| Chart Patterns $SML $TRAN $UTIL OIH PPH $VXN |
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| Wednesday, April 18, 2007 |
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Evening Update
The S&P 600 Small Cap Index (SML)
Today the small cap index made new 52 week highs at 370.27. The daily chart remains in its reverse symmetrical triangle (RST). As always, the general rule of thumb is, that higher highs are bullish even though this pattern itself is treacherous. The RSI on the daily chart is heading higher and is at 65.5, the stochastics are bull flagging, and the williams% indicator is bullish and trending. It remains to be seen if this pattern will over shoot the upper trend line and turn into a continuation RST. Do not let this pattern scare you out of the market and prevent you from trading.
The Dow Jones Transportation Average (TRAN)
As with the Small Cap index the TRAN is also in a reverse symmetrical triangle pattern. So far this year the TRAN has erased all its losses in the past two days alone on massive volume and price. Should this pattern turn out to be bearish, it will not take out resistance at the trendline. However, I do not foresee that to be the case.
The Dow Jones Utility Average (UTIL)
When I look at the daily UTIL chart I think it is bullish. I see it as a failed topping pattern. The UTIL index is currently in a sideways correction whilst holding its uptrend line as it forms an ascending triangle pattern. If the utility indexes start moving up then all indexes will be aligned to move higher much to the pleasure of Dow theorists. If you are looking for setups look to the utilities, and look for them in the stock scan as well.
Oil Services Holders ETF (OIH)
I want to update the OIH because, once again, it hit new 52 week highs at $149.35 today. As previously stated, this has been the best sector this January. It is up 15.52% this month alone. That is up nearly 20 points. What more can I say, except, that I love the pattern stock scan. The stock scan called out this move in the OIH back in November / December as it was breaking out of its ascending triangle. The stock scan also picked all of our energy stocks UPL, SU , CNQ and BRY. In addition, the OIH is front running Oil (WTIC) and there is no bearish divergence. It is also making new PPO highs on the weekly. (However, it is getting frothy- let's just wait and see)
The Pharmaceutical Holders ETF (PPH)
On the weekly chart, the PPH has broken its downtrend line going back to the year 2000. The PPH continues to be in a bearish trend reversal on the Aroon indicator. Nevertheless, I think the PPH is going to turn bullish. The PPO is starting to turn up as are stochastics on the weekly. I would start looking towards this sector because there may some rotation going on as investors become more risk adverse and more defensive. I would look at Pfizer (PFE) and some large cap pharma's. Keep an eye on this sector because eventually there will be rotation out of commodities and into utilities and pharmas.
The Volatility Index - Nasdaq (VXN)
We are currently back to levels on the VXN where we had a monster rally and the broader indexes still remain bullish. If I interpret that correctly, that means to me that we may have more momentum to break out. I would still not be short at these levels. I will not be short until the day our longs stop working.
$SML
$TRAN--DON'T HOLD BREATHE BUT DON'T THINK FOR A SECOND THE POWERS AT BE AREN'T UP TO SOMETHING
$UTIL
OIH
PPH
$VXN
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