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Friday - September 30, 2005

Random Rants

Some think that yesterday's gains stem from end of quarter window dressing. I am not sure who did the buying, but it is clear that someone is buying and that is all that counts.

The Dow is holding support yet again with a big bounce above 10500.

The Dow Utilities closed at yet another new high. The strong just get stronger.

The Nasdaq held support at 2100 with a big move on Thursday.

After five days of indecision, the S&P 500 made up its mind with a sharp move above 1220.

The Consumer Staples SPDR (XLP) led the way higher and the swing within the triangle is up again.

The Finance SPDR (XLF) held support at 29 with a long white candlestick and was the biggest gaining sector on Thursday.

The HealthCare SPDR (XLV) managed to firm on Thursday and hold key support at 31.

The iShares REIT ETF (IYR) formed a bullish engulfing at support.

The Semiconductor HOLDRS (SMH) formed a harami cross on Tue-Wed and a long white candlestick on Thursday. A break above 36.6 would be short-term bullish.

The Transports ETF (IYT) broke resistance with a surge on big volume.

The CRB Index is closing in on another new high.

EP surged on big volume.

JBHT formed a bullish engulfing and a move above 19.5 would confirm this bullish candlestick reversal.

PG closed at a new high and is leading the Consumer Staples SPDR (XLP) higher.

CD formed a bullish engulfing at support and advanced on high volume last week.

MDCC is getting a bounce off support.

Can LUV fly above resistance at 14.8?

CSCO and FFIV closed lower on Thursday and show relative weakness.

By Arthur B. Hill - Fri 30-Sep-05 at 08:18AM in General
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Regional Bank HOLDRS Form Bullish Engulfing

The Regional Bank HOLDRS (RKH) has been one of the worst performing groups in September, but found some support with a bullish engulfing on Thursday. However, the bulls best wait to see if the stock can follow through with a break above 132.5 before getting excited.

By Arthur B. Hill - Fri 30-Sep-05 at 08:17AM in Industries
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Software HOLDRS Locked in a Range

As the single biggest industry group in the Nasdaq, Software exerts a lot of influence and should be watched clues on Technology in general. The Software HOLDRS (SWH) formed a triangle that extends back to the late June low. This neutral pattern shows a lot of indecision and I will be watching 37 for an upside breakout and 35 for a downside break.

By Arthur B. Hill - Fri 30-Sep-05 at 08:17AM in Industries
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Internet HOLDRS Surge

The Internet HOLDRS (HHH) formed a falling price channel from early August and broke above the upper trendline with a long white candlestick on Thursday. As long as Thursday’s gains hold (58.5), this breakout rules the chart.

By Arthur B. Hill - Fri 30-Sep-05 at 08:16AM in Industries
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Transports Break A Barrier

The Dow Transports formed a falling flag that found support near broken resistance. The breakout at 3670 is bullish. A move below 3650 would challenge this breakout and I would then become more cautious.

By Arthur B. Hill - Fri 30-Sep-05 at 08:15AM in Sectors
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Wal-Mart At Long Term Support

James Cramer of Mad Money and Gary Smith of TheStreet.com recently recommended Wal-Mart as it trades near multi year support. While it may be at support and oversold, the chart looks sick to me. The triangle break and heavy downside volume show that the bears are clearly in control.

By Arthur B. Hill - Fri 30-Sep-05 at 08:15AM in Stocks
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Thursday - September 29, 2005

Random Rants

End of quarter window dressing is lifting strong sectors and stocks (Energy).

Durable goods orders rebounded and the ISM fell to 53.6. Beware if ISM dips below 50.

We are waiting for a breakout on a number of indices and stocks. But which way?

Jim Jubak of MSN thinks KWK, CRZO and UPL will benefit from hgiher oil prices.

Gold sure has turned volatile lately.

Oil is back above $66.

RMBS won a battle against Samsung in a Virginia court. The stock surged, but the war still rages.

James "Rev Shark" De Porre of TheStreet.com leads off with the "market's rotting floorboards".

Semis are not performing well and this is weighing on the Nasdaq.

The Nikkei hit a four year high.

The S&P 500 and Dow rebounded, but the Nasdaq finished in the red.

Natural Gas moved to record highs just before winter.

Sivy of CNNMoney thinks Alcoa looks awfully cheap. It is cheap for a reason - higher input costs from rising energy prices.

The Dow has risen four of last five days, but it looks like a weak rally with lots of indecision.

The Dow Transports got a pop yesterday and is on the verge of a resistance break at 3670.

The S&P 100 ETF (OEF) formed a doji and hammer at support - watch 55.8 down and 56.5 up.

SPY formed five indecisive candlesticks in a row as it consolidates above key support at 120.35.

The Consumer Discretionary SPDR (XLY) slipped back below 32 and I am lowering key resistance to 32.7

The Finance SPDR (XLF) is locked in a trading range with a lower high at 30 and a descending triangle taking shape since mid July.

The Biotech HOLDRS (BBH) formed a harami over the last two days and support may actually hold.

The Regional Bank HOLDRS (RKH) is driving the Finance sector lower.

SMH formed a doji near support. The stock needs to clear 36.6 for any bounce to be taken seriously.

The Telecom HOLDRS (TTH) formed a big bullish engulfing. Q, VZ, SBC and BLS all participated in the advance and Internet TV may be the driving force.

The iShares Lehman TIPS Bond Fund (TIP) formed a flag in September and a break above 106 would be bullish.

The iShares 7-10 Year T-Bond Fund (IEF) formed a falling flag and a break above 85.5 would be bullish. Flight to safety?

Of the big bells, SBC has the most support (23.5), Q has the most to gain and VZ looks the weakest.

IBM found support from broken resistance (June high) and popped on good volume yesterday

Little networkers are hot as LU became the latest to pop on good volume.

CIEN extended its gains and breakout at 2.35.

NOVL is one of the stronger stocks of late with a high volume move in Aug-Sep and consolidation the last two weeks.

CHKP shows good relative strength and a break above 24.1 would be bullish.

INTU now needs to clear 46 to confirm the bullish engulfing.

BEAS broke support at 8.6 from a mini head-and-shoulders (Jul-Sep)

CSC is showing signs of life with a bounce on pretty good volume.

