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Dave, please post your conclusions about
this. I always like to keep an eye out for additional concepts that I can
add to my scans. If any other Amibroker users are running scans that look
for new P and F uptrends, as well as new P and F downtrends, I
would like to see them posted. I am currently testing ways to buy
reversals, both to the upside, as well as to the down side. I
am on the lookout for additional coding that will help insure that the
buy arrows occur only in an uptrending stock. As I recall, Anthony was
working on a concept called price persistancy. Also, Dimitris just talked
about whether the close occurs in the upper half, or in the lower
half, of the high and low range of
the day. Perhaps additional coding for these two conditions
would be helpful in making sure that my buy arrows are
placed only on uptrending stocks.
<IMG height=375
src="" width=50>
<IMG height=25
src="" width=670>
<IMG height=375
src="" width=50>
<IMG height=102
src="" width=493>
<IMG height=60
src="" width=177
useMap="" border=0>
Issue Date: 2003-July-06
<IMG height=21
src="" width=177>
<IMG height=248
src="" width=20>
<IMG height=27
src=""
width=472>
<IMG height=25
src="" width=16>
<TD class=iti vAlign=center width=457
background="">Chip Anderson: <A
href="">Finding
Strong Breakouts
<IMG height=25
src="" width=16>
John
Murphy: US
Bonds Up, Japanese Bonds Down, VIX Sideways
<IMG height=25
src="" width=16>
<TD class=iti vAlign=center
background="">StockCharts Web Site News: <A
href="">New
Newsletter Format
<IMG height=25
src="" width=16>
<TD class=iti vAlign=center
background="">Richard Rhodes: <A
href="">Short-Term
Bull, Long-Term Bear
<IMG height=25
src="" width=16>
Carl
Swenlin: McClellan
Oscillator Complex Bottom
<IMG height=25
src="" width=16>
<TD class=iti vAlign=center
background="">Arthur Hill: <A
href="">QQQ
- Third Time Lucky?
<IMG height=1
src=""
width=473>
<IMG height=248
src="" width=44>
<A
href=""><IMG height=242
src=""
width=122 border=0>
<IMG height=248
src="" width=13>
<IMG height=8 src=""
width=120><MAP
name=Map><AREA shape=RECT coords=80,28,175,42
href="">
<IMG height=1
src="" width=50>
<IMG height=25
src="" width=670>
<IMG height=1
src="" width=50>
<IMG height=30
src="" width=670>
Hello Fellow ChartWatchers!
Things look a little different this week as the market - and our new
newsletter format - continue to improve. In pre-holiday trading last week
all of the major averages posted gains with the Nasdaq (+2.35%) leading
the way. After I show you how to scan for strong breakouts, John Murphy
looks at the Bond market, it's relationship to stocks, and what Japan can
teach us about the two. Carl Swenlin looks at the McClellan Summation
Index's recent bottom, Richard Rhodes is bullish in a bear market, and
Arthur Hill see good things ahead for the Qs. But first...
<P
align=center><FONT
color=#6666ff>Finding Strong Breakouts
We've gotten several questions recently about finding stocks that are
breaking out of trading ranges using our Scan Engine. Unfortunately, the
standard way to scan for such patterns is more complex than it seems. The
problem is that the concept of a "trading range" isn't easy to describe to
a computer. What's the minimum distance between the top and bottom of the
range? What's the maximum distance? How many times does the stock need to
bounce within the range? How close to the top must the stock get to
constitute a bounce? etc. etc. etc.
Fortunately, there is a shortcut - our Point & Figure pattern
recognition feature. Because P&F charts automatically filter out
insignificant price movements, pattern recognition is much simpler. A
quick review of <A
href="">our P&F Alerts
Page reveals that the P&F Spread Triple Top pattern is very
similar to the trading range breakout pattern we are looking for. So any
stock that has the Spread Triple Top pattern now, but didn't have it the
previous day, is worth a close look.
