John Murphy, King of Technical Analysis

Top 15. Apr 2, 2005 2:00 PM

» Normxxx - Re: Re: NEXT TARGET FOR FINAL UPWAVE IS 1245-1250 IN S&P 500

In response to Re: NEXT TARGET FOR FINAL UPWAVE IS 1245-1250 IN S&P 500 posted by bob90245:

Don't know; but it's a definite possibility by mid-May, depending on what happens to oil.

It is not an everyday experience to see the McClellan oscillator move below -300. It is also equally rare to see the 21-day oscillator, which is nothing more than a cumulative 21-day advance/decline line, dip under -10,000. If there was even a remote possibility of the market about to experience a waterfall decline-- such as occurs in the intensity of bear markets-- these historically rare oversold conditions would not be a time to even “nibble” at stocks. But nothing else is so filled with doom, and my other indicators are saying that things are still in decent enough shape that the odds of an ensuing serious waterfall decline are very, very low-- at least until mid-April.

To quote Mcclellan:

"We are seeing in stocks right now one of the great oversold opportunities of the last 15 years. The McClellan A-D Oscillator low on March 23 is of the type that mark the termination of declines, and set a floor for future price action.

"We still look for a 40-week cycle bottom at the end of May, but it likely will not go below this level. Look for a top April 14-21 to set up for the decline into that late May cycle bottom, and then prices should rally during the summer."

[Normxxx Here: I wouldn't bet on that! ]

"Bond prices are very oversold, as traders have overreacted to the inflation news. Commercial traders are now net long, suggesting a price rebound for bonds.

"Gold also got oversold in the paranoia about the Mar. 22 FOMC meeting, and should bounce back into April before a further decline."

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only. Individuals should consult with their own advisors for specific investment advice.

-- posted by Normxxx

Top 16. Apr 3, 2005 1:18 PM

» Normxxx - BAD NEWS FOR ECONOMICS, DOW THREATENING LOW

BAD NEWS FOR ECONOMICS, DOW THREATENING LOW

- John Murphy | 2 April 2005

THE ECONOMIC NEWS ISN'T GOOD ... It's interesting to see the media put a positive spin on recent economic reports. It was reported this week that fourth GDP growth was lower than expected while prices were higher than expected. That was described as good for the economy. Earlier this morning, the government reported that March non-farm payroll numbers were only half what was expected. That was reported as good because it lessened the chances for higher interest rates. A report of lower consumer confidence was viewed as a non-event. The ISM report showed a weakening in manufacturing activity coinciding with surging raw material prices. That apparently is why companies haven't been hiring. It was reported that although the ISM number fell to 55.2, it was still above 50 which is good. My question is how can a slowing GDP number, slowing manufacturing activity, lower consumer confidence, higher raw material prices, and fewer jobs be good for the economy. The market is telling the truer story. Sector rotations during the first quarter paint a bearish picture for the market. After suffering a bad first quarter, the market fell sharply again today and threatens to get even worse. A number of stock indexes are testing chart support at their 2005 lows. I suspect they'll be broken sooner or later. Since the market is also a leading indicator for the economy, economists might do well to pay more attention to the message the market is sending. Unfortunately, it's not an optimistic one.

DOW THREATENING JANUARY LOW... The daily Dow chart shows the market at a critical juncture. The Dow fell 99 points today and is threatening its January low, its 200-day moving average, and its September peak at 10390. I suspect all will be broken. There's always the possibility of an April bounce. But seasonal factors then turn negative until the autumn. My best guess at this point is that Dow is headed toward its fourth quarter low near 9700. I would continue view any short-term bounces as selling opportunities. Two of the best places to be right now are energy and cash. If you haven't already done so, take a look at some bear market mutual funds. They'll allow you to make money in a falling market.

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx

Top 17. Apr 18, 2005 1:58 PM

» Kirk - Says Buy Bear Funds on Pullbacks (S&P Bounces)

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Still a bear.

