ChartWatchers Newsletter logo

September 2015

ChartWatchers

Ascending Triangle (Bullish) or Ascending Wedge (Very Not Bullish)?

by Chip Anderson

Hello Fellow ChartWatchers! The Fed's announcement on Thursday was the big news of the week both fundamentally and technically.  Prior to the announcement, stocks had moved up nicely.  After the announcement, those gains were all given back and then some.  It was a pivotal moment.  In a flash, a promising bullish pattern turned into a very bearish pattern.  But before I can show you exactly what I mean, we need to have a quick review of some common chart patterns. When two groups of people can't agree on the proper price for a stock, prices oscillate between two Read More 

ChartWatchers

What's the Difference Between a Correction and a Bear

by John Murphy

My September 2 message addressed the question about whether the market is in a normal correction or something more serious. We'll find out soon enough. I've leaned toward the correction view (a drop of 10-15%), but a lot of longer-term indicators suggest a more serious decline (20% or more). The only way we'll know for sure is whether or not previous support levels hold. The daily bars in Chart 1 put the recent stock rebound in better perspective. Thursday's downside reversal day in the S&P 500 took place just shy of the 62% retracement line. (The Dow bounce ended closer to the 50% Read More 

ChartWatchers

Strong Earnings Matter in Volatile Market

by John Hopkins

To say the past three weeks have been wild would be a major understatement. For example, the S&P lost 11% of its value in just 4 trading days ending in the most recent low of 1867 on August 24. Then it gained over 8% from that August 24 low to Thursday's high of 2020 after the knee jerk reaction to the Fed's decision to stay pat on rates. Then the S&P fell almost 3% from its peak on Thursday to its low on Friday, after traders had some time to contemplate the Fed's decision. That qualifies as a wild ride! All of this volatility got me wondering how stocks Read More 

ChartWatchers

3 Reasons To Watch Commodities For A Rally Here

by Greg Schnell

When I wrote the title for the article, I started with "3 Reasons To Watch Commodities Now" and realized most people would add "Go Down, Go Down More, And Go Down A Lot More" on to the end. So I amended the title. How crazy is it to expect commodities to rally here? Well, one of the nice things about commodities is they can rally in the face of a weak market so you can find something going up.   The $USD closed Friday at the same level it was at in Mid January so the dialogue of the recent strength in the $USD by the Fed is confusing. Looking at the chart tells us Read More 

ChartWatchers

Battle of the Wedges - Stocks Versus Bonds

by Arthur Hill

The S&P 500 SPDR (SPY) and the 7-10 YR T-Bond ETF (IEF) are going their separate ways as opposing wedges takes shape and IEF outperforms SPY (bonds outperform stocks). First, note that I am using close-only price charts to filter out some of the noise few weeks. This includes the ridiculous spike low on August 24th in several ETFs, the pop-and-drop on September 9th in SPY and the Fed-induced volatility on September 17th. Instead of intraday noise, I prefer to focus on closing prices and the overall trends at work.  Let's start out with bonds using the 7-10 YR T-Bond ETF (IEF) as Read More 

ChartWatchers

The Best Of The NASDAQ 100 Awards

by Tom Bowley

As we approach the end of the third quarter in 2015, it's time to unveil a few "Best Of" awards as they pertain to the NASDAQ 100.  Let's get this party started: Best Buy & Hold Google (GOOGL).  The long-term chart speaks for itself.  You do have to deal with some volatility here.  If you're not sure what I'm referring to, I'll simply point you to 2008.  The bear market was devastating, but nearly all the losses were gone by the end of 2009.  After a stellar 2013 and early 2014, GOOGL paused for more than a year before recently turning higher on Read More 

ChartWatchers

China Long-Term SELL Signal--Kinda Late

by Carl Swenlin

This week the DecisionPoint Long-Term Trend Model generated a long-term SELL signal for $DJCHINA, but it was a tad late, considering how far that index has fallen. This chart provides us with a good example of when mechanical signals need to be ignored. In this particular case, $DJCHINA experienced a parabolic rise that ended in June. This rapid price rise caused the moving averages to spread abnormally far apart, so that, when price reversed downward, crossover signals were delayed beyond any usefulness. For example, when the 50EMA crossed down through the 200EMA generating Read More 