Armed with that info, we head over to our Standard Scan Interface page
and plug in the following criteria:
<IMG height=389
src=""
width=747>
Note the final criteria - "The chart does not have a Spread Triple Top
pattern for yesterday". Since P&F patterns can remain valid for days,
weeks, or even months into the future, this last criteria line ensures
that only those stocks that have just formed a Spread Triple Top pattern
are returned.
When I ran that scan this weekend, I only got one stock on the results
page - Vical, Inc. (VICL). Here's the P&F chart:
<IMG height=427
src=""
width=520>
The chart looks promising to my eye - not only is the stock breaking
out, but it is also breaking above its long-term downtrend line (red). To
be sure, let's look at a standard candlestick chart of VICL:
<IMG height=294
src=""
width=700>
The Price-by-Volume bars on the left side of the chart show that
VICL has been moving sideways for sometime and help confirm that the
recent move above $5 is very significant. While more research may be
required before we pull the trigger here, this chart is obviously worth a
close look.
- Chip Anderson
<IMG height=1
src="" width=50>
<IMG height=35
src="" width=670>
<IMG height=1
src="" width=50>
<IMG height=30
src="" width=670>
US Bonds
Up, Japanese Bonds Down, VIX
Sideways
BOND YIELDS JUMP... The yield on the 10-year T-note
jumped again today. That keeps the yield above its 50-day moving average
line. That means that bonds are being sold. There are two ways of looking
at that. The good news is that money may be rotating out of bonds and into
stocks as investors grow more optimistic about the market and the economy.
That might give stocks a boost for awhile. The downside is that rising
rates aren't normally good for stocks over the long run. That's one of the
reasons we continue to believe that we're in a cyclical bull market within
a secular bear trend. If the economy doesn't strengthen, the stock
market's gains will be limited. If the economy does recover, interest
rates will rise which will slow the recovery. We still think the market
can move higher. We just don't think this is the start of a major bull
trend. Interestingly, the very same phenomenon seems to be happening in
Japan as money is starting to move out of Japanese bonds into their
stocks.
<IMG height=301
src=""
width=520>
STOCKS ARE RISING IN JAPAN. -- BONDS ARE SINKING...
The AMEX Japan iShares made the most actives list today. That's not
surprising given the two big volume spikes that have occurred over the
past two days. Although the EWJ closed marginally lower today, it's had an
impressive few weeks. The chart shows it rising to the highest level in
ten months. [The 50-day average has also crosses over the 200-day which is
a good sign]. Something good seems to be happening in Japan, which has
been mired in a deflationary funk for years. It seems that Japanese bond
prices have been falling for the first time in awhile. With rates near
zero, Japanese bonds can't go up much more. But they were staying up --
until recently. That suggests that some switching is going on with money
coming out of JGB bonds and moving into stocks. That's a good sign for
Japan and may cause some global money to start moving in that
direction.
<IMG height=384
src=""
width=520>
THE VIX IS STILL LOW BUT IS STAYING THERE... There's
good and bad news regarding the CBOE Volatility Index (VIX). The bad news
is that it's in the low 20s, which is reflective of a complacent stock
market. VIX readings in the low 20s have, in the past, been a prelude to
market tops. The good news is that the VIX hasn't started moving up. Our
work suggests that the VIX Index needs to rise above 25 to signal a
correction in stocks. It closed today under 22. Even so, we're watching it
very closely. Any decisive close over 25 would turn us more defensive on
the market's short-term trend.
<IMG height=301
src=""
width=520>
- John Murphy
<IMG height=35 src=""
width=50>
Want more commentary from John Murphy? <A
href="">Subscribe to John
Murphy's Market Message today!
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<TABLE borderColor=#cc0000 cellSpacing=0 cellPadding=0 width=594
border=1>
<FONT face="Arial, Helvetica, sans-serif"
size=3>Learn the Real World Trading Secrets of a
bona fide Master.
<TABLE cellSpacing=0 cellPadding=0 width=479 align=center
border=0>
<IMG
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width=127>Don't miss out on the great strategies inside.
