HeadlineCharts.blog.com

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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Bernie Schaeffer made the observation this week that when the bear market started back in 2001, the moving averages served as resistance for every rally attempt.  In that decline, once the 80 and 160 week averages were broken, that was it. 

Schaeffer notes that this time, the market broke below the 160 week, but then snapped back up above it.  He wonders if this could possibly be a favorable development for the market.  The 160 week now becomes an important test of support.

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The NYSE new lows continue to behave really well.  Five days after the big .75% Fed Funds decline, the punishing new lows have dried up.  The NASDAQ new lows are higher then the NYSE and aren't quite as favorable, but have also stabilized.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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The TBill rate hasn't improved much, but at least it hasn't gotten worse.  Last week we noted how the Fed Funds follow the TBill so it looks like eventually the Fed Funds rate will dip below 3%.   Not sure when that will be though, and I would prefer to be wrong.  I continue to believe that money flowing into TBills keeping the rate at these low levels undermines the prospects for a sustained rally in the stock market.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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I'm watching energy and materials.  Both have now retraced right back up under the resistance of the 200-day.  I've been negative towards commodities in the belief that they will follow the stock market lower.  But commodity prices have held up very well while the related companies sold off down to the August lows. 

So far last week's stock price lows look like a significant bottom may have been established based on the dramatic index reversals and the decline in new lows.  But we're waiting on plenty of big news this week so we need a bit more time.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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Above is the latest monthly NYSE short interest figures.   I stopped showing this graph for a while because the signal wasn't working, or I wasn't sure how to read it.  Joseph Granville mentioned last summer that he thought the unbelievable surge in short interest was actually bearish towards stock prices, rather than a bullish contrary sentiment indicator.  So this means up until spring 2007, when the short interest reached above 6 days, it indicated fear and was therefore bullish.  This stopped working in the summer of 2007 when the days to cover reached above 7 days, and then it indicated there was a real problem developing.  And of course the shorts and Joseph Granville turned out to be correct.  Anyone with ideas about this graph and how to read short interest, please send me a note.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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Some good news this week.  Although TBills remain at distress levels, the number of new lows dropped and the newsletter writer's bullish sentiment is at a favorable level.

ECRI continues to believe that a recession has not yet started and that one can be avoided if additional steps are taken by government.  Their inflation gauge continues to tick lower giving the Fed plenty of room to continue their easing of Fed Funds.

Jim Cramer was embarrassed in front of millions of TV viewers as he claimed to have been bearish towards stocks over the past months.  Replays of his market positions were shown over the web revealing a number of bullish comments.  This prompts us here at HeadlineCharts.blog.com to start recording our market position so that there is no question about our outlook...



Our view is to remain in cash as we look for an IBD follow through day.  We fully expect the market to retest the recent lows before moving higher in a sustained uptrend.  Continue to avoid most financials and discretionary stocks.  The favored sectors are utilities and healthcare.  Lately we've been reading the Advisor's Corner.

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Red is a column of O's in a downtrend, blue is a column of X's in an uptrend.  Below 30% is oversold, and above 70% is overbought.  Yellow is a shift down, green is up. 

Some nice shifts up from oversold levels this past week confirming the recent lows and increase in prices.  As we thought, eventually every group was hit hard as healthcare, utilities and the dow industrials joined the party to the far left.  What we didn't expect is that money seemed to move directly from these defensive groups into the weakest financials and discretionary stocks as nimble traders took profits in both of their successful long and short stock positions.  Nice work on their part.  Although conditions are now more favorable for a rally, I won't trust any price advances until some time is dedicated to consolidate and retest.  Also, I'm watching the pesky TBill to see if it confirms stock price increases with corresponding increases in the rate.  A rally in stock prices is unlikely to succeed for long while money is flowing into the safety of TBills.

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 Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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The Tuesday, Wednesday, Thursday posts were all published earlier today.



We finally received what we wanted in the newsletter survey.  The bulls have now declined to a level where a bottom in stock prices can form.  I'm not saying the bottom in prices has been reached, I'm just saying the newsletter sentiment is at a level where it can happen.  The individuals very early on recognized that there is a serious problem in the stock market, and their sentiment led stock prices lower instead of following the market lower like the newsletter writers.  The wrong-way blogger sentiment could still move lower, but it is now also dipping which adds to the overall gloomy mood.  This mood indicates that a lot of the selling has been completed and the buyers can now begin to gain the upper hand.  From a contrarain point-of-view, sentiment is now favorable towards higher stock prices.

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The excellent longer-term chart shown above is provided for free by Market Harmonics.  It shows the bulls very close to their extreme lows.  Now we could use a bit of a shift into the bear camp as well, and then we'll have an ideal set up for prices to begin a sustained advance.

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I won't show the VIX chart since it has been shown in every blog and newsletter in existence this past week.  Needless to say, the VIX finally spiked to levels where you can expect to see stock prices start to firm.  It looks like paying attention to the VIX has paid off during this correction.