EXPD is inching above resistance

By Arthur B. Hill - Thu 29-Sep-05 at 05:11PM in General
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Wednesday - September 28, 2005

Firm On Bad News

Stocks are supposed to decline with bad news and advance with good news. At least that seems logical. When stocks act as they should, there is little reason to question our underlying assumptions. However, when stocks don’t act the way they should, we should question these assumptions.

Consumer Confidence came in worse than expected and stocks declined in early trading. This was the initial reaction. A weak market would have continued lower and failed to rebound. However, SPY stabilized around 121 and rebounded in the afternoon. In fact, this rebound carried the stock above its morning high and yesterday’ price action was positive.

By Arthur B. Hill - Wed 28-Sep-05 at 10:32AM in Indices
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Consumer Confidence and TA

Consumer confidence suffered its largest decline in years and moved to its lowest level since Oct-03. The trend in Consumer Confidence has turned lower. There was a breakout in Nov-03 and this fueled a nice run in the Retail HOLDRS (RTH) and Consumer Discretionary SPDR (XLY) from Mar-03 to Jul-05. RTH and XLY have been relatively weakn the last two months and yesterday’s consumer confidence report explains it all. Is this just a temporary hurricane related blip or will this drop in confidence last? Unless RTH and XLY forge significant breakouts, I would look for consumer confidence to continue faltering. Just to keep everyone guessing, the University of Michigan Consumer Sentiment survey will be released on Friday morning at 9:45AM. By the way, I added the trendlines, support and resistance to this chart.

By Arthur B. Hill - Wed 28-Sep-05 at 10:32AM in Economy
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Kirby Surges Through Resistance

Its another high volume breakout for Kirby Corp (KEX) as energy related stocks continue to lead the pack. The stock formed a falling flag that

By Arthur B. Hill - Wed 28-Sep-05 at 10:31AM in Stocks
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Hain Gaps Higher

Hain Celestial (HAIN) formed a rather strange looking flag in July and August. Even though the flag expands like a megaphone, I think this is a valid correction. Regardless of the technical beauty, the stock firmed and surged above the upper trendline with big volume. The gap is also bullish and this Consumer Staples stocks looks like it is headed higher.

By Arthur B. Hill - Wed 28-Sep-05 at 10:30AM in Stocks
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Random Rants

Last year's fourth quarter rally was quite impressive. Will we get the same again this year?

Consumer confidence falls sharply, yet the markets remain firm in the face of bad news. Hmm….

Despite the hurricanes, the Fed signals more rate increases - yet bonds remain firm.

Federal money will flow to help rebuild after Rita and Katrina - this may be temporary, but it is an economic stimulant.

The Fed indicates that inflation is the top priority at the moment.

There is a battle raging between the bulls and the bears. Right now, niether is winning as the market churns and bruises both.

The Dow is consolidating near support around 10400. Watch 10350 for an important break.

The Dow Transports continue to firm, but no cigar (bull reversal) until a break above 3670.

The Utilities just keep going and going and going.

The Nasdaq is finding support at 2100 from June resistance and the August low.

It has been four days of indecisive candlesticks for SPY.

XLP led the market higher on Tuesday as money moved into safety - CL, WAG, MO and PEP.

Led by AMGN, BBH broke support at 186.

IAH may have a head-and-shoulders working, but a break above 35.4 would negate the pattern.

SMH led the way lower on Tuesday and closed at ts lowest level since early July.

Home builder Lennar (LEN) beat yet again and raised its estimates - can the stock follow suit?

Can McDonalds (MCD) unlock the value of its real estate?

El Paso (EP) is pushing towards a 52-week high on high volume.

Mircon Tech (MU) led the decline in the Semiconductor HOLDRS (SMH).

Intel (INTC) has a horrible looking chart and Advanced Micro (AMD) I challenging its 52-week high.

JBL formed an outside reversal and the resistance breakout is failing.

Is that another exhausiton gap for HPQ?

JDSU continues to sprint higher.

FFIV formed a bearish engulfing at resistance from the July gap.

CSCO could not make is back above broken support (July low).

ORCL cannot recover from the gap.

RSAS declined on the highest volume in over a month.

MER formed a shooting start on 20-Sep and declined over the past week.

LLY is trading back near support in the low 50s.

ADRX is firming around 15.

PG hit a 52-week high yesterday.

SFD gapped higher on good volume.

HNZ filled last week's gap with a high volume advance.

By Arthur B. Hill - Wed 28-Sep-05 at 10:29AM in General
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Tuesday - September 27, 2005

Paccar Breaking Down

Paccar (PCAR) formed a large triangle over the last few months and broke trendline support last week. Volume is relatively subdued, but the stock is down six days in a row and clearly under selling pressure.

By Arthur B. Hill - Tue 27-Sep-05 at 10:30AM in Stocks
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Colgate Leading Staples Lower

The Consumer Staples sector used to be the place to hide when the market looked frothy or vulnerable. However, one must be choosy even in this sector. Colgate Palmolive (CL) gapped up in early September, but failed to hold this gap and filled it the very next week. The stock then gapped lower last week and broke support at 51.8. Stay away for now.

By Arthur B. Hill - Tue 27-Sep-05 at 10:29AM in Stocks
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Regency HS Top

Regency (REG) formed a classic head-and-shoulders top over the last few months. Volume expanded on the decline from 63 and again over the last few days. A neckline break would project further weakness towards 50.

By Arthur B. Hill - Tue 27-Sep-05 at 10:29AM in Stocks
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Intersil Looking Scary

The big trend is clearly up, but the stock got overextended and declined on high volume the last seven days (gray ovals). A trendline break would be the next bearish signal and I see support around 17.5-18.

By Arthur B. Hill - Tue 27-Sep-05 at 10:27AM in Stocks
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Random Rants

Stocks opened strong and finished weak. Not a good sign.

The Dow Transports continue to firm as oil remains soft. However, we still need a breakout on good volume to turn bullish.

The Nasdaq has a falling wedge working over the last two months, but Monday's bounce was not impressive.

The Dow Diamonds (DIA) formed an indecisive spinning top and this bounce off support needs more juice.

The S&P 100 ETF (OEF) closed near its low and showed relative weakness on Monday.

The VIX is creeping higher.

XLY followed through on the bullish engulfing, but Monday's black candle shows serious reservations among the bovines.