<A
href="">Get
this e-book now!
Anyone can
show you how to create a theoretical trading strategy, but
there are only a few with the courage to show their
actual trades in real time.
We invite
you to learn first hand how a master trader with 30 years
experience expertly applies his trading strategy in the real
world.<A
href="">Click
here to see the latest trades and get your copy of Tom's
personal trading guide, "Synergetic Trading."
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<TD vAlign=top width=20 background=""
height=211>
NEW NEWSLETTER FORMAT - What 'cha think of our new, sleeker
look? Feel free to use <A
href="">our feedback
page to send us your thoughts.
PUBLIC CHART LISTS HEATING UP - Congrats to <A
href="">public
list author Ted Burge, the top-vote getter for the month of June. His
come-from-behind finish was the product of frequent updates to his
well-annotated charts and his mix of Candlestick and P&F charting
techniques. But, will Ted be able to hold off challengers like Henri
Straetmans this month? You decide by voting each day. Don't forget!
MARTIN PRING'S INTRO TO TA NOW ON SALE - This month's special
book is <A
href="">Martin
Pring's Introduction to Technical Analysis which we are now
selling at the special price of just $29.95. The book includes an
interactive tutorial CD-ROM. The price goes back up when this special is
over so act
today!
<IMG height=20
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width=670>
<IMG height=1
src="" width=50>
<IMG height=35
src="" width=670>
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src="" width=50>
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src="" width=670>
Short-Term
Bull, Long-Term Bear
In terms of the S&P 500 index – the 100-wma (25-month for this
chart purpose) crosses at 998; this in the past has proven its merit as a
very important level to larger trading moves. If a weekly close is
obtained above this level…then we would expect a very sharp rally towards
and S&P 500 level of 1150-1200. This is the range where the 45-month
moving average crosses and it most certainly would not be accompanied by a
marked improvement in the economy – but an increase in the “animal
spirits” psychology and will be further accompanied by disbelief.
We have not changed “our colors” in terms of the bearish argument, but
for the next several months we have. Our fundamental reasoning stems from
simply asset reallocation – the bond market more than likely put in
historical yield lows several weeks ago, with the resulting rise in yields
causing all manner of capital to flow to stocks…this is being seen in
Japan, Europe and the US – and will result in higher equity prices.
Especially so given managers “have to” put the money to work. But as
always…the result will end up creating a larger top of magnitude – and
then we shall return to the short perspective.
Thus, the equity markets are very near a critical juncture – either
they break above resistance and continue higher…or find resistance and
turn lower. Our “bet” is obviously on the former rather than the latter,
but we must prepare for the latter case to assert itself, and we shall
further be nimble in our trading. We shall not hesitate to reverse
positions once again. Be prepared.
<IMG height=340
src=""
width=460>
- Richard Rhodes
<IMG height=35 src=""
width=50>
Want more of Richard's award-winning advice? Check out his
Web site: <A href=""
target=_blank>TheRhodesReport.com
<IMG height=35 src=""
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McClellan
Oscillator Complex Bottom
The McClellan Oscillator has recently dropped deeply below the zero
line, and this normally signals the beginning of a Complex Bottom
formation, an extended period of oscillation below the zero line, which is
the result of the negative breadth associated with corrections or
consolidations. I have drawn circles around several Complex Bottoms that
have occurred over the last three years, and you can see that they
typically last for several weeks. Chances are that we will see a similar
outcome this time.
<IMG height=443
src=""
width=618>
One might draw the conclusion from the examples above that severe price
corrections are associated with Complex Bottoms, but keep in mind that the
chart encompasses the worst bear market in decades. When the market is in
a bull phase, which it likely the case now, the corrections can sometimes
be rather mild.
A "textbook" Complex Bottom lasts from four to twelve weeks. Based on
our cycle projections I think this one will complete around the first of
August.