ChartWatchers

August 25th - the Birth of a New Market?

by Chip Anderson

Hello Fellow ChartWatchers! We have lots to talk about since our last newsletter!   For those of you who have been watching the "ChartWatchers LIVE" webinar, you know that for almost three months prior to the recent market collapse on August 19th, we had been expressing concerns over the market's slowing momentum and weakening breadth statistics.  Well, clearly, the collapse that occurred during the 19th thru the 24th was the "big change" that those indicators were pointing to.  The question since then has been and continues to be "Now what?" Read More 

ChartWatchers

NYSE Percent of Stocks Above 200-Day Average Stabilizes

by John Murphy

One of the warnings that I wrote about over the summer was the drop in the percent of NYSE stocks trading over their 200-day average. I pointed out over the summer (before the August plunge) that a stock market couldn't maintain an uptrend while two-thirds of its stocks were in downtrends (below their 200-day lines). Chart 1 is an updated version of those earlier charts, and carries good and bad news. First the good news. The red line has fallen below 20% which puts it in a major oversold condition. This is a logical spot for it to attempt a bottom. The bad news is that the red line is Read More 

ChartWatchers

It's True...The Only Thing We Have to Fear is Fear Itself

by John Hopkins

We've all heard that famous quote from Franklin D. Roosevelt in his first inaugural address. It's a saying that has had staying power for over 80 years. And it's something that rings true today in the current and volatile market environment. It starts with the VIX which hit a level on August 24 that had not been seen since March, 2009, when the market was in tatters and bottomed. And even before that the VIX had skyrocketed to an historical high that might never be seen again. Whether or not this recent fear is warranted hardly matters. It is what it is. But it's Read More 

ChartWatchers

Japan Succumbs To Global Weakness ($NIKK)

by Greg Schnell

One of the areas I like to watch is the global arena. When the markets around the world are breaking down it can be a good warning signal for the US markets. Obviously, the big drop from the parabolic rise of the Shanghai market has been a concern globally. But I also like to watch Japan. As the third largest economy in the world and a highest level of debt to GDP, I like to keep an eye on this market. Currently the government program of Abenomics has involved a massive Quantitative Easing package. While this package usually attracts investors to the Japanese market, the dropping Read More 

ChartWatchers

This Bearish Story Might Be Fiction

by Tom Bowley

There are plenty of technical analysts calling for the beginning of a bear market after the past couple weeks of heavy volume selling.  I'm certainly open to that possibility as I always respect price support breakdowns with accelerating volume.  But the story behind the scenes isn't making a lot of sense and doesn't support that line of thinking.  Typically, we see money flow away from aggressive sectors on a relative basis (vs. the benchmark S&P 500) before the plunge begins.  The weakness recently, however, has been focused more on energy, materials and Read More 

ChartWatchers

Bonds Hold Trend and Outperform Stocks

by Arthur Hill

Bonds are outperforming stocks as money flows into relative safety and shuns risk. Overall, relative strength in bonds reflects risk aversion in the financial markets. Relative strength in bonds also indicates that investors should prefer bonds over stocks right now. Like all market dynamics, it is subject to change, but current trends favor bonds until there is evidence to the contrary. I am using the Aggregate Bond ETF (AGG) to represent the "bond" market and the Equal-Weight S&P 500 ETF (RSP) for the stock market benchmark. The chart shows AGG firming in the 107.5 area in June and Read More 

ChartWatchers

Dollar and Commodities Only Issues in DP Market/Sector Summary with Rising 20-EMAs

by Erin Swenlin

Take a look at the DecisionPoint Scoreboard for last week. (You'll find the Scoreboards in the DecisionPoint Chart Gallery. The link is on the homepage). If you've read any of my articles this week, you'll know that the new Long-Term Trend Model (LTTM) 50/200-EMA crossover SELL signals are a harbinger of doom (or at least have very bearish implications). Both the S&P 500 and S&P 100 joined the Dow Industrials with LTTM SELL signals this week.  The other attention getter right now is the DP Market/Sector Summary (found Read More