XLP attempted to move back above broken support but failed miserably as BUD weighed the sector down.

XLF: I still view the trendline break in Aug and failure at 30 as bearish until proven otherwise.

XLV is trying to firm at suppport and a break below 31 would be bearish.

XLB may be firming, but I want a breakout at 28.2 before turning bullish.

BHH managed to close strong and show some buying interest. Watch 2.35 for a pennant breakout.

BBH slipped further below its channel trendline and is now testing key support at 186.

IAH has a head-and-shoulders working over the last four months with support at 34.

HHH bounced within the falling price channel, but remains well short of a meaningful breakout.

IGN held the April trendline, but closed weak on Monday.

RKH opened on the high and closed on the low. Banks are weak.

SMH firmed near the August low and 62% retracement, but we need a stronger bounce to take support seriously.

SWH has lots of support around 35, but the damage has already been done with the break below 36.

With VoIP, who has the guts to buy the baby bells?

TLT is testing support from its March trendline.

GLD opened weak and closed strong as the bid remains in gold and gold shares.

Can XILNX complete the head-and-shoulders that has been working since May?

Is RMBS putting in a bottom?

By Arthur B. Hill - Tue 27-Sep-05 at 09:30AM in General
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Monday - September 26, 2005

Energy Gaps

Hurricane season is ending and gaps in the Energy SPDR (XLE) are being filled. Up gaps are bullish until they are filled. Once filled, these up gaps become exhaustion gaps. XLE has already filled two gaps with high volume on the downside and is poised to fill the third. This is still top picking territory, but recent selling pressure suggests either an extended trading range or a correction in the offing.

By Arthur B. Hill - Mon 26-Sep-05 at 06:55AM in Sectors
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Transports Firming

The Dow Transports ($TRAN) declined within a falling flag over the last seven weeks and is starting to firm. The average formed two inverted hammers and two hammers over the last four days. Take these candlesticks with a grain of salt because the Average does not have a true open based on an actual trade (it is an index/average of 20 stocks). The falling flag is typical for corrections and a break above 3670 would be quite positive.

By Arthur B. Hill - Mon 26-Sep-05 at 06:54AM in Sectors
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NY Composite Still Strong

Despite selling pressure over the last few weeks, the NYSE Composite remains above the May trendline and August low. The index has lots of support around 7350 from broken resistance and I would not turn bearish on this broad non-tech index until a break below 7350. Watch the May trendline (7450) for early signs of weakness.

By Arthur B. Hill - Mon 26-Sep-05 at 06:54AM in Indices
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JDSU Surges on Big Volume

JDS Uniphase has been featured twice at BullBearInvestor.com: once mid July and once in mid September. The stock continues to move higher on good volume moved further above resistance at 1.75. This breakout is for real as long as 1.45 holds.

By Arthur B. Hill - Mon 26-Sep-05 at 06:53AM in Stocks
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Will Ciena Follow JDSU?

Ciena is another poster child of the dot-com fiber-optic bubble. The stock has consolidated since May and a triangle formed over the last few months. Upside volume is picking up and a breakout above 2.35 would be quite bullish.

By Arthur B. Hill - Mon 26-Sep-05 at 06:52AM in Stocks
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Random Rants

Here is a selection of observations from the charts and media.

The Dow formed a doji at support from the April trendline and late August low.

The Dow Transports continue to firm with two inverted hammers and two hammers over the last four days. Still need a breakout at 3670 to turn bullish though. See LUV and JBHT.

The Nasdaq is finding support from broken resistance at 2100 (the June highs).

The Nasdaq 100 is finding support from broken resistance (mid June high) and the late August low.

The S&P 100 ETF (OEF) formed a harami at trendline support.

XLY is trying to follow through on its second bullish engulfing in three weeks.

XLP is trying to fill the gap and follow through on last week's bullish engulfing.

XLE gapped up on Wed, formed a bearish engulfing on Thurs and gapped lower on
Friday. Energy is finally coming under pressure.

XLF is getting a bounce off support at 29.

XLI is getting a bounce off triangle support at 29.1

XLB is firming at neckline support

XLK broke rising flag support, but managed to firm near the August low.

XLU is finding support from broken resistance

BHH remains firm with a pennant type consolidation - watch 2.35 for a breakout.

BBH broke trendline support, but this still looks like a pullback within a larger uptrend and there is lots of support around 186.

HHH firmed near the April trendline and 62% retracement. The bounce is positive, but still within a falling price channel and a move above 61 is needed for a breakout.

IGN is finding support from broken resistance around 31.5.

SMH broke support at 36, but the pattern could evolve into a falling price channel that retraced 62% of the Apr-Jul advance. This is a bottom pick and a break above 38 would be bullish.

SWH broke the April trendline with a gap down - blame ORCL.

TLT gapped up on Wednesday and filled the gap on Friday. Further weakness below 91. Would be bearish.

XAU is getting resistance near its Nov-04 high and could pull back to broken resistance at 100.

AA warned on Friday and blamed rising input costs (oil).

ORCL reported soft database sales.

The Nikkei just keeps powering ahead and is one of the strongest markets in the world over the last few weeks.

Will retail rebound?

Will housing rebound?

SLB did not hold last week's gap.

APA has an exhaustion gap working.

PCU is holding the gap and PD moved to a new all time high.

UTX shows good relative strength over the last 12 months.

EMR broke resistance on good volume and Barron's.

DCI is holding the gap.

CPS formed pennant.

FDX is holding gap.

JBHT is bouncing off support with good volume.

LUV is bouncing off support with good volume.

By Arthur B. Hill - Mon 26-Sep-05 at 06:51AM in Market Musings
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Friday - September 23, 2005

Dow Triangle

Dow Industrials: The Dow has gone nowhere since November 2004. In fact, this period of flat trading could even extend to January 2004 when the Dow moved above 10500. For almost two years, the Dow has simply treaded water. This period of flatness could be coming to an end. But which way will the Dow break?

The Average formed a large triangle over the last 12 months and the trendlines are slowing converging. Within the triangle, the Dow broke support at 10350 with a sharp decline in April and the advance over the last few months looks like a rising price channel. The support break is bearish and the rising price channel is typical for a corrective rally. The only thing missing is confirmation with a trendline break and lower low. The Dow tested trendline support this week and a move below the late August low (10350) would signal a continuation lower and project further weakness towards the October low around 9700.

