Hello Fellow Chart Watchers!
Indecisive. Uncertain. Ill-defined. Up in the air. Inconclusive. Unknown.
The stock market hates all of those terms especially when they refer to election results. The volume patterns for the NYSE and Nasdaq last week tell the tale. As soon as it became clear that a very close election was about to happen, the late October rally lost steam and volume began to dry up. The day of the election, 7-Nov, volume was lower than it had been in two months (barring holidays). The day after the election, nobody knew what to think and stocks edged lower on very light volume as a result. On Thursday, it was obvious that things would take a while to get resolved. The short term traders ran for the exits in the morning. Things turned around in the afternoon as longer term traders stepped in. Volume picked up as shares traded hands. Like that now infamous concession call, the rally was premature. With no end in sight on Friday, stocks fell again, returning to the Thursday lows. It was not a stampede for the exits however as Friday's volume was lighter than Thursday's. All-in-all, volume paints a picture of a market that's holding its breath.
A possible clue to the future may be found in the Volatility Index. The VIX rose quickly during the week and is now back over 30. As an "inverse index", high VIX readings are bearish and low VIX readings are Bullish. Readings over 30 are definitely in the bearish range as the chart below shows:
The overlaid Rate-of-Change (ROC) indicator shows that the VIX and the S&P frequently move in opposite directions with the VIX often leading the Large Caps by a day or two. So where are things right now? The VIX appears to be pointing to some sharp drops in the near future.
(By-the-way, unfortunately, you cannot create the overlaid chart above using the tools on our website . . . yet. I used a graphics editing program to combine two SharpCharts by hand. We hope to add a chart overlay capability to SharpCharts soon. Hang in there...)
If you don't like the VIX signal I just mentioned, then don't read Arthur Hill's Market Commentary below. It's even more bearish. But first...
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- Classic Point and Figure Charts!
We now provide two different tools for creating and analysing Point and Figure charts. Site veterans are probably very familiar with our Java-based "Dynamic P&F Charts" which let you adjust chart settings simply by moving sliders. Well, we've just added more traditional looking "Classic P&F Charts" to our line-up. The Classic charts are text-based, so they work with any web browser and they look almost identical to the charts that other sites charge subscription fees for. Additional features include automatic trendlines and pattern recognition. Two unique P&F features that you will only find on our Classic charts are Moving Average overlays and Volume bars! Check out the instruction page for more information. I've included an example chart of the NYSE Composite below. Enjoy!
NYSE Composite Index ($NYA) INDX
10-Nov-2000 O:656.20 H:656.20 L:646.39 C:646.44 V:968,858,600 Chg:-9.76
© StockCharts.com
700.00 | | | | 700.00
695.00 | | | | 695.00
690.00 | | | | 690.00
685.00 | | + | | 685.00
680.00 | | X + | | 680.00
675.00 | | 9 O + | | 675.00
670.00 | | X O X + |High| 670.00
665.00 | | X X X X O A O + B | | 665.00
660.00 | | X O X O X X X O X O X O + X O | | 660.00
655.00 | | + 4 O X O 5 X O X O X O X O X O + X O | | 655.00
650.00 | X |1 X + X O O X O X O 6 O X O X O + O X + X O | | 650.00
645.00 | X O|X O X O + X O X O X O X O X O X + O X O X |Avg | 645.00<
640.00 | X O|X O X O + X O X O X O X 7 8 + O X X O X | | 640.00
635.00 | + C O|X O X O + X O X O X O X + + O X O X O X | | 635.00
630.00 | + X O| O X O X + X O X O X O + O X O X O + | | 630.00
625.00 | B | O X O 2 O + X O X O + O O X + | | 625.00
620.00 | X | O X O X O + X O X + O X + |Low | 620.00
615.00 | X X | O O X O X O X + O + | | 615.00
610.00 | X O X | O O X X O X + + | | 610.00
605.00 | X O X | + O X O X X O + | | 605.00
600.00 | X O X | + O 3 O X O X + + | | 600.00
595.00 | X O X | + O X O X O X + | | 595.00
590.00 | X O X | + O X O O + | | 590.00
585.00 | + O X |+ O X + | | 585.00
580.00 | O X +| O | | 580.00
575.00 | O + | | | 575.00
570.00 | + | | | 570.00
565.00 | | | | 565.00
560.00 | | | | 560.00
555.00 | | | | 555.00
00
+ = bearish resistance line
+ = bullish support line |
Intrigued? Click here to learn more about P&F Charts.
Monthly SharpChart Bars!
You asked for it and StockCharts.com delivers! You can now create SharpCharts that have monthly bars/candlesticks on them. Simply select "Monthly" from the "Periods" dropdown above the chart. I've found these work best if you also select "Fill the Chart" from the "Duration" dropdown. Long-term investors will probably want to add monthly charts to their Favorites list also.
