the StockCharts.com Newsletter
HOT STOCK(CHARTS) TIPSby Chip Anderson | ChartWatchers
Hello Fellow ChartWatchers!
This week, I'm taking time off from our on-going "Technical Analysis 101" series, to enlist your help. We are in the process of compiling a list of "Tips" for using StockCharts.com and we need you to review the tips that we've come up with so far. When this list is complete, we'll make it available to everyone on the website.
Here's our current collection. How many of these did you not know about?
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- Unlike on bar charts, chart patterns on P&F charts can be reliably detected by computers.
- We don't currenty support annotations for P&F charts.
- The widespread use of P&F charts predates the widespread use of Bar and Candlestick charts.
- A P&F Reversal Marker marks the level that the price would need to reach in order for a reversal to occur.
- Each column on a P&F chart corresponds to an uptrend or downtrend section on a traditional bar chart.
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- StockCharts provides market commentary from two of the best technical analysis writers, John Murphy and Arthur Hill.
- John Murphy was the chief technical analyst for CNBC.
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- The Market Message provides video and audio tutorials.
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- Market Message subscribers get access to Arthur Hill's "Arts Charts" blog which is updated several times a day.
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- John Murphy typically talks about inter-market analysis (stocks,bonds,commodities and currency).
- Our chief technical analyst, John Murphy, has been called the "Father of technical analysis."
- Arthur Hill wrote much of the content in ChartSchool.
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- We provide a bundle of John Murphy's books in our bookstore.
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See any that are confusing? Any typos? Know of any good tips that we left out? Let me know in the comment area of the ChartWatchers blog.
P.S. Don't forget about our Holiday Special going on right now. It's going to end later this month so don't delay!
BOND YIELDS AND DOLLAR BOUNCEby John Murphy | The Market Message
Sometimes good news produces a
bad effect. That's especially true when dealing with financial markets.
Today's unemployment report dropped to 10% and payrolls fell by an
unusually small amount. That good news was given a positive reception
by most markets. By day's end, however, commodities and stocks were on
the defensive. The good news caused a big jump in the 10-Year T-note Yield
(Chart 1) as bond prices fell sharply. The jump in bond yields (and a
more positive view on the U.S. economy) pushed the dollar higher. Chart
2 shows the Power Shares Dollar Bullish ETF (UUP)
surging 1.5% on the heaviest volume in two months. The UUP is now
challenging its 50-day moving average. Chart 3 shows the Euro
(which trends in the opposite direction of the UUP) falling below its
50-day moving average for the first time in several months. The rising
dollar caused profit-taking in commodities, and gold in particular.
FINANCE SECTOR STILL LAGGINGby Arthur Hill | Art's Charts
The finance sector continues to underperform the overall market. While the S&P 500 and Dow are consolidating near 52-week highs, the Financials SPDR (XLF) remains well below its October high and shows relative weakness. The bottom indicator contains the price relative, which is the XLF:$SPX ratio. XLF is outperforming when the ratio rises and underperforming when the ratio falls. Notice that the ratio peaked in October and declined to its lowest levels since late July. XLF is clearly underperforming the S&P 500.
Click this chart for details.
On the price chart, XLF formed a triangle consolidation over the last eight weeks. Prior to this triangle, the ETF advanced from July to October. While this triangle can be considered a consolidation within an uptrend, the next signal is dependent on the triangle resolution. A break above 15 would be bullish, while a break below 14.2 would be bearish. The market is likely to follow in the direction of this triangle break.
EXPECTING UPSIDE BREAKOUTby Carl Swenlin | DecisionPoint.com
On Thanksgiving Day Dubai announced that it would be delaying loan
payments by six months. This resulted in a global selloff, in which the
U.S. markets participated on the following day. There was virtually no
follow through selling this week. Looking at the S&P 500 chart
below, you can see that the Dubai selloff is practically invisible
within the context of the trading range of the last several weeks.