By Arthur B. Hill - Fri 23-Sep-05 at 03:52PM in Indices
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Donaldson Finds Support

Donaldson (DCI) has a piercing pattern working. Actually, it formed on Tuesday and Wednesday. The stock gapped higher on Thursday and upside volume has been quite strong over the last seven days. A trendline break is the next hurdle to reverse the seven week downtrend.

By Arthur B. Hill - Fri 23-Sep-05 at 03:50PM in Stocks
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MAGS Pennant

Isreali security company Magal Security (MAGS) formed a pennant and a breakout at 11.5 would be bullish.

By Arthur B. Hill - Fri 23-Sep-05 at 03:50PM in Stocks
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COCO Gets Hot

COCO has lots of support around 12.5 and recent broke resistance at 13 with a good move and a positive story in Barron’s

By Arthur B. Hill - Fri 23-Sep-05 at 03:50PM in Stocks
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GD Breaks Resistance

Defense is still hot as General Dynamics breaks to a new 52-week high on good volume.

By Arthur B. Hill - Fri 23-Sep-05 at 03:49PM in Stocks
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Thursday - September 22, 2005

MDY Tests Support

The S&P Midcap ETF (MDY) failed at its early August high, broke the April trendline and declined to support from the late August low. This support level (127) is confirmed by broken resistance (June high) and a break would confirm the double top. This would open the door to 122 and be bearish for housing stocks.

By Arthur B. Hill - Thu 22-Sep-05 at 11:05AM in Indices
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XLF Confirms Bearish Engulfing

What does the Finance sector think about Fed policy? Just ask the Finance SPDR (XLF). The stock formed a bearish engulfing at resistance (16-19 Sep) and confirmed this pattern with a support break on 21-Sept. This makes for a massive failure at resistance (30) and I would expect a move lower over the next few weeks. As the biggest sector in the S&P 500 and NYSE Composite, this will undoubtedly weigh on the broader market.

By Arthur B. Hill - Thu 22-Sep-05 at 11:05AM in Sectors
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Chemicals Lead XLB Lower

We have already seen what happened to the Consumer Discretionary SPDR (XLY). The Materials SPDR (XLB) is another cyclical sector that is dependent on economic growth. Industries in the Materials sector supply the materials needed to produce the goods that Retailers in the Consumer Discretionary sector sell. These two sectors have been the weakest in the S&P 500. XLB formed a continuation head-and-shoulders over the last few months and broke neckline support. This simply affirms the downtrend that was already in place. It would take a move above 28.1 to reverse this support break and turn bullish.

By Arthur B. Hill - Thu 22-Sep-05 at 11:05AM in Sectors
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Remember the VIX?

And the Alamo too! There is an obscure (:~) indicator called the VIX that measures the implied volatility of S&P 500 options. Volatility is a measure of risk. High risk means high volatility and low risk means low volatility. While the S&P 500 and S&P 500 Equal Weight Index move higher, the VIX moves lower. As this chart shows, it has been trending lower for over two years and a long falling price channel has formed. The indicator found support around 11% over the last 10 months and a move above the August high would show increased volatility (more risk). This would be bearish. Further strength above 18% would break the long downtrend and usher in a period of rising volatility. This would likely coincide with a prolonged decline in stocks.

By Arthur B. Hill - Thu 22-Sep-05 at 11:04AM in Sentiment
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Nowhere to Hide

Even the small-caps value stocks came under intense selling pressure. The Russell 1000 Value ETF (IWD) gapped and surged above 69.5 last week, but failed to hold the gains and formed a bearish engulfing this week. In fact, a harami first formed and then a long black candlestick engulfed the entire harami. The gap below 69 and black candlestick confirm these bearish engulfing pattern and the next support level is around 67.5.

By Arthur B. Hill - Thu 22-Sep-05 at 11:00AM in Indices
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Wednesday - September 21, 2005

Broadening Formation

The S&P 500 has formed a broadening formation over the last few months. These are big bad bearish reversal patterns. The higher highs in 2005 show good buying pressure, but the lower lows reflect uncertainty and volatility. The index formed a lower low in April and a higher high in early August. Should the index break support at 1200, I would expect a move towards the lower trendline. This trendline extends below 1100 in October.

By Arthur B. Hill - Wed 21-Sep-05 at 12:22PM in Indices
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SML Will Move Faster

The S&P 500 is not alone with its broadening formation. The S&P SmallCap Index (SML) also formed a broadening formation over the last few months. This index is made up of high beta small cap stocks. These usually outperform on the way up and underperform on the way down. Should the S&P 500 break support and start a broad market decline, I would expect these small caps to decline faster and deeper.

By Arthur B. Hill - Wed 21-Sep-05 at 12:21PM in Indices
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HPQ Looking Frothy

Dell (DELL) and Lexmark (LXK) have tanked recently, but Hewlett Packard (HPQ) continues to charge ahead and make new highs. I would be might nervous holding this perennial disappointer after such a run. The stock reached the upper trendline of a rising price channel that extends from mid May and formed a bearish engulfing (red oval). It is still a top picking exercise, but this stock could easily correct back to 25.

By Arthur B. Hill - Wed 21-Sep-05 at 12:20PM in Stocks
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Dell Reaches Support

When comparing the charts for DELL and HPQ, one would be inclined to think they are in different industry groups. DELL is testing support that extends back to 2004 and cannot hold a bid. Meanwhile, HPQ is recording 52-week highs and pushing all the right buttons. DELL is a leader and this kind of performance bodes ill for the broader market and the industry. The stock is getting oversold and at support. While this may provide a reprieve, the damage done over the last few weeks will have lasting affects.

By Arthur B. Hill - Wed 21-Sep-05 at 12:20PM in Stocks
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Qlogic Reaches Retracement

Storage is a hot industry group and Qlogic is part of it. However, the chart pattern does not look so hot. QLGC retraced 50% of its prior decline with a rising price channel advance to around 35. This was a laborious advance with relatively light upside volume. Volume is fuel and low fuel tells me this was a corrective advance. The stock is running into trouble around 35 and a move below the lower trendline (32) would signal a continuation of the prior decline.