Mon, 18 Apr 2005 4:51 PM ET

WHY CHARTISTS ARE TALKING ABOUT 1140 ... Last Friday I expressed my view that the S&P 500 was headed toward its August low near 1060. A number of chart analysts, however, have been talking about the market being oversold and in chart support near 1140. Chart 7 shows what they're referring to. The daily RSI line is in oversold territory. There's also chart support along the June and October peaks near 1140. That's a logical spot to expect a short-term bounce. Expect initial overhead resistance at its 200-day average at 1154. Even if it gets through that, there's a lot of overhead resistance over 1160 which marked the January low. I'd use any S&P bounce to do some selling. Any bounce in the S&P should coincide with pullback in bear market funds. I'd use a pullback there to do some buying.

The above came to me via email:

A Market Message Update (#2) from John Murphy

-- posted by Kirk

Top 18. Apr 21, 2005 10:52 AM

» Kirk - 4/21/05: Murphy says "Sell Rallies"

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Thu, 21 Apr 2005 1:29 PM ET
You have to pay to see his charts. I'm simply recording his market calls here.
http://stockcharts.com/members/analysis/...

KEY CHART LEVELS ON DAILY S&P 500 CHART -- WEEKLY CHART IS STILL NEGATIVE -- MONTHLY CHART HASN'T GIVEN MAJOR SELL SIGNAL, BUT IT'S GETTING CLOSE

KEEP YOUR EYE ON THE KEY CHART LEVELS ... It's important to keep your eyes on the key chart levels. That helps keep things in their proper perspective. It also prevents us from getting too caught up in day-to-day market swings and conflicting signals from short-term technical indicators. The daily bars for the S&P 500 in Chart 1 show three key levels. The first one is the overhead resistance line near 1163 which represents the January low. If the recent chart breakdown was for real, the S&P shouldn't climb back over that barrier. That's because broken support levels become new resistance levels. There are two underlying support levels shown on the chart. The first one is near 1140 which represents the October peak. When a market starts to fall, it will usually find support at a previous peak. The 1140 is also a fifty percent retracement of the August/March rally which is a level that usually provokes some buying. Given today's market bounce, that appears to be happening. I'm labeling the 1140 level as "interim" support because I believe that it will eventually be broken. But it is one of the key support levels. That means that the S&P could bounce around between 1140 and 1160 before resuming its downtrend. A decisive close over 1163 would be needed to cause me to reevaluate my bearish outlook. A decisive close under 1140 (which I believe to be more likely) would pave the way for a bigger decline toward major support at the low of last August near 1060. My general advice is the same: "sell into rallies".

Chart 1

WEELY MACD LINES STILL BEARISH ... Weekly signals are more important than daily signals. When studying a daily chart, it's always important to study the trend of the weekly chart. That's because rallies on a daily chart won't carry very far if the weekly chart is in a negative mode. And that appears to be the case. Chart 2 shows the weekly bars for the S&P 500. The lines overlaid on the price bars are the MACD and MACD histogram. The MACD lines are in negative alignment and have been so during most of the first quarter. The fact that the December peak in the MACD lines failed to reach their early 2004 peak (while the S&P hit a new high) also represents a big negative divergence. The MACD histogram (green) bars plot the difference between the MACD lines and are also negative. Until those weekly lines turn positive, any short-term market rallies should be viewed in a bearish light.

Chart 2

NO LONG-TERM BEAR SIGNAL YET ... The monthly chart is the most important of all because it highlights the major long-term trend of the market. There's good and bad news on the monthly bars in Chart 3. The good news is that the monthly MACD lines (and histogram) haven't turned negative yet. They issued a major buy signal in the spring of 2003. The bad news is that the MACD lines have been converging (weakening) over the last year. That can be seen more clearly in the falling histogram bars which are at the lowest level in nearly two years. The histogram bars need to fall beneath the zero line to give a major sell signal. They're getting close, but haven't done so yet. Keep in mind, however, that the monthly signals are usually the last to kick in. Investors have to ask themselves if the current sell signal on the weekly chart is enough to justify "some" anticipatory selling especially on market bounces. I think it is. And I've been recommending that since January.

Chart 3

-- posted by Kirk

Top 19. May 4, 2005 2:20 PM

» Kirk - Cover Shorts

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I guess if you sold the rally but didn't short you should stay in cash according to my take of today's comments. He has some nice charts for his subscribers (I get a free subscription in exchange for using their stockcharts here which I really like I might add.)

