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Hello Fellow Chart Watchers! We're still in a Bear Market folks! Don't forget that with lower price levels come increased percentage moves and increased emotional volatility both of which were evident last week. While all of the major averages did move up more than one percent on the week, so far this "rally" hasn't done much to change the overall technical picture. Check out the Nasdaq's downtrend channel for the best picture of where we are at. Caution is still the key here folks. This looks and smells like yet another Bear Market Rally, something we are all familiar with by now. Trade if you must, but don't be surprised if another downleg or two appears on the charts before the bottom does. The charts in the CWW Public Chart List tell the whole story so be sure to check them out. Speaking of Public Chart lists, have you been following these things? I think they are GREAT! So far 16 Extra! users have decided to share their analysis work with the world and most of the charts and commentary is terrific. Here are some samples:
As you can see, the content is very diverse and very thought-provoking. It turns out that it is just as helpful to the contributors as it is to the readers! Check out what Drew Georgopulos, the top doctor at "Drew's Hurt Stocks Hospital", had to say about what happened as he created his public list: Just wanted to thank you for an unintended consequence of posting Public charts. I've discovered that writing and defending one's interpretation is not as easy as reacting to the messages one intuits from the pix. In going public with your ideas there evolves an additional weight for the privilege of posting your comments. Feeling this weight has really helped me... I have profited so much in these last three days from this exercise that it was like a free seminar about investing. I thank you for the chance to work out my ideas... Nobody gets to study learning better than the teacher. This has logarithmically deepened my understanding and appreciation for [Technical Analysis]. Couldn't have said it better myself. Finding the "perfect" stock to invest in takes time, patience and experience. Once you've read all about the various indicators, studied zillions of charts, and analyzed the market to death, you still have to find the right stock to buy and the right time to buy it. This is where technical analysts turn to Stock Scanning for help. Used properly, stock scanning can reduce the list of candidate stocks from thousands down to less than 100. So called "black box software" tries to narrow things down even more and give you specific buy/sell advice. While I don't think that a computer should make the final decision for you, I do think that using scans to reduce the number of charts you need to review can be very beneficial. Here's an example of what I mean: The market stinks right now, so let's look for some short term trading opportunities while we wait for signs of a bigger turnaround. Richard Estes' Buy-Buy-Buy scan (discussed on our Scan Hall of Fame page) is a great starting point. Extra! members can run that scan by simply clicking on the link on the HOF page and then clicking the "Run Scan" button. Today (25-Aug), Buy-Buy-Buy is returning 97 candidates for us to consider. We could reduce that number by continuing to add criteria to the scan, but I want to show you another technique - Visual Analysis using our CandleGlance view. Start by adding those 97 stocks to a new Favorites list - clicking on the link that the top of the results page should do the trick. Next, view the new list in "CandleGlance" mode by changing the "Format" dropdown from "Summary" to "CandleGlance". Now you can quickly examine each of the 97 candidates visually. If a stock doesn't look good to you, simply check the checkbox beside that chart. When you reach the bottom of the page, click the "Move Selected to Trash" button and then repeat the process until you've gone through all of the stocks. I used this technique to find stocks stocks which have recently had strong, unambiguous bullish MA crossovers. Notice that there's some subjectivity in that criteria (How do you define "recent" and "strong" in a scan formula?) which is why a visual review works best here. I was able to narrow things down to just 14 stocks out of the original 97. They are Albertsons, Inc. (ABS), Blockbuster, Inc. (BBI), DRS Technologies, Inc. (DRS), General Semiconductor Inc. (SEM), Intersil Holding Corp. (ISIL), OMGroup, Inc. (OMG), Sigma-Aldrich Corp. (SIAL), SonoSite, Inc. (SONO), Stora Enso Oyj (SEO), Syncor International Corp. (SCOR), T. Rowe Price Associates, Inc. (TROW), Trident Microsystems, Inc. (TRID), Vector Group Limited (VGR), and Wallace Computer Services Inc. (WCS). Click this link to see a regular CandleGlance view of these stocks. As a final step, I'll add the 20-day Chaikin Money Flow indicator to all of the charts by selecting it from the indicator dropdown on the CandleGlance page. Of those 17 candidates, only three have had strong, clear CMF buy signals recently. I'll leave it to you to figure out which ones. ;-) Again, the specific indicators and selection criteria I'm using is just meant to illustrate this technique. They are filled with assumptions and biases related to how I, Chip Anderson, do my trading. I encourage you to use this example as a starting point however and eventually come up with something similar that corresponds to your investing strategies and goals. Good luck!
Friday's rally in the markets was not wholly unexpected given the major market averages didn't follow through on their break of key support on Tuesday. Thus, the question is which index is going to outperform between the Nasdaq Composite and the Dow Industrials. If one looks towards the Dow Industrials/Nasdaq Composite Ratio - it is becoming ever more clear that the countertrend rally shall favor the Nasdaq Composite.  Like all of us, Richard's thoughts on the market continue to evolve. For more on his views, including specific buy/sell advice, visit Richard's website - http://www.therhodesreport.com. % INVESTMENT ADVISORS AT 47%... Two factors are keeping us from getting overly enthusiastic about the prospects for a big market rally in the near future. One is the normal seasonal trend. Historically, September and October are the two worst months of the year. That doesn't guarantee that'll be the case this year, but it's a calendar hurdle we'd prefer to have behind us instead of in front of us. The other is the fact that sentiment figures are still too bullish. Bullish investment advisors are at a high 47%, while bearish advisors are at a low 32%. At major bottoms, those numbers are usually reversed. At the very least, there should be more bears than bulls. That's clearly not the case. VIX TOO LOW... The CBOE Volatility Index (VIX) is too low to support a major market bottom. The VIX dropped sharply today to the low 20s. At market bottoms (like the last two Aprils), VIX is usually well over 35. At market tops (like last August), VIX is closer to 20. Right now, the level of the VIX is more bearish than bullish.  % OF STOCKS OVER 200-DAY AVERAGE TOO HIGH... The % of NYSE stocks trading over their 200-day moving average is over 60%. Normally, readings over 70 mark an overbought market that is close to a top. Readings under 30 usually mark an oversold condition and a possible bottom. Right now, the number is too high to justify a major market rally. LOW VOLUME RALLY... Today's impressive price rally was missing only one thing -- VOLUME. Unfortunately, that's a very important thing. Today's volume was one of the lightest of the month. We'll have to give the market a few more days to see if it can build on today's price gains. If it's going to do so, volume is going to have to get a lot better. The Nasdaq rally, in particular, needs to show some staying power and start breaking through some resistance barriers. The NYSE Index has held above chart support, but still needs to get through its moving averages to signal an upturn. Given the negative seasonal and sentiment factors described above, we're skeptical that a major up-move is in the offing.   
Here are some links that should help you get started:
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