly gold chart shows that the metal is holding above a line of support that goes back over a year. In contrast, the XAU (gold mining stocks) has formed a bearish head and shoulders pattern, which executed when price dropped below the neckline earlier this year. We can see that the breakdown was followed by a brief snapback before the decline continued. At this point the minimum downside target would be the support line drawn from Read More