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Hello Fellow Chart Watchers! This week we've lined up four of the top charting experts for your reading enjoyment: Carl Swenlin, Arthur Hill, Richard Rhodes, and of course John Murphy. This is the first time they've all appeared in the same place! Carl looks at what the Put/Call ratios are saying right now. Arthur looks at Networking stocks. Richard dissects the Nasdaq Composite and John has a 3-chart article on the NYSE Composite. One of those peculiar inversions is now in progress on the 10-DMA of the OEX Put/Call Ratio, and it is a good indication that a decent decline is in store. Normally, high readings on the Put/Call Ratio signal a bottom, and this is a reliable rule for the CBOE Total and CBOE Equity Put/Call Ratios because high put volume relative to call volume generally means people are getting too bearish; however, the OEX Put/Call Ratio occasionally behaves in just the opposite manner and starts running an inverted pattern compared to the CBOE and Equity P/C Ratios. Such is the case now.  What does it mean? To me it can only mean one thing, that smart money is buying puts in preparation for a decline. A lot of Equity and Total put volume represent individual bets against stocks. OEX puts can be used by individuals, but they can also be used by big money players to hedge portfolios and short the index. When I see large participation in put buying that is running counter to equity put buying, like now, I attribute it to the big guys. If you look at the chart, you will see that the subsequent decline can be large or small, but odds are very high that there will be a tradable top when the OEX Put/Call Ratio reaches present levels. --Carl Swenlin For more of Carl's in-depth technical insights, check out DecisionPoint.com. Filled with high-quality, long-term market breadth studies, DecisionPoint.com is the perfect compliment to StockCharts.com. DP has my highest recommendation. - Chip
Networking Index Meeting Resistance  After breaking above the Sep-00 trendline and retracing 62% of the prior decline, the Networking Index ($NWX) is meeting resistance around 360. Apr-01 support (green arrow) turned into resistance in Jun-01, Jul-01, Dec-01 and now Jan-02. The pattern from Jun-01 to Jan-02 looks like an inverse head-and-shoulders with neckline resistance at 360. A break above 360 would be bullish and indicate a continuation of the prior advance.  However, signs of selling pressure are starting to emerge on the daily chart. The index broke above resistance at 360 in December, but failed to hold this break and declined below its prior reaction low. This decline also broke the second of three fan lines and coincided with a negative divergence in the Percentage Price Oscillator (PPO). The index zoomed back to resistance in January, but formed a lower high and appears to be under selling pressure again. Even so, the index has yet to actually breakdown and would need to close below 310 to turn bearish. 
Old-timers know Arthur Hill as the author of much of our ChartSchool area. If you want more of Arthur's intuitive commentary, check out his website: TDTrader.com - Site includes: Market Commentary, Technical Analysis and Trading Strategies. Take your TA to the next level! Did you know that Richard was the top rated analyst for MSN MoneyCentral's latest quarter? Check it out. Congrats Richard! For the Nasdaq Composite, the rally off the low has been strong indeed to date. However, that strength is now moderating as price action is having more trouble moving past the November highs than would be thought at this point. While current price action can be considered languishing within a well-defined trading range between 1920 and 2100, we believe this to be a distribution pattern, and given the 14-week stochastic is very overbought, and with price action reaching resistance at the "apex" of the triangle formation, we believe the proper trading stance is to become short technology shares prudently in the near future. While that time has yet to arrive, a break of the 50-week moving average to the downside would provide us with further confirmation our stance is indeed correct.  Good luck and good trading, If you want more of Richard's award winning advise, check out his website: TheRhodesReport.com - Highly recommended! NYSE COMPOSITE INDEX SLIPPING... The chart of the NYSE Composite may be giving the best indication of what's happening to most stocks on the big board. After failing a challenge of its (red) 200-day average on Monday, it ended the week closer to its (blue) 50-day average. Needless to say, a decisive close below that potential support line would be a short-term negative. That could signal a drop toward more substantial support at the December low near 570. The daily stochastic and MACD lines are negative, which isn't encouraging either.  RETRACEMENT POSSIBILITIES... Earlier in the week, we showed that the NYSE had recovered 62% of last year's losses and was therefore dangerously overbought. What are downside possibilities if the current rally starts to roll over? One possiblity is a period of consolidation. That scenario would suggest a possible decline toward the December low around 570, which also marks the peaks set in October. That would be our first downside objective. If that's broken, that would probably call for a deeper correction -- in the magnitude of 38% to 50% of the recent gains. The horizontal blue lines show where those potential support areas are located.  LONGER-TERM VIEW... The weekly charts give a more mixed picture. The weekly MACD lines along the bottom are still positive. That supports the idea that any short-term downturn will be corrective in nature and not the start of a new downtrend. The weekly stochastics lines along the top, however, are in the 90s (which is extremely overbought) and appear to be turning negative. That suggests to us that the intermediate uptrend over the last three months has come too far too fast.   John Murphy's daily commentary is the perfect compliment to StockCharts.com's tools. Click here to get your FREE 2-week trial subscription to John's site!
Here are some links that should help you get started:
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