In fact, the market is consolidating during a time when I had
expected it to be declining into the 20-Week Cycle low. Because of this
I have had to reconsider my cycle assessment: It appears that the
20-Week Cycle low occurred on November 1, about three weeks ahead of
schedule. Early or late arrival is a frequent occurrence, but not
something we can know until after the fact. All we can do is adjust
accordingly. At this point, I think a new 20-Week Cycle began on
November 1. The next major cycle-related correction low is projected
for April 10, 2010 when the 9-Month Cycle is due to bottom.
Let's look at the chart again. What I see is a flag pole (the rally
from the November low) and flag (the recent three-week consolidation).
The technical expectation from this formation is an upside breakout
with an initial target of about 1180. We are in a bull market with the
market behaving extremely well, so I have high confidence in this
outlook. If prices drop below the bottom of the flag, breakout
expectations would be negated.
Next is a monthly chart of the S&P 500, and it contains some
very bullish evidence. The monthly PMO (Price Momentum Oscillator) is
rising off a very oversold reading (lowest since 1932), and it has
crossed up through its 10-month moving average. There are only four
other deeply oversold PMO bottoms since 1929, and all were associated
with new bull markets. Four data points in 90 years is a thoroughly
inadequate statistical base from which to draw conclusions, but,
understanding how the PMO works, I think the bull market is likely to
continue for at least a year and could easily challenge previous
all-time highs. Be advised, however, the positive long-term picture
does not eliminate the possibility of substantial corrections along the
way, but a smoothly rising monthly PMO presents a solidly positive
long-term technical picture.
Bottom Line: Technically, the market is showing solid strength, but the
bull market is running strictly on speculation and emotion, and there
is virtually no fundamental support under the market. The Dubai event
is a good example of the kind of thing that has the potential to start
an avalanche of selling. There are probably hundreds of them waiting in
the bushes. Taken one at a time, they may only cause a momentary
ripple. If too many pop out at one time, it could end in disaster.
OIL SERVICES READY TO RUN?by Tom Bowley | InvestEd Central
When I see a relationship in the market that tends to hold true over time, it always peaks my interest when the market varies from that "norm". That seems to be the case right now with oil services stocks. Generally speaking, when oil prices rise, money flows to oil services stocks relative to the S&P 500. Likewise, when oil prices are on the decline, I expect to see oil services stocks struggle. Take a look at the following chart to see the relationship that exists between the direction of oil prices and the relative performance of oil services stocks:
Notice how oil services stocks have fallen quite a bit on a relative basis in the last two months? Crude oil has ticked a little lower, but not enough to cause oil services to drop so much. I believe this skewed relationship will resolve itself in time by oil services stocks outperforming. Time will tell.
Some wonder why oil prices aren't following gold prices higher. After all, the dollar continues to weaken and gold is benefiting, why isn't oil? Personally, I believe there are other influences at work in taking gold higher. Gold is a hedge against a weak dollar, inflation and deflation. Right now, we have folks in all three camps. It seems that everyone wants to own gold and we can't fight the tape. Let's get back to oil and the dollar for a moment. Oil has benefited from a weak dollar. Oil has roughly doubled during 2009. That increase is partly due to an improving economic picture, but the weaker dollar has contributed as well. My view is the dollar will remain under pressure for the foreseeable future and that will only aid crude oil and oil services stocks.
The market overall continues to gyrate back and forth. The major indices have edged mostly higher over the past couple months, but rotation has been the name of the game. No one sector - other than gold and perhaps healthcare - has been able to maintain a consistent uptrend since the May/June highs. That has left us with a mostly trendless market where timing is critical, both at the sector and individual stock level.
Everyone must remain patient in a market like the one we've been in for last few months. I like to focus exclusively on low risk, high reward trade candidates while in this type of market environment. Trade fewer shares and be willing to accept smaller profits. Otherwise, profits evaporate as sectors rotate. Another requirement to profitable trading in this environment is to keep stops in place. Small losses don't hurt much, but big losses are hard to recover when the market is essentially trendless.
Feel free to check out my Chart of the Day at Invested Central. I scan for stocks that fit the description above and provide annotated charts and a brief analysis every day as educational reinforcement. CLICK HERE to check it out.