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[RT] Fwd: "Chart Watchers Weekly" (HTML Version) for 08 December 2002

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Subject: [RT] Fwd: "Chart Watchers Weekly" (HTML Version) for 08 December 2002
From: John Cappello <jvc689@xxxxxxx>
Date: Sun, 8 Dec 2002 06:50:14 -0800

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Title: Chart Watchers Weekly - 08 December 2002 This kind of took some of the wind out of my sails. John ------------------ Forward Header -------------------- Originally From: Chip Anderson Subject: "Chart Watchers Weekly" (HTML Version) for 08 December 2002 Date: 12/07/2002 11:29pm Received: from StockCharts.com ([12.144.129.34]) by tom.po.com (8.12.2/8.12.2) with ESMTP id gB88KbXF017803 for ; Sun, 8 Dec 2002 03:20:37 -0500 (EST) Received: from StockCharts.com by stockcharts.com with SMTP (MDaemon.PRO.v6.0.3.R) for ; Sat, 07 Dec 2002 23:29:11 -0800 Chart Watchers Weekly - 08 December 2002

Hello Fellow ChartWatchers!

ChartWatchers This week, I thought that I'd show you a couple of long term charts illustrating how the current market rally is overbought and due for a pullback, how the major indices are hitting long-term resistance levels and why the intermarket picture indicates that you still need to be careful these days. Then I read John Murphy's latest Market Message update and saw that he has already said all of that much better than I ever could. So, as a special treat, I thought we'd share John's entire weekend update with all of our ChartWatchers. You'll find it below along with columns from our "regulars" - Carl Swenlin, Arthur Hill and Richard Rhodes. Enjoy! Be sure to read the "Site News" section of this newsletter for exciting news about the latest member benefits resulting from our merger with MurphyMorris.com.

Market Message MARKET STILL BELOW RESISTANCE LEVELS... While we utilize daily charts for shorter-term timing purposes, weekly and monthly charts are much better for picturing the market's longer-term trends. The market may have stopped going down. But it hasn't gone up much either -- certainly not enough to reverse the major bear trend. Chart 1 shows that the recent rally in the S&P 500 has failed to overcome initial chart resistance at the August high (and the 40- week moving average). Those are the minimum requirements needed to confirm that a major bottom has been seen. Interestingly, the flat trendline where the market is meeting new selling coincides pretty closely with the lows of last September. That's because previous lows -- once they're broken on the downside -- become new resistance barriers over the market. The weekly RSI line has reached potential resistance at 50. The good news is that the weekly MACD lines are still positive. Chart 2 draws a trendline over the highs of the last three years. It hasn't been broken yet. A decisive upside break of that trendline is also needed to signal that the big bear has ended. MONTHLY VIEW STILL NEGATIVE... The monthly chart also puts the recent bounce into better perspective. The blue down trendline matches the resistance line shown in Chart 2. The flat red line is the "neckline" that was broken during July. In order to negate the potential "head and shoulders" top, the S&P needs to rise back over the neckline. So far, it hasn't been able to do it. The monthly stochastics lines have turned positive from oversold territory under 20 -- which is encouraging. However, the monthly MACD lines (which are slower to turn) haven't turned positive yet. That would also have to happen to signal that the the two-year bear market has ended. HEAD AND SHOULDERS BOTTOM?... Several of our members has asked about the possible formation of a "head and shoulders" bottom being formed in the major averages. According to that view, the "left shoulder" was formed by the July bottom -- with the "head" forming at the October bottom. The S&P has stalled at its August high -- and a possible "neckline". So far, so good. To complete that pattern, the market still needs to pullback enough to form a "right shoulder". Then, it has to break the August high (and the 200- day moving average). It's certainly a plausible interpretation -- and one which we're taking seriously. The On balance volume line has already exceeded its August high. GOLD STOCKS SHINING AGAIN... Gold stocks have been the week's strongest group. The daily chart shows the XAU exceeding its November high and its 200-day moving average. That's a bullish breakout. The weekly chart shows that the major uptrend in the XAU that started two years ago is still intact. It shows the recent pullback finding support at the two-year support line. Some of our members have asked about a "symmetrical triangle" that's been forming over the past six months (defined by the converging green lines). Since the prior trend was up, the triangle is a bullish continuation pattern. The weekly chart also shows that the six-month falling trendline has been broken on the upside. That's another bullish sign. Two intermarket factors helping gold stocks are selling in stocks -- and a falling dollar. The dollar has been slipping all week -- and fell sharply today. A falling dollar is usually bullish for gold and gold stocks. To get John's commentary throughout the week, sign up for John Murphy's Market Message by clicking here. Recently Joined? Need a Hand? John Murphy's Getting Started with StockCharts.com15- minute exercise booklet will help you get started.Download Now!