- Carl Swenlin
<IMG height=65 src=""
width=50>
Visit Carl's web site -- <A
href="" target=_blank>DecisionPoint.com --
for the most comprehensive collection of market indicator charts on the
Web. Breadth charts, Investor sentiment charts, P/E charts, even
historical charts going back to the 1920s - DecisionPoint has it all!
<IMG height=65 src=""
width=50>
<IMG height=1
src="" width=50>
<IMG height=35
src="" width=670>
<IMG height=1
src="" width=50>
<IMG height=30
src="" width=670>
<FONT
color=#6666ff>QQQ - Third Time Lucky?
One of the basic tenets of technical analysis is that broken resistance
turns into support. For the third time this year, broken resistance has
turned into a key support level for QQQ. The stock broke resistance at
25.35 in March and this level turned into support with two bounces in
April (1).The next resistance level was established at 27.38 in March.
After the April breakout, this level turned into support with a successful
bounce in May (2). The most recent resistance breakout occurred at 29 and
this level offered support with a one-day reversal on Tuesday (3).
<IMG height=462
src=""
width=444>
In addition to resistance-turned-support, the index formed a trading
range after each breakout and then broke resistance (on a closing basis)
to signal a continuation higher. The most recent trading range looks like
a large flag with a slight downward slope. This flag has extended for four
weeks, which is a bit long for a flag, but the pattern itself looks
robust. A close above the upper trendline and prior reaction high (31.23)
would signal a continuation higher. Expanding volume would add validity to
any breakout and the projected move would be to around 33.35 (31.5 – 27.4
= 4.1, 29.25 + 4.1 = 33.35). Flags are said to fly at half-mast and the
second move is expectedto be equivalent to the first move. Should the
stock fail and move below 29, the medium-term trend would turn bearish for
the first time since early March.
- Arthur Hill
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For more of Arthur's insights, check out his Web site: <A
href="" target=_blank>TDTrader.com
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Title: ChartWatchers - The StockCharts Newsletter - 2003-July-06
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Issue Date: 2003-July-06
Chip Anderson: Finding
Strong Breakouts
John Murphy: US
Bonds Up, Japanese Bonds Down, VIX Sideways
StockCharts Web Site News: New
Newsletter Format
Richard Rhodes: Short-Term
Bull, Long-Term Bear
Carl Swenlin: McClellan
Oscillator Complex Bottom
Arthur Hill: QQQ
- Third Time Lucky?
Hello Fellow ChartWatchers!
Things look a little different this week as the market - and our new newsletter format - continue to improve. In pre-holiday
trading last week all of the major averages posted gains with the Nasdaq (+2.35%) leading the way. After I show you how to
scan for strong breakouts, John Murphy looks at the Bond market, it's relationship to stocks, and what Japan can teach us
about the two. Carl Swenlin looks at the McClellan Summation Index's recent bottom, Richard Rhodes is bullish in a bear market,
and Arthur Hill see good things ahead for the Qs. But first...
Finding Strong Breakouts
We've gotten several questions recently about finding stocks that are breaking out of trading ranges using our Scan Engine.
Unfortunately, the standard way to scan for such patterns is more complex than it seems. The problem is that the concept
of a "trading range" isn't easy to describe to a computer. What's the minimum distance between the top and bottom
of the range? What's the maximum distance? How many times does the stock need to bounce within the range? How close to the
top must the stock get to constitute a bounce? etc. etc. etc.
Fortunately, there is a shortcut - our Point & Figure pattern recognition feature. Because P&F charts automatically
filter out insignificant price movements, pattern recognition is much simpler. A quick review of our
P&F Alerts Page reveals that the P&F Spread Triple Top pattern is very similar to the trading range breakout
pattern we are looking for. So any stock that has the Spread Triple Top pattern now, but didn't have it the previous day,
is worth a close look.