By Arthur B. Hill - Wed 21-Sep-05 at 12:18PM in Stocks
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Before the Oil Runs Out

The Christian Science Monitor (click here) is running a three part series entitled “Before the Oil Runs Out”. It is a seriously long-term outlook, but worth a big cup of Joe and a read.

By Arthur B. Hill - Wed 21-Sep-05 at 12:18PM in Oil
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Tuesday - September 20, 2005

Signs of Inflation

The iShares Lehman TIPS Bond Fund (TIP) is indexed to inflation and represents a hedge against inflation. In contrast, the iShares ~20-year T-Bond Fund (TLT) is not hedged and this bond would not perform well in an inflationary environment. When TIP outperforms TLT, signs of inflation are present. When TLT outperforms TIP, inflation is under control and not a concern.

TIP is outperforming TLT and this tells me that inflationary concerns are heating up. The TIP/TLT spread declined from late April to mid July and broke resistance in late August. This breakout reflects a preference for TIP over TLT. Moreover, bonds (TLT) usually decline in such an environment and gold becomes attractive.

By Arthur B. Hill - Tue 20-Sep-05 at 05:54AM in Bonds
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Finance Powers SPX

The Finance SPDR (XLF) represents the biggest sector in the S&P 500 and NYSE Composite (~20%). It is the gorilla of sectors and will likely drag the S&P 500 with it. The stock has been fairly strong lately and managed to hold its early September gains. However, the breakout at 30 remains elusive and the stock formed a bearish engulfing pattern. A move below 29.5 would confirm the pattern and lead to weakness in the S&P 500.

By Arthur B. Hill - Tue 20-Sep-05 at 05:54AM in Sectors
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Retail Remains Weak

I have noted weakness in the Retail HOLDRS (RTH) and it continues to plague the Consumer Discretionary. The S&P 500 is holding up relatively well, but relative weakness does not inspire confidence. RTH formed five black candlesticks in a row and broke support at 94. On a break above 98 would reverse the downtrend in this key group.

By Arthur B. Hill - Tue 20-Sep-05 at 05:54AM in Industries
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SPY Harami Cross

A harami started the rally in late August and a harami cross may have ended the rally. This is a bearish candlestick reversal that requires confirmation. The decline over the last few days provides confirmation and it would take a move above 124 to turn short-term bullish again.

By Arthur B. Hill - Tue 20-Sep-05 at 05:53AM in Indices
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DIA Triangle Tightens

DIA is caught in a triangle and the noose is tightening. The direction of the break will have ramifications for the rest of the year and perhaps longer. A move above 107.5 would be bullish and a move below 103.5 bearish.

By Arthur B. Hill - Tue 20-Sep-05 at 05:53AM in Indices
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Monday - September 19, 2005

HON Cup with Handle

Honeywell (HON) is testing resistance and a breakout would confirm the cup-with-handle pattern. The cup extends from February to July, the handle from August to September and the rim marks resistance at 39.5. A breakout would signal a continuation higher and forecast higher prices.

By Arthur B. Hill - Mon 19-Sep-05 at 06:48AM in Stocks
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Hi Ho Silver

Not only are gold stocks breaking out and surge on good volume, but silver stocks are also joining in on the action. Coeur D’Alene (CDE) broke resistance in mid August, corrected and surged again in September. Notice that CDE moved back below the August breakout, but held the consolidation lows. The stock gapped higher in early September and surged on good volume Friday. The precious metals group is moving higher.

By Arthur B. Hill - Mon 19-Sep-05 at 06:47AM in Stocks
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Yahoo! Feeling Google Heat

While Google (GOOG) tests its July highs and resistance around 300, Yahoo! (YHOO) continues to wallow near its July lows. The stock never recovered from the gap down and consolidated the last two months. There is support at 32.5 and resistance at 35. Traders should watch these boundaries for a signal. Given the unfilled gap and inability to bounce, I think the stock will continue lower and break support. A move above 35 would negate this theory and be bullish.

By Arthur B. Hill - Mon 19-Sep-05 at 06:47AM in Stocks
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RSAS Making Noise

RSA Security is in the business of network security. The company fell on hard times earlier this year with an earnings miss, but has clawed its way back. The stock surged in July, consolidated in August and broke resistance in September. Given the correction in the Nasdaq in August, I think the stock held up quite well and the breakout argues for higher prices. Volume picked up on Friday and it would take a move below 12.4 to negate the breakout and turn bearish.

By Arthur B. Hill - Mon 19-Sep-05 at 06:46AM in Stocks
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Pulte Filling the Gap

A up gap is bullish as long as it holds and a down gap is bearish as long as it holds. Once these gaps are filled, the gap is negated and a move in the opposite direction (of the gap) may take hold. PHM gapped up on Friday 9-Sep and declined sharply on Friday 16-Sep. The decline occurred on high volume and the stock finished in the middle of the gap. This gap is getting a quick challenge and further weakness below 43.5 would fill the gap. This would make it an exhaustion gap and PHM could then test support around 40 again. Turning bearish now would still be a top picking exercise, but the recent surge in downside volume shows an uptick in selling pressure and this group may remain under pressure.

By Arthur B. Hill - Mon 19-Sep-05 at 06:46AM in Stocks
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Friday - September 16, 2005

Retail Drives Market Lower

Does this chart look familiar? It should. It looks pretty similar to the Consumer Discretionary SPDR (XLY) chart and weakness in retail is a big reason for weakness in XLY and the S&P 500. The Retail HOLDRS (RTH) broke support at 99 in mid August and declined to 95. The stock found support around 95 and bounced, but the move was relatively weak and a reaction high formed at 98 this week. As long as RTH remains below 98, I view this chart as bearish and would expect further weakness, which will weigh on XLY and SPX. Is this decline a mere correction of the Apr-Jul advance or the start of a bigger move down? While this may be unclear, one thing is clearly clear. Without a catalyst, we should expect this decline to continue. A bullish catalyst (break above 98) would bring the correction theory to the forefront and argue for at least a test of the early August high.

By Arthur B. Hill - Fri 16-Sep-05 at 02:31PM in Industries
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NDX Correction or More?

