GUEST COMMENTARY: USING CARPETS TO GAUGE THE MARKET
GUEST COMMENTARY BY CHIP ANDERSON... John is visiting family in the western US right now so Chip Anderson, president of StockCharts.com, is filling in for him. John should be back by Thursday.
MARKETCARPET DRILL DOWN... John has been a fan of our free MarketCarpet analysis tool for years and he often demonstrates it to people who attend his conference talks. I thought I'd run through the kind of things John talks about using today's market results. You can use our S&P 500 MarketCarpet anytime by clicking on the "Free Charts" tab on the StockCharts.com homepage and then on the "Use this tool now" link in the "Market Carpets" area of the page. Finally, click on the link for the "S&P Sector Carpet" and you should - after a slight pause - see something like this:
Chart 1
MATERIALS LED THE WAY TODAY... For those of you who aren't familiar with this kind of chart, each colored square represents one of the companies in the S&P 500 index. The color is based on the "Price Performance" of the stock over the past 2 days (i.e. today's percent increase or decrease). The "greener" the stock, the higher it climbed. Conversely, the "redder" the stock, the more it fell. First off, we see that Gateway (GTW) was today's big winner - up 8.99% - followed by Tiffany, Corning, Eastman Kodak, and Lowes. However, from a sector perspective, the story is different... The stocks on the carpet are grouped into nine major sectors - based on the membership of the S&P Select Sector Spyders. Next to each sector name is a number that represents the average gain (or loss) of all the stocks in that sector. For example, the "Financial" sector (in the lower right) had an average gain of "+1.5" today. The sector with the biggest average gain today was the "Materials" sector. It was up "+2.3%" today. Let's drill down into that sector and see if we can learn more. If I click on the little bar that says "Materials", that sector expands to fill the carpet and here's what I see:
Chart 2
FINDING THE STRONG ONES... Looking at the list on the right of the chart tells the story - US Steel (+4.22%) and Nucor (+3.13%) had big gains as did Alcoa, Air Products and Praxair. Let's take a peek at the charts for some of these stocks:
Chart 3
Chart 4
US STEEL AND NUCOR IN STRONG UPTRENDS... Both of the charts above show strong stocks in a strong sector that are well above their important moving averages - rising moving averages at that. Ever heard of the phrase "There's always a bull market somewhere?" Now, what about the other strong stocks in the Materials sector?
Chart 5
Chart 6
Chart 7
NON-STEEL MATERIAL STOCKS NOT AS HOT... Notice that the charts above aren't nearly as strong looking as the first two. The moving average lines are not rising as strongly and the blue 50-day MA is either above today's price bar or touching it.
IT DEPENDS... Some investors may view the steel stocks as "over-bought" and therefore due for a pull-back. Other investors may feel that steel stocks still have more upside potential. Similarly, some investors may feel that the other three charts are just starting to jump. My point today is that, in just a couple of clicks, the MarketCarpet carpet can take you right to "where the action is" everytime. For more info on using this free carpet tool, see this page. - Chip
DON'T FORGET THE BOOKSTORE SPECIAL!... Subscribers to John Murphy's Market Message can save 10% off our already low bookstore prices just be entering the code "MURPHY" into the Coupon box when checking out. You can use this coupon again and again, as often as you like to save money on every book, video, CD-ROM, or software package we carry. There's no reason to buy charting books anywhere else! The StockCharts.com Bookstore is THE place for you.