Armed with that info, we head over to our Standard Scan Interface page and plug in the following criteria:
Note the final criteria - "The chart does not have a Spread Triple Top pattern for yesterday". Since P&F patterns
can remain valid for days, weeks, or even months into the future, this last criteria line ensures that only those stocks
that have just formed a Spread Triple Top pattern are returned.
When I ran that scan this weekend, I only got one stock on the results page - Vical, Inc. (VICL). Here's the P&F chart:
The chart looks promising to my eye - not only is the stock breaking out, but it is also breaking above its long-term downtrend
line (red). To be sure, let's look at a standard candlestick chart of VICL:
The Price-by-Volume bars on the left side of the chart show that VICL has been moving sideways for sometime and help confirm
that the recent move above $5 is very significant. While more research may be required before we pull the trigger here,
this chart is obviously worth a close look.
- Chip Anderson
US Bonds Up, Japanese Bonds Down,
VIX Sideways
BOND YIELDS JUMP... The yield on the 10-year T-note jumped again today. That keeps the yield above its
50-day moving average line. That means that bonds are being sold. There are two ways of looking at that. The good news is
that money may be rotating out of bonds and into stocks as investors grow more optimistic about the market and the economy.
That might give stocks a boost for awhile. The downside is that rising rates aren't normally good for stocks over the long
run. That's one of the reasons we continue to believe that we're in a cyclical bull market within a secular bear trend. If
the economy doesn't strengthen, the stock market's gains will be limited. If the economy does recover, interest rates will
rise which will slow the recovery. We still think the market can move higher. We just don't think this is the start of a
major bull trend. Interestingly, the very same phenomenon seems to be happening in Japan as money is starting to move out
of Japanese bonds into their stocks.
STOCKS ARE RISING IN JAPAN. -- BONDS ARE SINKING... The AMEX Japan iShares made the most actives list today.
That's not surprising given the two big volume spikes that have occurred over the past two days. Although the EWJ closed
marginally lower today, it's had an impressive few weeks. The chart shows it rising to the highest level in ten months. [The
50-day average has also crosses over the 200-day which is a good sign]. Something good seems to be happening in Japan, which
has been mired in a deflationary funk for years. It seems that Japanese bond prices have been falling for the first time
in awhile. With rates near zero, Japanese bonds can't go up much more. But they were staying up -- until recently. That suggests
that some switching is going on with money coming out of JGB bonds and moving into stocks. That's a good sign for Japan and
may cause some global money to start moving in that direction.
THE VIX IS STILL LOW BUT IS STAYING THERE... There's good and bad news regarding the CBOE Volatility Index
(VIX). The bad news is that it's in the low 20s, which is reflective of a complacent stock market. VIX readings in the low
20s have, in the past, been a prelude to market tops. The good news is that the VIX hasn't started moving up. Our work suggests
that the VIX Index needs to rise above 25 to signal a correction in stocks. It closed today under 22. Even so, we're watching
it very closely. Any decisive close over 25 would turn us more defensive on the market's short-term trend.
- John Murphy
Want more commentary from John Murphy? Subscribe to John Murphy's Market Message
today!
- Advertisement -
Learn the Real World Trading Secrets of a bona fide Master.
Don't miss out on the great strategies inside. Get
this e-book now!
Anyone can show you how to create a theoretical
trading strategy, but there are only a few with the courage to show their actual trades in real time.
We invite you to learn first hand how a master trader with
30 years experience expertly applies his trading strategy in the real world.
Click here to see the latest trades and get your
copy of Tom's personal trading guide, "Synergetic Trading."
NEW NEWSLETTER FORMAT - What 'cha think of our new, sleeker look? Feel free to use our
feedback page to send us your thoughts.
PUBLIC CHART LISTS HEATING UP - Congrats to public
list author Ted Burge, the top-vote getter for the month of June. His come-from-behind finish was the product of frequent
updates to his well-annotated charts and his mix of Candlestick and P&F charting techniques. But, will Ted be able
to hold off challengers like Henri Straetmans this month? You decide by voting each day. Don't forget!