The chart above still leaves some doubt about the extent to which investors are pessimistic about stocks.  It has been a really miserable number of weeks in the market including 20% and above losses in most indexes.  Yet this put /call ratio hasn't even exceeded the prior peak.  Maybe the very long-term, multi-year uptrend in this ratio is over, and this lack of fear of lower prices is helping keep a cloud over stock prices and contribute to a new bear primary trend.  Also note that this indicator completely broke down as a buy/sell signal tool late last year.  Maybe all the volatility in the market has caused it to go out-of-sync with the market cycles, and it needs to time to sync back up again.

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I may be reading too much into this and need to give the ratio some time to prove itself.  Hopefully, prices can hold above this week's lows while we're waiting.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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The Tuesday and Wednesday comments were published earlier today.



Commodity prices pulled back a little bit along with the stock market during this week's wild sessions.  But when equities snapped back commodities recovered as well.  I may deserve the flip flop award, but if this past week can't shake out these commodities then we have no choice but to question whether a big decline in commodity prices will occur.  Also, if the uptrend in commodities is this strong, you have to question whether the world economy is really ready to fall off a cliff.  More time is needed, but if commodities generally retain these prices, then when the stock market recovers there isn't much doubt that agriculture, energy, materials, precious metals, alt-energy, etc will be the leading groups.... yet again.

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This chart was shown last week.  Not much has changed in this chart even though a lot has happened in the past week in the world markets.  Are these uptrends deteriorating?  Or are these uptrends consolidating before hitting new highs?  I can't believe a higher Euro is in anyone's interest at this point, but unless the ECB starts to ease it may be headed higher.  The inverted US Dollar will likely move in the same direction as the Euro.  These currency trends have been closely tied to the commodity trends, and will likely continue to be.  So a higher Euro likely means a higher CRB as well.

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There are declarations of recession everywhere (except the ECRI) yet all three energy components shown above remain in an uptrend above the 40-week average and reasonably close to their new highs.  More time is needed, but after the action in the market this past week, we are now opening up to the possibility that the commodity bulls will remain in control.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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I'm playing catch up with these posts.  The Tuesday comments were published a couple hours ago.



This is very encouraging.  For weeks and weeks, after logging in to see the market action an hour into the day there would be hundreds of new lows on both exchanges.  It didn't matter whether the market indexes were up or down.  The new lows were broadcasting for anyone who wanted to see that a huge number of shares were being sold by institutions.  But now we have a couple days where the new lows are contained.  Too soon to make too much of it, but this is a good sign because it is a critical ingredient in order for the market to right itself.

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The advance /declines have never been my favorite indicator, but still they are worth monitoring for the subtle signs of the market.  This chart is encouraging also.  These moving averages never dipped below the August 2007 lows and haven't confirmed to the downside.  So this is a postive divergence.

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I've shown this longer-term chart a couple times before.  The cumulative AD line broke below the moving average giving a good signal of the downturn we've experienced.  We should have paid more attention to it.  But notice how well it confirmed the bull market and how it showed the broad participation of stocks.  Contrast it to the very weak participation near the end of the prior bull market.  I believe the weakness in the AD line 8 years ago hinted at how deep the price correction would be once stocks finally rolled over.  So the strength of the current AD may be indicating that prices don't have the far to fall this time.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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I'm encouraged by this week's market, but it seems to need more time to consolidate, stabilize and retest its lows.  The TBill rate has been very important showing investors remain very nervous about the markets as money flows into TBills pushing down the rate.  This indicates that it isn't quite yet time to rush back into stocks, and it probably also indicates more declines in the Fed Funds rate ahead.

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Above is the longer term view of the TBill rate with the SPX below.  The declining rate was a stock market sell signal in late 2000 and now again in 2007.  Most of us are conditioned to not fight the Fed, but the market now seems to be more likely to follow short-term rates higher, not lower.  But I still agree that the Fed will win eventually, so the good news is that we are getting closer to when the Fed will win this battle.

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Above is another interesting view of the TBill rate and the stock market.  In the 80's and 90's, the TBill rate peaks looked more like opportunities to buy stocks.  Starting in 2000, the relationship between the TBill rate and stocks changed.  Now when TBill rates peak, it means money is starting to move from stocks to the safety of TBills.

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

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The timing of today's rally made sense based on some of the stats provided by Investor's Intelligence who are reporting favorable weekly selling climaxes (which translates to accumulation of oversold stocks), a large drop in bullish sentiment (finally!), very strong insider buying and extremely oversold short-term and long-term momentum indicators.

The subprime area was center stage again today, only this time because the dramatic declines may have finally reached their lows (couldn't get much lower).  These two bond insurers above were the heroes as New York state set in motion steps to help their finances.  I wouldn't be buying these stocks, but I'm following their stories along with the charts below as part of the base developing for the intermediate cycle.

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The bond insurers may be on the mend, now the mortgage insurers need to do the same.  Improvement here would be very welcome.

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The mortgage finance group dropped like a rock last fall, but may have just retested the lows.  The home builders held at very long-term support dating back to 2002. 

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