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2007 PERFORMANCE RANKINGS REFLECT ECONOMIC WEAKNESS FOR 2008 AND PROBLEMS FOR THE STOCK MARKET -- WEAK DOLLAR STILL FAVORS COMMODITIES AND FOREIGN STOCKS -- WEAK YEAREND RALLY DOESN'T BODE WELL FOR THE NEW YEAR

by John Murphy,

Chief Technical Analyst, StockCharts.com

2007 SECTOR LEADERS ARE MOSTLY DEFENSIVE... One of the trends that we've commented on over the past few months has been steady outperformance by more defensive sectors in the market. Chart 1 shows that the 2007 leaders (in descending order) are Energy, Materials, Utilities, Consumer Staples, and Healthcare....   READ MORE 

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DIA HOLDS THE GAP -- QQQQ AND IWM SURGE TO RESISTANCE -- XLE AND OIH MAINTAIN THEIR LEADERSHIP -- MAJOR INDEX AND SECTOR PERFORMANCE FOR 2007

by John Murphy,

Chief Technical Analyst, StockCharts.com

AN ISLAND REVERSAL FOR DIA ... Today's Market Message was written by Arthur Hill. - Editor The Dow Industrials ETF (DIA) held above its November low by forging an island reversal over the last two weeks. On Chart 1, DIA peaked on 11-Dec when the Fed issued its policy...   READ MORE 

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SANTA CLAUS RALLY MAY ALREADY HAVE STARTED -- BOUNCE IN SMALL CAPS SUGGESTS JANUARY EFFECT MAY HAVE ALSO STARTED EARLY -- SEASONALS AND CHARTS FAVOR ENERGY STOCKS -- GOLD MAY BE TURNING UP AS WELL

by John Murphy,

Chief Technical Analyst, StockCharts.com

SANTA CLAUS RALLY... One of the most valuable investment books that I use is the annual Stock Trader's Almanac published by Jeffrey and Yale Hirsch. The book is published each year and contains a wealth of seasonal market information. I rely on it quite heavily as do many...   READ MORE 

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GLOBAL MARKETS WEAKEN SOME MORE -- EAFE SHARES FALL HARDER THAN US -- WEEKLY RANKINGS STILL SHOW A DEFENSIVE MARKET -- NASDAQ LEADS MARKET FOR FIRST TIME IN SIX WEEKS

by John Murphy,

Chief Technical Analyst, StockCharts.com

MORE FOREIGN BREAKDOWNS ... On Tuesday, I showed a list of eleven foreign stock ETFs that had fallen below their 200-day moving averages. I showed a list of four foreign ETFs challenging that long-term support line. Two of those broke down today. Charts 1 and 2 show the Australia...   READ MORE 

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DOUBLE TROUBLE FOR IWM -- QQQQ TESTS TREND LINE SUPPORT -- NDX BULLISH PERCENT HITS NEW LOW - BONDS REMAIN STRONG - NEW LOWS EXPANDING AGAIN

by John Murphy,

Chief Technical Analyst, StockCharts.com

IWM BATTLES SUPPORT ... Today's Market Message was written by Arthur Hill. John Murphy will return tomorrow. - Editor There is a big battle raging at support for the Nasdaq 100 ETF (QQQQ) and the Russell 2000 ETF (IWM). Chart 1 shows the long-term trend with weekly prices for...   READ MORE 

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RECENT DROP IN GLOBAL MARKETS CALLS INTO QUESTION THEORY OF GLOBAL DECOUPLING -- AGRICULTURAL COMMODITIES STILL HOLD THE LEAD -- GOLD MAY BE READY TO RALLY

by John Murphy,

Chief Technical Analyst, StockCharts.com

GLOBAL INDEXES SHOW WEAKNESS... One of the new ideas I keep hearing is that foreign stocks are relatively immune from an economic slowdown in the U.S. While a weaker dollar has helped keep foreign markets stronger than the U.S., I'm skeptical of the theory of "...   READ MORE 

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INFLATION'S BACK!

by Chip Anderson,

Three consecutive economic reports have shown that inflation, after lying dormant for several years, has been rekindled. The Fed, surely armed with the economic data we've seen, decided to lower the fed funds and discount rates by another quarter point each. Slowing growth and a pick up in...   READ MORE 

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A HEAD-AND-SHOULDERS FOR DIA

by Chip Anderson,

Is that a head-and-shoulders pattern taking shape in the Dow Industrials ETF (DIA)? While it has yet to be confirmed, traders and investors should keep a close eye on this chart in the coming weeks. The potential head-and-shoulders pattern extends from June to December. The left...   READ MORE 