WHAT'S NEW ON THE WEBSITE

DecisionPoint A lot of people tell you about this sentiment poll and give you their interpretation of the weekly results, but it is always best to look at the chart and make the historical comparisons yourself. Note that high bullish readings appear at tops in a bear market, and in bull markets they mark periods of consolidation or deceleration. The threshold for major market bottoms is 50% bears. Note that we have yet to see those levels in spite of a 50% decline in the S&P 500. The Bull/Bear Ratio section of the chart fine tunes the results and alerts us to lopsided readings even though historical thresholds of bulls or bears haven't been met. The most recent reading is 2.04. As you can see, if we are in a bull market as some claim, prices will probably flatten until some of the bullishness fades. If we are still in a bear market, which is most likely, much lower prices are probably dead ahead. Charts courtesy of DecisionPoint.com -Carl Swenlin Don't forget to visit DecisionPoint's "Top Advisors Corner" for free, periodic updated from some of the best in known names in the stock market advisor business. Click here for the latest postings.

Biotechs Extend Consolidation

TD Trader There are two patterns at work in the Biotech HOLDRS: an ascending triangle and a rectangle consolidation. Ascending triangles are typically bullish continuation patterns, but can also form as bullish reversals, which would be the case with BBH. Consolidation patterns, such as rectangles and flags, are typically bullish continuation patterns, but can also result in a reversal. Regardless of the pattern, key support and resistance levels are well defined and future performance is tied to the next break. A move above 92 would confirm both the ascending triangle and the rectangle as bullish. Conversely, a move below 84 would break key support and be bearish. As an ascending triangle breakout, the projected advance would be to around 120 over the next few months (92 - 65 = 27, 92 + 27 = 119). Look to volume for further confirmation. Volume expanded on the initial jump from 73 to 92 and declined as the consolidation unfolded over the last few weeks. This is normal for consolidation patterns and volume should expand to confirm a bullish breakout. For starters, volume should at least exceed the 60-day SMA. In addition, a move above +10% in Chaikin Money Flow could be used for confirmation. For more of Arthur's intuitive commentary, check out his website: TDTrader.com Take your TA to the next level!

Tech Rally Coming to an End?

The Rhodes Report As the technology rally has progressed over the course of the several weeks - and subsequently has failed - many continue to return to the "tried and true" names such as Intel (INTC), Microsoft (MSFT), Oracle (ORCL) and many of the down-trodden communication shares just to name a few. However, we believe this rally is slowly but surely coming to an end, and that the technology sector high for the next several months may have already formed. However, if not, then we believe it shall occur in the next several days to weeks as we are prone to wide time frames due to markets moving farther and longer than we anticipate. When one looks at the technicals involving the Nasdaq 100 - one finds prices have unsuccessfully tested the longer-term 200-day moving average - a test which may or may not come again...we simply don't know. In fact, our 40-day stochastic is trading at levels that in the past have marked a cyclical turning point for technology. And given such, we are prone to becoming selectively short as our fundamental research indicates the harsh realities of 2003 have yet to be taken into account. Thus, we are modestly short...and looking to become even more so in the very near future. If you want more of Richard's award winning advise, check out his website: TheRhodesReport.com - Highly recommended!

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