Kirk

Wed, 4 May 2005 4:51 PM ET

FINANCIALS LEAD MARKET RALLY -- MARKET INDEXES EXCEED INITIAL RESISTANCE LEVELS -- LIGHTEN UP ON BEAR POSITIONS

FINANCIAL SPDR EXCEEDS 200-DAY LINE ... I've written several times recently that if the market were going to stage a rally, one of the groups that would lead it higher would be the financials. And that's what happened today. In a strong market day, financials were the day's top sector. Chart 1 shows the Financials Sector SPDR (XLF) moving back over its 50- and 200-day moving averages. The last time it climbed over both lines was back in early November. The financial relative strength line has also started to climb. It recently broke a two-month down trendline and is now trading at a two-month high. Most of today's big financial gainers were banks, brokers, and insurance stocks. Chart 2 shows Bank Regional Holders breaking through their 200-day average on rising volume.

Chart 1
Chart 2

BEARS STEARNS HELPS BROKERS REGAIN 200-DAY LINE ... Chart 3 shows Bear Stearns rallying back over its 200-day moving average. That helped the Broker/Dealer Index (XBD) regain its 200-day average as well. The recent fall by the XBD below the 200-day line raised market risk since brokers are considered to be leading market indicators. Today's move back over that long-term support line has removed some of that market risk.

Chart 3
Chart 4

DRUGS, REITS, AND DIVIDEND ETF ARE MARKET LEADERS... Scanning through the various group indexes, the next three jumped out because of their superior chart performance. The Pharmaceutical Index (DRG) continued its recent climb and hit a new 52-week high today (Chart 5). REITs continued to gain ground as well. Chart 6 shows the Morgan Stanley REIT Index (RMR) moving over its March high to the highest level in four months. Chart 7 shows the Dow Jones Dividend iShares (DVY) breaking through its April high and its 50-day moving average. Its relative strength line is trading at a new six-month high. Apparently, investors are opting for the relative safety of dividend paying stocks.

Chart 5
Chart 6
Chart 7

MARKET INDEXES CLEAR FIRST HURDLES ... Each of the three main stock index ETFs broke through initial chart barriers today. Chart 9 shows the Dow Diamonds (DIA) closing over their 200-day average, a two-month down trendline, and the January low at 103.15. That paves the way for a possible test of its 50-day moving average and more chart resistance just over 105. Chart 9 shows similar improvement in the S&P 500 SPDRs (SPY). The SPY closed over initial chart resistance at 116.77 and is nearing a test of its 50-day line near 118. The daily MACD lines have turned positive. The Nasdaq 100 Shares (QQQQ) are well below their moving average lines, but did close above initial resistance at 35.71. The lines below the QQQQ chart show an improving short-term trend. The +Directional Index (+DI) line (green) is rising, while the -Directional Index (-DI) line (red) is falling. They haven't crossed positive yet, but they're converging. That's confirmed by the fact that the Average Directional (ADX) line is starting to drop (black line). That's usually a sign that the current downtrend may be changing direction. That's not enough to turn the chart bullish. But it is enough to suggest some short-covering.

Chart 8
Chart 9
Chart 10

EXITING BEAR POSITIONS ... Last Friday (and again on Monday) I suggested that those on the short side of stock index ETFs could place protective buy stops over last week's price highs. Those highs have now been exceeded which warrants some short-covering of existing bear positions. With virtually all of the market indexes back over their 200-day moving averages, and positive short-term market action, the imminent threat of a market breakdown has been neutralized for now. That's enough, in my opinion, to reduce short positions. The same is true for those traders who bought bear market funds. I'd suggest lightening up on those as well. While I'm not recommending new long positions at this point, anyone looking to commit money to the market should consider new market leaders -- like some of those groups shown above.

Great! For those of us who were buying this dip rather than buying bear funds as Murphy suggested, this short covering should give us some nice gains quickly.