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RETEST IN PROGRESS

by Chip Anderson,

Two weeks ago I stated that the rally off the November lows signaled that a bottoming process had begun, and that, after the short-term rally topped, we should expect a retest of the November lows. Last week the rally was still in progress, and I told Ike Iossif during...   READ MORE 

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RETAIL WEAKNESS IS A BIG PROBLEM

by Chip Anderson,

The two charts below demonstrate part of the reason why recent Fed moves haven't had much of a positive impact on the stock market. It has to do with negative fallout on retail spending resulting from the housing meltdown. The bars in Chart 1 plot the S&...   READ MORE 

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OBJECTIONABLE PRICE OBJECTIVES

by Chip Anderson,

Hello Fellow ChartWatchers! Every week we hear about a couple of message board posts that have appeared on some website somewhere which essentially says "StockCharts.com is saying that this stock will rise (fall) dramatically!" Here's a screenshot from a recent example: We said that? What?...   READ MORE 

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HIGH INFLATION NUMBERS BOOST BOND YIELDS AND DOLLAR -- GOLD SELLS OFF -- WEEKLY AND MONTHLY MACD LINES ARE NEGATIVE WHICH THREATENS BULL TREND -- YEAREND RALLY MAY HAVE COME AND GONE

by John Murphy,

Chief Technical Analyst, StockCharts.com

INFLATION NUMBERS BOOST BOND YIELDS... A rate cut by the Fed on Tuesday, and a coordinated infusion of funds by central bankers on Wednesday, weren't enough to keep the market from falling. Part of the reason for selling late in the week was big inflation jumps in the...   READ MORE 

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QQQQ HITS A WALL -- XLE ADVANCES TO RESISTANCE -- VOLATILITY IS INCREASING THIS YEAR -- THE RISING FEAR FACTOR -- FILTERING OUT THE NOISE

by John Murphy,

Chief Technical Analyst, StockCharts.com

QQQQ BATTLES RESISTANCE ... Today's Market Message was written by Arthur Hill. John Murphy will return tomorrow. - Editor The Nasdaq 100 ETF (QQQQ) is waging a major battle around resistance at 52. The gaps and breakouts over the last few weeks are holding, but a rising wedge is taking...   READ MORE 

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STOCKS TUMBLE ON FED MOVE -- FINANCIALS LEAD DECLINE -- BONDS RISE ON FLIGHT TO SAFETY

by John Murphy,

Chief Technical Analyst, StockCharts.com

FED CUTS TWO RATES BY A QUARTER POINT ... The market was more than a little disappointed by the two modest rate cuts by the Fed and its accompanying statement. It lowered both the Fed fund and discount rates by a quarter of a point. Apparently, the market was hoping for...   READ MORE 

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LAGGING TRANSPORTS SUGGEST A DOW THEORY DIVERGENCE IN THE MAKING -- THE SAME IS TRUE OF LAGGING FINANCIALS AND SMALL CAPS -- GOLD APPEARS TO BE CONSOLIDATING IN UPTREND AS EURO RALLIES -- FED EXPECTED TO LOWER RATES A QUARTER POINT TOMORROW

by John Murphy,

Chief Technical Analyst, StockCharts.com

DOW THEORY DIVERGENCE... One of our readers asked for an update on Dow Theory, which is the oldest of technical indicators. Simply put, the Dow Theory holds that a new high by either the Dow Industrials or the Dow Transports should be confirmed by the other. When one hits a...   READ MORE 

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USING PERFORMANCE CHARTS AND MARKET CARPETS TO FIND GROUP LEADERS -- MERCK LEADS PHARM HOLDERS TO UPSIDE BREAKOUT AND TEST OF OLD HIGH IN HEATHCARE SECTOR

by John Murphy,

Chief Technical Analyst, StockCharts.com

HEALTHCARE IS ONE OF NEW MARKET LEADERS ... In response to a question about how I go about my daily analysis, I used the Market Summary page yesterday to show new buying in small caps, financials, and energy stocks. Today, I'm going to show how to use the Performance...   READ MORE 