MARTIN PRING'S INTRO TO TA NOW ON SALE - This month's special book is Martin
Pring's Introduction to Technical Analysis which we are now selling at the special price of just $29.95.
The book includes an interactive tutorial CD-ROM. The price goes back up when this special is over so act
today!
Short-Term Bull, Long-Term
Bear
In terms of the S&P 500 index – the 100-wma (25-month for this chart purpose) crosses at 998; this in the past
has proven its merit as a very important level to larger trading moves. If a weekly close is obtained above this level…then
we would expect a very sharp rally towards and S&P 500 level of 1150-1200. This is the range where the 45-month moving
average crosses and it most certainly would not be accompanied by a marked improvement in the economy – but an increase
in the “animal spirits” psychology and will be further accompanied by disbelief.
We have not changed “our colors” in terms of the bearish argument, but for the next several months we have.
Our fundamental reasoning stems from simply asset reallocation – the bond market more than likely put in historical
yield lows several weeks ago, with the resulting rise in yields causing all manner of capital to flow to stocks…this
is being seen in Japan, Europe and the US – and will result in higher equity prices. Especially so given managers “have
to” put the money to work. But as always…the result will end up creating a larger top of magnitude – and
then we shall return to the short perspective.
Thus, the equity markets are very near a critical juncture – either they break above resistance and continue higher…or
find resistance and turn lower. Our “bet” is obviously on the former rather than the latter, but we must prepare
for the latter case to assert itself, and we shall further be nimble in our trading. We shall not hesitate to reverse positions
once again. Be prepared.
- Richard Rhodes
Want more of Richard's award-winning advice? Check out his Web site: TheRhodesReport.com
- Advertisement -
McClellan Oscillator Complex Bottom
The McClellan Oscillator has recently dropped deeply below the zero line, and this normally signals the beginning of a Complex
Bottom formation, an extended period of oscillation below the zero line, which is the result of the negative breadth associated
with corrections or consolidations. I have drawn circles around several Complex Bottoms that have occurred over the last
three years, and you can see that they typically last for several weeks. Chances are that we will see a similar outcome this
time.
One might draw the conclusion from the examples above that severe price corrections are associated with Complex Bottoms,
but keep in mind that the chart encompasses the worst bear market in decades. When the market is in a bull phase, which it
likely the case now, the corrections can sometimes be rather mild.
A "textbook" Complex Bottom lasts from four to twelve weeks. Based on our cycle projections I think this one will
complete around the first of August.
- Carl Swenlin
Visit Carl's web site -- DecisionPoint.com --
for the most comprehensive collection of market indicator charts on the Web. Breadth charts, Investor sentiment charts, P/E
charts,
even historical charts going back to the 1920s - DecisionPoint has it all!
QQQ - Third Time Lucky?
One of the basic tenets of technical analysis is that broken resistance turns into support. For the third time this year,
broken resistance has turned into a key support level for QQQ. The stock broke resistance at 25.35 in March and this level
turned into support with two bounces in April (1).
The next resistance level was established at 27.38 in March. After the April breakout, this level turned into support with
a successful bounce in May (2). The most recent resistance breakout occurred at 29 and this level offered support with a
one-day reversal on Tuesday (3).
In addition to resistance-turned-support, the index formed a trading range after each breakout and then broke resistance
(on a closing basis) to signal a continuation higher. The most recent trading range looks like a large flag with a slight
downward slope. This flag has extended for four weeks, which is a bit long for a flag, but the pattern itself looks robust.
A close above the upper trendline and prior reaction high (31.23) would signal a continuation higher. Expanding volume would
add validity to any breakout and the projected move would be to around 33.35 (31.5 – 27.4 = 4.1, 29.25 + 4.1 = 33.35).
Flags are said to fly at half-mast and the second move is expected
to be equivalent to the first move. Should the stock fail and move below 29, the medium-term trend would turn bearish for
the first time since early March.
- Arthur Hill
For more of Arthur's insights, check out his Web site: TDTrader.com
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