There are three possibilities when we look at a price chart. We see what we WANT we see. We see what we THINK we sell. We see what is ACTUALLY there. That insight comes from David Fuller of fullermoney.com. Just what is actually there on the NDX chart? The index retraced 50% of the prior advance with a falling flag and broke resistance with a surge above 1575. The doji on Tuesday and decline over the last two days are negative, but not enough to reverse this breakout, which would take a move above 1570. For now, the April trendline and broken resistance (~1570) are holding. Even though Tuesday’s doji and Wednesday’s long black candlestick are certainly disconcerting and maybe even short-term bearish, it would take a move below 1570 to do real damage on the daily chart.

By Arthur B. Hill - Fri 16-Sep-05 at 02:31PM in Indices
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Regional Banks Look Weak

The Regional Bank HOLDRS (RKH) remains weak and the bigger pattern at work points to more weakness. The Apr-Jul advance formed a rising wedge and fell well short of the January high. Remember, the S&P 500 and Nasdaq surpassed their January highs and RKH shows relative weakness. The lower high and rising wedge make for a bearish pattern and the recent support break at 133 is bearish. The stock is not going quietly though and there is a lot of support around 135. Even so, I would expect lower prices (~125) over the next few months and would not entertain bullish thoughts unless the stock breaks above 137.

By Arthur B. Hill - Fri 16-Sep-05 at 02:30PM in Industries
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Dollar Testing Resistance

The falling flag remains in place and the US Dollar Index is testing upper trendline resistance. Technically, the index broke above the trendline, but I will not be impressed (bullish) unless there is a break above 89. Such a move would signal a continuation of the prior advance and target an advance to around 96. Show me the breakout first. The long term gold outlook is featured in this week's TDT Report (click here)

By Arthur B. Hill - Fri 16-Sep-05 at 02:27PM in US Dollar
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Thursday - September 15, 2005

NDX AD Line

As the above chart illustrates, Nasdaq 100 breadth is not strong at all. The AD Line is a cumulative measure of advancing stocks less declining stocks. This AD Line is based exclusively on the 100 stocks in the Nasdaq 100. The AD Line followed the Nasdaq 100 higher in July, but not in early September. While NDX is challenging its early August high, the AD Line traded flat over the last few weeks and formed a large negative divergence. In addition, the AD Line broke support in late August and this tells me that fewer and fewer stocks are participating in the current rally. Rallies don’t go far when participation thins.

By Arthur B. Hill - Thu 15-Sep-05 at 11:17AM in Breadth
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NDX AD Volume Line

The AD Volume Line is even weaker because it broke support and remains below broken support. This indicator is a cumulative measure of the volume in advancing stocks less the volume in declining stocks. Unless both of these indicators can make it back above their 50-day SMAs, the outlook for breadth is bearish and this will ultimately weigh on the Nasdaq 100 and by extension the S&P 500. As Greg Morris asserts, “breadth is the footprint of the market”. The AD Line represents the rank-and-file and the AD Volume Line represents the large-caps. You know that selling pressure is picking up when both are deteriorating.

By Arthur B. Hill - Thu 15-Sep-05 at 11:17AM in Breadth
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Dow AD Line

Speaking of bad breadth! The AD Line for the Dow is in terrible shape. The indicator formed lower highs and lower lows over the last few months. Fewer and fewer Dow stocks are showing strength and this bodes ill.

By Arthur B. Hill - Thu 15-Sep-05 at 11:17AM in
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Wachovia Breaks Support on Big Volume

I first highlighted Wachovia (WB) on 31-August with the triangle. The stock bounced in early September, but quickly fell back and broke support with high volume. This support break looks like it is here to stay and WB appears headed lower. Only a move above the September high at 51 would reverse this break.

By Arthur B. Hill - Thu 15-Sep-05 at 11:16AM in Stocks
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P&G Harami

Procter & Gamble (+ Gillette) is the biggest stock in the Consumer Staples sector and the Consumer Staples SPDR (XLP) is not going anywhere without agreement by PG. After a triangle breakout in early September, PG formed a harami (red oval) and then gapped lower. The two day decline confirms the harami and negates the trendline break. Should the market turn lower, the Consumer Staples SPDR (XLP) or PG will not offer safe keeping.

By Arthur B. Hill - Thu 15-Sep-05 at 11:16AM in Stocks
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Wednesday - September 14, 2005

Monaco Coach Breaks Trendline

Here is another classic setup. Monaco Coach (MNC) formed a falling wedge in August and broke the upper trendline with good volume yesterday. The decline was a bit deeper than usual for a correction, but the pattern (falling wedge) is valid. I am also impressed with volume flows over the last two weeks as upside volume outpaces downside volume. The Accumulation Distribution Line moved higher from late April until late July and then traded flat as the stock corrected. This shows light selling pressure and even some accumulation during the August decline. A move below 14.5 would negate this breakout.

By Arthur B. Hill - Wed 14-Sep-05 at 06:22AM in Stocks
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JDS Uniphase Surges off Support

JDS Uniphase (JDSU) has shown signs of firmness for the last few months and is getting another bounce off support on good volume. The stock bounced in July with good volume and this move also featured above average volume. The pattern looks like a 3-4 month consolidation and a break above 1.8 would be bullish. Low priced stocks carry above average risk and a move below 1.45 would be bearish.

By Arthur B. Hill - Wed 14-Sep-05 at 06:21AM in Stocks
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Applied Materials Consolidates

For the Semiconductor HOLDRS (SMH) to really get moving, the equipment stocks need to break resistance. Look no further than the leader: Applied Materials (AMAT). The stock advanced from 14.5 to 18.5 and then consolidated with a triangle. There is support around 17.5 from the lower channel trendline and September low. A move above 18.5 would break consolidation resistance and signal a continuation higher. This would be bullish for the stock and the Semiconductor HOLDRS (SMH). Conversely, a move below the early September low would be quite negative.

By Arthur B. Hill - Wed 14-Sep-05 at 06:21AM in Stocks
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Entergis Breaks Resistance

Entergis (ENTG) traced out a nice setup and the upside breakout has a lot of power. The decline to around 10 retraced 50% of the prior advance (May-Jul) and formed a falling wedge. Both the decline and the retracement are typical for corrections. In addition, the decline found support near broken resistance This another good sign as the breakout is holding. The stock gapped up on 6-Sept and again on Friday. Volume surged and this breakout looks like it is here to stay. Watch 10.5 for signs of a failure.