-- posted by Kirk

Top 20. May 18, 2005 12:49 PM

» Kirk - Re: 4/21/05: Murphy says "Sell Rallies"

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In response to 4/21/05: Murphy says "Sell Rallies" posted by Kirk:

Whipsaw?

on 4/21: Investors have to ask themselves if the current sell signal on the weekly chart is enough to justify "some" anticipatory selling especially on market bounces. I think it is. And I've been recommending that since January.

Now with the market up significantly... he thinks it is time to start buying... perhaps.

Wed, 18 May 2005 1:55 PM ET

MARKET TAKES TURN FOR THE BETTER -- FINANCIALS, RETAILERS, AND TECHS LEAD MARKET HIGHER -- MAJOR INDEXES EXCEED MOVING AVERAGES

SECTOR ROTATIONS TURN POSITIVE ... Over the last couple of days, I've been writing about sector rotations that normally take place in a market upturn that's often accompanied by falling energy prices. Earlier in the week I wrote about how semiconductors were leading the technology-dominated Nasdaq market higher, which is good for the rest of the market. Yesterday, I explained that financials and retailers also have a history of leading the market higher after energy prices peak. Interestingly, the three top market industry groups over the past week have been semiconductors, banks, and retailers. That's a positive sign for the market as a whole. Chart 1 shows the Bank Index climbing back over its 200-day average and breaking a five-month down trendline. Today's benign inflation report (and falling oil prices) are giving a big boost to rate-sensitive stock groups. Bond yields are falling while homebuilders and REITs are very strong. Chart 2 shows the Retail Holders (RTH) jumping sharply over both moving average lines this week. Their relative strength ratio has also turned up. Along with technology stocks, these are the types of stocks that usually lead a market advance.

Chart 1

Chart 2

NASDAQ 100 TURNS UP ... On Tuesday I showed the Nasdaq 100 Shares (QQQQ) breaking a five-month down trendline and challenging their 200-day moving average. They've broken through that important resistance line. I also pointed out that an upturn in the QQQQ/SPX ratio was a good sign for the market since the Nasdaq usually led the market higher at bottoms. It looks like the rest of the market is following the Nasdaq higher.

Chart 3

DOW AND S&P 500 CLEAR MOVING AVERAGE LINES... The improvement in the broader market is seen on the next two charts. The S&P 500 is trading back over its 50-day average for the first time in two months. The Dow has climbed back over its 200-day moving average (as well as its 50-day line). Impressive as the price action has been over the last couple of days, the one thing missing has been a noticeable pickup in volume. That's a necessary ingredient in a major market upturn. For now, however, we have to respect the strong price action. This isn't a time to fight the tape. It's also not a time to be short the market or to be holding onto a bear market fund. [My May 4 message recommended reducing shorts and bear market positions (May 04, 2005)]. It may even be time to put some money back into the market. That's especially true of the groups mentioned above that are leading the advance.

So... time to reduce bear funds and buy into the higher beta sectors that are now going up? I'd love to see how he puts this into practice in a typical portfolio.

-- posted by Kirk

Top 21. May 18, 2005 1:34 PM

» Normxxx - Re: Re: 4/21/05: Murphy says "Sell Rallies"

In response to Re: 4/21/05: Murphy says "Sell Rallies" posted by Kirk:

Didn't Hulbert give him a lousy rating?

This could easily go to 1300-- but I expect a down week next week before then.

-- posted by Normxxx

Top 22. May 18, 2005 2:54 PM

» Kirk - Re: Re: Re: 4/21/05: Murphy says "Sell Rallies"

In response to Re: Re: 4/21/05: Murphy says "Sell Rallies" posted by Normxxx:

"Didn't Hulbert give him a lousy rating?"

I don't know. What is his newsletter called? I don't see anything listed under "John Murphy" in the most recent HFD long term performance ratings.

-- posted by Kirk

Top 23. May 18, 2005 4:41 PM

» Normxxx - Re: Re: Re: Re: 4/21/05: Murphy says "Sell Rallies"

In response to Re: Re: Re: 4/21/05: Murphy says "Sell Rallies" posted by Kirk:

"John Murphy's Market Message" -- but he seems to be part of StockCharts.com now, so maybe HFD no longer rates him

-- posted by Normxxx