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MARKET BREAKS THROUGH CHART BARRIER -- UPSIDE LEADERSHIP COMES FROM SMALL CAPS, FINANCIALS, HOMEBUILDERS, AND ENERGY -- PROSPECTS LOOK BETTER FOR YEAREND RALLY

by John Murphy,

Chief Technical Analyst, StockCharts.com

S&P 500 BREAKS THROUGH CHART SUPPORT ... Earlier today, I wrote about the more positive tone of the market with new signs of strength in small caps and financials. By day's end, those two groups (along with homebuilders and energy) helped the S&P 500 (and...   READ MORE 

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USE MARKET SUMMARY PAGE TO GET BIG PICTURE -- SMALL CAPS AND FINANCIALS LEAD MARKET HIGHER FOR A CHANGE -- ENERGY IS STRONG AS WELL -- S&P 500 TESTS RESISTANCE AT 1492

by John Murphy,

Chief Technical Analyst, StockCharts.com

SMALL CAPS LEAD FOR A CHANGE... One of our readers asked how I go about making sense of so much market data on a given day. One of the places I start with is the Market Summary page. I'll use some of today's data to show...   READ MORE 

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TECHS POWER THE MARKET -- QQQQ HOLDS GAP -- BROKEN SUPPORTS TURN INTO RESISTANCE LEVELS -- SOFTWARE HOLDRS SURGE -- ORACLE AND MICROSOFT LEAD SOFTWARE -- CONSUMER DISCRETIONARY STILL LAGGING

by John Murphy,

Chief Technical Analyst, StockCharts.com

BIG TECHS PUSH MARKET HIGHER... Today's Market Message was written by Arthur Hill. John Murphy will return tomorrow. - Editor The Nasdaq 100 ETF (QQQQ) led the market higher on Wednesday. On Chart 1, we can see that the surge above 51 is keeping last week's gap...   READ MORE 

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S&P 500 AND NASDAQ 100 BACK OFF FROM MOVING AVERAGE RESISTANCE -- SHORT-TERM MOVING AVERAGE SIGNALS ARE STILL NEGATIVE

by John Murphy,

Chief Technical Analyst, StockCharts.com

S&P 500 BACKS OFF FROM RESISTANCE ... Last week I wrote about two longer-range moving averages based on Bollinger band values. I showed support at the 20-month (400 day) moving average line and resistance at the 20-week (100-day) average. I stated that the S&...   READ MORE 

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USING POINT & FIGURE CHARTS FOR INTERMEDITE AND LONG-TERM SIGNALS -- AGRICULTURALS ACCOUNT FOR DIFFERENT COMMODITY INDEX READINGS -- BROKERAGE DOWNGRADE WEIGHS ON MARKETS -- CONSUMER STAPLES, HEALTHCARE, AND UTILITIES REMAIND DEFENSIVE LEADERS

by John Murphy,

Chief Technical Analyst, StockCharts.com

USING P&F CHARTS FOR LONGER-TERM SIGNALS... One of our readers asked if point & figure signals could be used for intermediate and long-term trading signals. The answer is yes. Chart 1 uses a 1% box size for the S&P 500 which I find works...   READ MORE 

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LONG-TERM BREADTH AND MOMENTUM INDICATORS AREN'T ENCOURAGING -- COMMODITY INDEXES PULL BACK FROM RESISTANCE AT OLD HIGHS -- GOLD AND OIL IN CORRECTIVE MODE -- SELL INTO ANY YEAREND RALLY

by John Murphy,

Chief Technical Analyst, StockCharts.com

S&P 500 NEEDS TO CLEAR 100-DAY LINE ... On Monday I wrote about the S&P 500 testing long-term support at its 400-day (80-week) moving average line. The S&P has bounced off that support line to improve its short-term trend. I...   READ MORE 

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DOW HOLDS SUPPORT -- A LOOK AT PRIOR RATE CUTS -- FINANCE LEADS THE WAY -- CITIGROUP GETS OVERSOLD BOUNCE -- STATE STREET SHOWS RELATIVE STRENGTH -- QQQQ RALLIES OFF SUPPORT

by John Murphy,

Chief Technical Analyst, StockCharts.com

DOW SURGES FOR SECOND DAY RUNNING... Today's Market Message was written by Arthur Hill. John Murphy will return tomorrow. - Editor The market moved sharply higher on Wednesday as hopes of a rate cut spurred the bulls into action. First, let's review some of the economic highlights...   READ MORE 

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DOW ATTEMPTS REBOUND OFF AUGUST LOW -- P&F CHARTS FOR THE DOW SHOW BUY AND SELL POINTS -- WEAKNESS IN OIL SHARES HINT AT OIL PEAK

by John Murphy,

Chief Technical Analyst, StockCharts.com

DOW AND S&P 500 MAY ATTEMPT BOUNCE OFF AUGUST LOW ... The market's 10% drop since mid-October matches a similar decline during July and August. Although the market's long-term trend is now in doubt, there's a good chance for a rally...   READ MORE 