By Arthur B. Hill - Wed 14-Sep-05 at 06:20AM in Stocks
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Electronic Arts Gaps on Big Volume

The pattern is classic and the breakout looks robust. Electronic Arts (ERTS) corrected in August, gapped up and then surged above resistance on high volume. The gap and surge have broken the decline and this signals a resumption of the prior advance. Watch 58 for signs of a failed breakout.

By Arthur B. Hill - Wed 14-Sep-05 at 06:20AM in Stocks
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Tuesday - September 13, 2005

Dollar and GLD Up

What’s this? The US Dollar Index rises sharply and the StreetTracks Gold ETF (GLD) also gains. Monday’s move is impressive, but the greenback remains within a falling flag and I want to see a break above 89 to turn bullish again.

Gold opened weak on Monday, but rallied by the close and finished at its highest level of the year. The falling flag breakout is holding and I would not become concerned with the uptrend as long as 44 holds. A move below 44 would seriously challenge the breakout in gold.

By Arthur B. Hill - Tue 13-Sep-05 at 06:28AM in Gold
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Taiwan Semi

Here’s one to watch for the semiconductor group and techs overall. Taiwan Semi (TSM) formed harami in late August and early September (blue carets). These are bullish candlestick reversals that require confirmation. In addition, the stock formed a falling wedge and broke above the upper trendline last week. Moreover, upside volume is outpacing downside volume over the last two weeks. I am marking key resistance at 8.5 and a break above this level would signal a continuation of the April-June advance.

By Arthur B. Hill - Tue 13-Sep-05 at 06:27AM in Stocks
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Rambus 5 or 90?

Mike Cohen, director of research at Pacific American Securities, says that Rambus is "worth either $5 or $90". He adds that the varied valuations are based on whether or not someone expects Rambus to ultimately win its legal cases. The stock surged on takeover rumors and is testing trendline support. There are a number of court cases in progress and the stock will be prone to the ebb and flow of these cases. There are really no other drivers for the stock. Imagine a tech company driven by lawyers!

By Arthur B. Hill - Tue 13-Sep-05 at 06:27AM in Stocks
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RSAS Breakout

Network security company RSA Security (RSAS) broke to a five month high with a move above resistance on Monday. Volume was a bit light though. The stock has lots of support just above 13 and a move below 13 would negate the breakout. In fact, a failure to hold the breakout and a move below 13 would be outright bearish. Despite the low volume, the breakout is bullish until proven otherwise.

By Arthur B. Hill - Tue 13-Sep-05 at 06:26AM in Stocks
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Oil Services

Oil has already fallen from its highs around 70, but the Oil Service HOLDRS (OIH) remains at relatively lofty levels. The stock surged at the end of August and then formed a doji on 1-Sep (red circle). This shows sudden indecision and the stock is getting resistance around 120. In addition, notice that Chaikin Money Flow is in negative territory and buying pressure has dried up. Most momentum oscillators also sport negative divergence over the last few weeks. The stage is set for a correction or consolidation and I see lots of support around 105.

By Arthur B. Hill - Tue 13-Sep-05 at 06:25AM in Industries
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Monday - September 12, 2005

Transports Lag Industrials

Dow Theory stipulates that the Dow Industrials and Dow Transports should confirm each other to validate weakness or strength. Most recently, both Averages recorded new reaction highs in late July (green arrows) and this provided a Dow Theory confirmation of strength. Both Averages corrected in August, but only one surged in September.

The Dow Transports formed a falling flag correction in August. The only problem, for the bulls at least, was the inability of the Average to break the fall, exceed resistance at 3706 and signal a continuation higher. The flag just kept on falling and the Average gapped down on Friday.

In contrast to the Dow Transports, the Dow Industrials firmed around 10400 with a couple of bullish candlestick reversal patterns and surged above 10600 with a big move over the last four days. Wednesday’s long white candlestick is enough to confirm the prior bullish engulfing (30-31 Aug) and turn the Dow Industrials short-term bullish.

The Dow Industrials surged and the Dow Transports sank – something is wrong with this picture. This amounts to a non-confirmation of strength in the Dow Industrials. The Dow Transports need to break resistance at 3706 to get the Dow Theory bull back on track. Without confirmation from this economically sensitive group, the breakout in the Dow Industrials is prone to failure.

By Arthur B. Hill - Mon 12-Sep-05 at 06:53AM in Indices
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Bond Reversal

In the aftermath of Katrina, bond investors cheered at the prospects that the Fed would hold off on further rate hikes. However, Uncle Sam is likely to foot the bill for much of the rebuilding and this will require the government to issue more bonds. More bonds means more supply and more supply means downward pressure on bond prices. The yield rises as the bond prices falls. As yields rise, bonds become more and more attractive.

On the price chart, the iShares 7-10 Year T-Bond Fund (IEF) gapped higher at the end of August, consolidated and moved lower last week. The gap was filled and this makes it an exhaustion gap. The pattern over the last seven days even looks like an island reversal and all the buyers around 80 are stranded with loosing positions. The August advance was certainly sharp, but retraced 62% or the prior decline and I think last weeks reversal will lead to lower prices.

By Arthur B. Hill - Mon 12-Sep-05 at 06:53AM in
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US Dollar Index

The US Dollar Index is getting a lift today and a rise in interest rates could keep the green back strong. Higher interest rates attract more money and this money must be concerted into US Dollars to be invested in bonds. The decline over the last two months looks like a falling flag and the index found support around broken resistance (85.5). Even though the falling flag is a bullish correction, we need a breakout for confirmation. A move above the upper trendline and resistance at 89 would signal a continuation higher. Such a breakout would be negative for gold and gold stocks.

By Arthur B. Hill - Mon 12-Sep-05 at 06:52AM in US Dollar
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XOM Revives Energy

Why is the Energy SPDR (XLE) surging again? Thank ExxonMobil (XOM) in large part. XOM is the biggest component of XLE and has been lagging the sector this summer. The stock never broke down, but never broke up. Until now. After a falling flag breakout in June, XOM consolidated the last 2-3 months. The breakout at 61 on good volume is bullish and I would expect new highs over the next few weeks.