Data Delays
Some of you have recently experienced delays in getting updated charts from the site. We are in the process of integrating in our new high-speed, on-site datafeed from our data vendor, Primark, right now. In addition to speeding up the site quite a bit, this new feed will allow us to quickly get all of the data needed to create true intraday charts. We are very close to rolling out intraday charting and installing this new feed is critical to those plans. Unfortunately, some last minute snafu's have cause us to temporarily stop providing intraday quotes ('the yellow candles') for Canadian stocks and some of the indices that we currently track. We apologize for any inconvenience. Rest assured that we are working hard - very hard - to complete this work as quickly as possible. When it is done we think you will agree that our intraday charts will be worth it. Stay tuned...
On StockCharts.com right now:
- John Murphy: Which sectors perform best at this stage of the economic cycle? John demonstrates with a performance chart.
- Arthur Hill's Market Summary: Lack of buyers keeps Nasdaq 100 down.... NYSE Composite hits resistance at 663 again.... Dow hits trendline resistance.... NYSE breadth shows weakness.
- Rex Takasugi - When is it too late to consider one of Rex's contrarian ideas? Rex revisits Microsoft (MSFT) with a new upside target.
- Richard Rhodes - Is election uncertainty the excuse investors were looking for to send markets lower? Richard sees the Nasdaq headed sideways. Plus, Gateway is headed lower.
- Ken Mitchell - Ken looks at the S&P 500, Nasdaq 100, Dow Industrials, and the Amex Internet Index. Plus, a head and shoulders top for Sycamore Networks.
- Scott McCormick - Scott examines redemption fees. Should you be paying them? It might be worth it!
- P&F Columnist Mitch Harris - Investors are bullish on bonds, but should they be? Mitch thinks this may be wishful thinking, and demonstrates with a P&F chart of the Treasury bond yield.
- Scott Carney - Net stocks have taken a pounding, but Scott sees harmonic numbers for the Philadelphia Internet Index. Are there former leaders here that will survive?
- Our MailBag - Is Chaikin Money Flow going up while the Accumulation/Distribution line going down? Plus, Arthur Hill explains the derivation of his short-term and long-term viewpoints. Read More..
Large Caps
Relative to the Nasdaq and Nasdaq 100, the S&P 500 and Dow have held their own relatively well. However, the S&P 100, which represents the 100 of largest companies traded on the Nasdaq and NYSE, shows more signs of weakness and could lead the Dow and S&P 500 lower over the next few months.
The decline from 834.9 to 685.5 was quite spectacular and knocked the index for about 18% in a little over a month. For a major index, this is a huge move that should make investors sit up and take notice. There are a number of potential scenarios, and most are bearish:
- A large head and shoulders pattern with the head at 846.4, the right shoulder at 834.9 and the neckline marking support at 750. The index broke neckline support in October and declined to 685.5 intraday. Traditional technical analysis stipulates that broken neckline support turns into resistance. The index recently tested this newfound resistance level for a few days last week and has since turned lower.
- The index broke below the trendline extending up from Dec-94. This Dec-94 trendline has featured prominently in a number of indices lately. The S&P 500 and Dow Industrials both broke below their Dec-94 trendlines, but the Nasdaq and Nasdaq 100 remain well above their Dec-94 trendlines. The Dec-94 trendline also turned into resistance for the S&P 100 as it declined from 760 late last week.
- The index formed a lower high at 834.9, broke below its long-term trendline and formed a lower low at 685.5. By definition, the trend is bearish.
- The only positive not thus far is the indexs ability to remain above 720. I view the October break of 720 as a bearish development, but the index has managed to remain above the last two weeks.
- Relative to the S&P Smallcap Index ($SML), the S&P 100 has underperformed since Dec-99. Interestingly, the price relative (S&P 100/S&P Smallcap Ratio) remains above its Mar-00 low and the S&P 100 broke below its Mar-00. However, the trend for the price relative is down and large caps could fall further out of favor.
 What is the prognosis for the S&P 100? The decline from 834 to 685 was quite dramatic and the index appears oversold. From the low at 685, the advance to 760 retraced about 50% of the Sept/Oct decline. There is a lot of resistance around 775 and the bear controls the long-term trend with short-term upside looking rather limited. Based on traditional technical analysis, the neckline break projects a decline of about 115 points. This would take from index to around 635 over the next few months.
Important Tip
Don't forget that our Market Carpets are now updated throughout the trading day. Want to see WHY the Dow is up or the Nasdaq is down? Want to quickly find the hot and cold sectors each day? Forget those financial news sites! Our Market Carpets are all you really need.
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