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MARKET IS TESTING LONG-TERM MOVING AVERAGE LINES -- NO SIGN OF IMPROVEMENT ON SECTOR CHART --

by John Murphy,

Chief Technical Analyst, StockCharts.com

WEEKLY EMA LINES AT CRITICAL SPOT... I received a number of requests to review some of our moving average indicators starting with the 13-34 exponential moving average (EMA) combination. Charts 1 and 2 compare that combination to the daily and weekly chart of the S&P 500. The...   READ MORE 

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BONDS OUTPERFORMING STOCKS -- YIELD CURVE POINTS TO LOWER RATES -- WEAK DOLLAR LIFTS GOLD -- SURGING OIL SINKS TRANSPORTS -- QQQQ REMAINS STUBBORN

by John Murphy,

Chief Technical Analyst, StockCharts.com

BONDS CONTINUE TO ATTRACT MONEY... Today's Market Message was written by Arthur Hill. - Editor Money continues to flow into the bond market as the economic outlook deteriorates. John Murphy pointed to the sharp decline in the Cyclicals Index ($CYC) on Monday and noted that this was a "...   READ MORE 

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FINANCIALS CONTINUE TO LEAD MARKET LOWER -- FREEPORT MCMORAN COPPER & GOLD LEADS BASIC MATERIALS BELOW 200-DAY LINE -- BIG DROP IN CYCLICALS HINTS AT ECONOMIC WEAKNESS -- THAT CONTINUES TO FAVOR BONDS AND DEFENSIVE STOCKS -- NASDAQ THREATENS 200-DAY LINE

by John Murphy,

Chief Technical Analyst, StockCharts.com

MARKET STILL ON THE DEFENSIVE ... As I review my last Market Message written on Friday November 9 (before leaving for Europe), I see nothing to change my negative view of the market. The indicators that were bearish then are still bearish (both price and breadth). The weakest groups are still...   READ MORE 

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DON'T GIVE UP, BULLS!

by Chip Anderson,

There has been clear technical damage on the major indices as a result of concerted selling. The NASDAQ 100, which has led the market higher for most of 2007, has been treated rather rudely over these past few weeks and that's never good. The reason? During periods of...   READ MORE 

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IWM FORMS BIG DOUBLE TOP

by Chip Anderson,

The Russell 2000 ETF (IWM) shows the beginnings of long-term downtrend. In stark contrast to QQQQ, IWM forged a lower low in August and a lower high in October. The inability to move above the summer highs showed relative weakness on the way up. The ETF is already testing...   READ MORE 

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MARKET ENTERING OVERSOLD RANGE

by Chip Anderson,

Two weeks ago I stated that market strength was mixed, and that I thought that the correction had several more weeks to go before it was over. Since then further breakdowns of support have occurred, most notably on the Nasdaq 100 Index chart, which experienced a major break of its...   READ MORE 

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BEWARE THE ETF "TRAP"

by Chip Anderson,

Hello Fellow ChartWatchers! Last month I had the pleasure of sitting in on several local Technical Analaysis User Groups and seeing how they used many different tools to do group stock analysis. It was a very educational experience for me and I strongly recommend that everyone reading this newsletter join...   READ MORE 

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DEFINING TRENDS AND TIME-FRAMES - QQQQ FIRMS AT CHANNEL SUPPORT -- IWM IS THE WEAKEST OF THE MAJORS -- SPY TESTS LONG-TERM SUPPORT - DIA PARALLELS SPY

by John Murphy,

Chief Technical Analyst, StockCharts.com

DEFINITIONS FOR TREND AND TIMEFRAME ... Today's Market Message was written by Arthur Hill. John Murphy will be back next week. - Editor There are basically three time-frames at work in the market. While definitions can, and do, vary, I categorize the short-term, medium-term and long-term...   READ MORE 

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BANKS WEIGH ON THE MARKET -- BONDS CONTINUE STRONG -- RATES FALL TO NEW LOWS -- ANALYZING PAST CORRECTIONS -- APPLYING THE PAST TO THE PRESENT -- AD VOLUME RATIO SURGES

by John Murphy,

Chief Technical Analyst, StockCharts.com

FINANCIALS WEIGH ON THE MARKET ... Today's Market Message was written by Arthur Hill. John Murphy will be back next week. - Editor Continued concern over the sub-prime problems and the current credit crisis buoyed bonds and weighed on financial stocks-again. Barlays PLC reported that it will take...   READ MORE 