By Arthur B. Hill - Mon 12-Sep-05 at 06:52AM in Stocks
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PG Breakout

Procter & Gamble (PG) is the biggest component in the Consumer Staples sector and the recent breakout bodes well for both. Notice that volume expanded as the stock broke triangle resistance and exceeded its late July high.

Procter & Gamble (PG) is the biggest component in the Consumer Staples sector and the recent breakout bodes well for both. Notice that volume expanded as the stock broke triangle resistance and exceeded its late July high.

By Arthur B. Hill - Mon 12-Sep-05 at 06:51AM in Stocks
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JNJ Breakout

Strength in Johnson & Johnson (JNJ) is helping the HealthCare sector. The stock broke above the upper trendline of a long falling price channel and is challenging resistance from the Jul-Aug highs. Upside volume has outpaced downside volume the last two weeks.

By Arthur B. Hill - Mon 12-Sep-05 at 06:51AM in Stocks
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Tuesday - September 06, 2005

It's a Girl

Anais Hill
September 6, 2005 1:50PM
3.26 kilograms / 7.2 pounds
51 Centimeters / 19.9 inches

I will be taking a few days off from blogging to spend time with the newest edition of our family. This blog will continue next Monday 12-September.

By Arthur B. Hill - Tue 06-Sep-05 at 05:30PM in General
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Friday - September 02, 2005

Waiting for a Catalyst

The pieces are in place for a short-term bullish reversal and continuation of the advance that began in April. The Nasdaq 100 formed a falling flag that retraced 50% of the prior advance. In addition, the index found support from broken resistance and the April trendline.

1550 has been the downside target for the flag and we are now getting signs of buying pressure. The index broke the upper flag trendline and closed above the bullish engulfing high (Fri/Mon). This is the early bull signal and should be treated as such until proven otherwise.

Despite a break above the upper flag trendline, the current catalyst does not measure up to the early July breakout. Notice that the June/July setup is virtually identical: falling flag, 50% retracement, one month decline. The June correction ended with a bullish engulfing (1-Jul/5-Jul) and a two day surge above 1515 resistance (green oval). For the current catalyst to measure up, we need to see a big break above 1590 – preferably 1600. This would solidify the reversal and call for a continuation of the July advance. Wait for the break!

By Arthur B. Hill - Fri 02-Sep-05 at 03:14PM in Indices
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XLY lags

This sector, and by extension the broader market, could be in trouble. With the lower high at 35, the big pattern looks like a triangle (blue trendlines). The red and green trendlines show the up and down swings within the triangle. After a doji in late July (red caret), XLY came down pretty hard and broke trendline support to turn the swing down. The next stop is support around 32 and it would take a move above 35 for an impressive breakout.

By Arthur B. Hill - Fri 02-Sep-05 at 03:13PM in Sectors
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Software Catches A Bid

The Software HOLDRS (SWH) could be the one to watch. This represents the biggest sector within the Nasdaq and features stocks such as MSFT, ORCL, SYMC, CA, SAP, ADBE and INTU. The stock has been zigzagging higher the last five months and recently “zagged” to trendline support. A bullish engulfing is taking shape this week and support at 35 is confirmed by the June lows. Confirmation of the bullish engulfing with a move above 36 would start another “zig” higher and target a move above the July high.

By Arthur B. Hill - Fri 02-Sep-05 at 03:12PM in Industries
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Oracle Breakout

Oracle breaks falling wedge resistance with a big move. Volume was a bit light, but the breakout is clear.

By Arthur B. Hill - Fri 02-Sep-05 at 03:10PM in Stocks
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Thursday - September 01, 2005

Biotech Breakout

The Biotech HOLDRS (BBH) is doing it again. The stock gapped higher in mid July. This could have turned into an exhaustion gap, but the stock held the gap and established support at 186 in July. Yesterday’s pop on big volume reinforces support and signals a continuation higher. A move below 186 would negate this bullish signal.

By Arthur B. Hill - Thu 01-Sep-05 at 06:16AM in Industries
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Transports Find Support

Big moves are often followed by corrections. These corrections retrace 38-62% of the advance and often return to broken resistance levels or prior resistance zones. A key tenet of technical analysis is that broken resistance turns into support. In addition, corrections often trace out certain patterns such as falling flags or wedges.

Now that you have the back ground, we can apply some of this theory to the Dow Transports. First, there was a big surge from 3400 to 3800. Second, there was a correction that retraced 38-50% of the advance. Third, the Average is finding support near broken resistance. Fourth, the Average formed a falling flag. All the elements of a classic correction are there. Now we need a breakout. The bullish candlesticks are starting to form and a move above 3720 would forge a bullish breakout.

By Arthur B. Hill - Thu 01-Sep-05 at 06:16AM in Industries
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Bonds Concur

Don’t take the Fed’s word on interest rates. Listen to the bond market. The iShares ~20-year T-Bond Fund (TLT), which rising when interest rates fall, traced out a classic correction and broke resistance to signal a continuation higher.

Just as described in the Dow Transports analysis, TLT retraced 62%, found support near the Apr-May consolidation, formed a falling flag and broke resistance with a strong move. The strong rise in bonds (fall in rates) suggest that the Fed is indeed finished raising rates.

By Arthur B. Hill - Thu 01-Sep-05 at 06:15AM in Bonds
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Is the Fed done?

I highlighted a bearish pennant in the iShares REIT ETF (IYR) on 25-Aug. However, the stock held support, gapped higher and broke resistance. This is one of the most interest rate sensitive groups and the breakout signals lower interest rates ahead. At the very least, it suggests the end of rising rates.

By Arthur B. Hill - Thu 01-Sep-05 at 06:14AM in Industries
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Gas Humor

This one made me laugh…..

….until I filled up the tank.
LOL = Laughing Out Loud, OMG = Oh My God, WTF = What The &%$#

By Arthur B. Hill - Thu 01-Sep-05 at 06:12AM in Oil
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Middies Lead

On 31-Aug, I wrote that we should bank on the mid-caps. Sure enough, the market turned around on Thursday and the S&P Midcap ETF (MDY) led the way higher with good volume.

The stock formed a falling flag/wedge in August, firmed just above the April trendline and broke above 130 on Thursday. This signals a continuation higher and reinforces support around 127.

By Arthur B. Hill - Thu 01-Sep-05 at 06:11AM in Indices
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