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Hello Fellow Chart Watchers! The Bears continued to run on Wall Street last week as all of the major averages continues to retreat. The continued deflating of the Technology bubble has driven the Nasdaq back under 2750. It has now lost 46.7% of its value since peaking on 24 March! As the chart below shows, the "good" news is that the Nasdaq is now back at the same level it was at on 20 August 1999. Notice that the rest of the major averages haven't done much since then either. Where will it end? The next big support level for the Nasdaq is right around 2400. 2400 provided resistance back in early 1999 and then - as is common for important levels - turned into a support level in March 1999. The composite bounced off of 2400 six times between March and August making it a very important level. What if 2400 doesn't halt the decline? There is a weaker support level at 2000 and, below that, support at 1500 where the 1998 'Asian Meltdown' reversed itself. Let's pray it doesn't come to that shall we? Sector Rotation? There were some bright spots last week, namely the Basic Industries (+4.8%), Financials (+3.9%) and Cyclical (+2.8%) sectors. Looking at our sector rotation model, we are particularly encouraged by the recent reversal in the Cyclicals sector. Since hitting an all-time low on 12-October, the Cyclical SDPR (XLY) has formed a symmetric triangle pattern and is moving through the apex of that triangle now. Given that Cyclicals tend to do very well well near market bottoms, we will be watching this SPDR very closely next week. A strong move higher would signal that the end may be in sight.   Later in this issue Arthur Hill shares his thoughts on Canadian and French stocks, but first...
You asked for it and once again StockCharts.com delivers! Thanks to a exclusive agreement with our data vendor, Primark/AT Financial, we are now able to provide you with the numbers behind the charts. To see the raw numbers, use the link that now appears directly below all of our SharpCharts. Currently, you'll see the data going back to 01-January-2000. We'll soon add support for data going back as far as we have it. Stay tuned... Not one but two new indicators were added to SharpCharts last week - the Chaikin Oscillator and Wilder's Average True Range! The Chaikin Oscillator combines the MACD oscillator with the Accumulation/Distribution line providing a super-sensitive momentum oscillator. Wilder's Average True Range is a volatility measurement that is very similar to Wilder's ADX line - high ATR values often follow "panic" sell-offs, low ATR values occur during extended 'sideways' periods. We'll be adding a more detailed article on ATR to the Chart School soon. Stay tuned... Last week, StockCharts.com was re-approved to provide intraday Canadian data on our web site. We are working with our data vendor to re-enable that feature as soon as possible. Hopefully we will have that data up again by the end of the week! Remember, add ".TO" to the end of the symbol for Toronto stocks, add ".V" for CDNX stocks. On StockCharts.com right now:
A Look at Canada and France Last week, I showed a PerfChart comparing the perfomance of 5 major international indices against the S&P 500 since Jan-00. If you will recall, the Nikkei 225 was by far the worst performing index over the past year. The FTSEs performance was about even with the S&P 500 and the German DAX had outperformed by about 5%. The two top performing indices over the past 11 months were the Toronto Stock Exchange Index ($TSE) and the French CAC 40 ($CAC).  The $TSE had quite a run over the last few years by advancing from below 5000 in late 1998 to above 13,000 a few months ago. The index has since retreated in dramatic fashion and given up a large slice of its gain for the year, but remains above its Mar-00 low. The last high above 13,000 was well above the Feb-00 high and it would appear that the long-term up trend remains intact. Short-term, the index appears quite oversold, but this does not mean I would buy just yet. Key indicators remain bearish and the index is on the verge of a trendline break. The PPO formed a negative divergence in July and again in August. It moved below its previous low in Oct-00 to provide a bearish signal. From Mar-00 to Aug-00, -DI formed a series of higher lows, indicating that minus directional movement was strengthening. A bearish signal was given when -DI moved below +DI in late September (green vertical line). Both of these indicators remain in bearish mode and I would have to see some bullish evidence before considering a long position.  The $CAC appears on the verge of a breakdown, but has yet to decline below support at 6000. In August, the index broke below the steep trendline extending up from Oct-98 and began to test support. Despite coming close 5 of the last 8 weeks, the index has managed to remain above support at 6000. Such resilience resembles the S&P 500 and its refusal to break below support at 1330. Key indicators point to weak momentum and increased downward pressure. The PPO formed a large negative divergence over the last few months and turned negative in late Sept-00. Momentum definitely favors the bear. -DI bottomed in Dec-99 and formed a series of higher lows over the last 11 months, indicating strength in minus directional movement. -DI moved above +DI in Sept-00 to confirm that minus directional movement had overpowered plus directional movement. Even though the $CAC has yet to break support, these key indicators suggest an imminent break and further downside. A large top appears to be forming on the price chart and a break below 6000 could lead to a test of support around 4900. Here are some links that should help you get started:
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