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DIA GIVES UP EARLY GAINS -- QQQQ HITS A SNAG -- CONSUMER STAPLES LEADING CONSUMER DISCRETIONARY -- THE AD VOLUME RATIO AND TUESDAY'S SURGE

by John Murphy,

Chief Technical Analyst, StockCharts.com

DIA GETS COLD FEET... Today's Market Message was written by Arthur Hill. John Murphy will be back next week. - Editor The Dow Industrials ETF (DIA) started the day strong, but gave up early gains and closed down for the day. The ETF met resistance from broken support around...   READ MORE 

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BROAD RALLY LIFTS WALL STREET -- FINANCE ETF REBOUNDS SHARPLY -- WAL-MART INSPIRES RETAILERS -- RETAIL HOLDRS CONFIRM INVERTED HAMMER -- GAP INC HITS NEW HIGH -- BEST BUY BOUNCES -- OIL FALLS SHARPLY

by John Murphy,

Chief Technical Analyst, StockCharts.com

STOCKS REBOUND WITH BROAD RALLY... Today's Market Message was written by Arthur Hill. John Murphy will be back next week. - Editor Turnaround Tuesday lived up to its name today as the market surged with a broad rally. All of the major indices were up over 2%. The Nasdaq...   READ MORE 

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NYSE BULLISH PERCENT INDEX FALLS BACK BELOW 50 -- NYSE ADVANCE-DECLINE MEASURES WEAKEN AS WELL -- WEEKLY MACD LINES TURN NEGATIVE -- YEN RALLY THREATENS CARRY TRADE -- HOW TO USE PARABOLIC SAR TO PROTECT GOLD PROFITS

by John Murphy,

Chief Technical Analyst, StockCharts.com

NYSE BULLISH PERCENT INDEX FALLS BELOW 50 ... On Wednesday, Arthur Hill wrote about the negative divergence between a rising Nasdaq market and a falling Nasdaq Bullish Percent Index with bearish implications for that market. Today, I'm applying the same analysis to the NYSE. Unfortunately, the message is similarly...   READ MORE 

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FINANCIALS PULL MARKET LOWER -- TOO MANY NEGATIVE DIVERGENCES EXIST FOR A HEALTHY MARKET -- SECTOR ROTATION FAVORS CONSUMER STAPLES, HEALTHCARE, UTILITIES, AND BONDS

by John Murphy,

Chief Technical Analyst, StockCharts.com

LAST WEEK'S HEADLINES STILL APPLY... As I survey the damage done to the stock market this week, I reviewed what I wrote last Thursday. The preceding headline is taken from last Thursday's Market Message and describes today's market action quite well. Except that things...   READ MORE 

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WALL STREET HIT HARD -- FED CUTS NOT HELPING -- FINANCE SECTOR BEARS THE BRUNT -- DOW TRANSPORTS SINK -- NASDAQ 100 EQUAL WEIGHT ETF UNDERPERFORMING -- NDX BULLISH PERCENT INDEX SHOWS WEAKNESS

by John Murphy,

Chief Technical Analyst, StockCharts.com

BROAD SELLING HITS WALL STREET... Today's Market Message was written by Arthur Hill. John Murphy will be back tomorrow. - Editor All of the major index ETFs moved sharply lower as broad selling pressure gripped Wall Street on Wednesday. The Russell 2000 ETF (IWM) led the way by losing...   READ MORE 

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FALLING DOLLAR GIVES COMMODITIES BIG BOOST -- BOUNCE IN FINANCIALS HELPS MARKET -- BREAKOUTS IN CISCO AND INTEL LEAD NASDAQ HIGHER

by John Murphy,

Chief Technical Analyst, StockCharts.com

SILVER HITS NEW HIGH ... Another record low in the U.S. Dollar helped commodity markets to another big day on the upside. Oil jumped $2.72 to close near $97 and just three dollars shy of its 1980 high near $100 in inflation-adjusted dollars. Gold jumped $12 to close...   READ MORE 

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NET NEW HIGHS ARE DRAGGING

by Chip Anderson,

Even though the Nasdaq and the NY Composite hit new closing highs earlier this week, Net New Highs did not keep pace and this could become a problem. Net New Highs equals new 52-week highs less new 52-week lows. I apply a 10-day moving average to smooth...   READ MORE