StockCharts Blogs - Don't Ignore This Chart!

What Did the VIX Know and When Did It Know It?

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The VIX is the Volatility Index published by the Chicago Board Options Exchange (CBOE).  It measures the "implied volatility" of a hypothetical SPX option created from a weighted average of several actual SPX options.  (For all the gory details, check out our ChartSchool article on the VIX.)  Typically, the VIX is interpreted as an "inverse" market indicator - i.e., down is bullish and up is bearish.  In the chart above, I've plotted the reciprocal of the VIX with the ratio symbol "$ONE:$VIX" (Note: $ONE is always equal to, you guessed it, one.)  That allows me to then compare it to a chart of the actual market.  Looking back at the past couple of years, you can see that the VIX did an uncanny job of indicating "trouble ahead" for stocks.  Just like when it started moving up before the market did in 2002, the VIX started moving down in 2007 and the market followed dramatically in 2008.  Definitely, don't ignore this chart!

The Battle for Apple (AAPL)

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Apple has been bouncing around $90 since October.  Is that support going to hold?  One way to gauge the strength of a support level is to use the "Vol by Price" overlay - the horizontal histogram on the left side of this chart.  It adds up all the volume for any days on the chart that close within the bars price range.  The bars in two colors - one for volume when the stock closed up and the other for when the stock closed down.  In the case of AAPL, the long horizontal bar shows that lots of volume has occurred in the $90 - $100 range and that is the most important support level on the chart right now.  It also shows that the volume on "up" days (gray) is almost equal to the volume on "down" days (light blue).  The Vol by Price overlay clearly shows that 90 is the battleground for AAPL right now.  With AAPL oscillating around $90 (possibly in a triangle pattern), the battle is getting very heated and is worth watching closely in the coming days.

Up + Down = Down (CQP)

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The MACD Histogram shows the change in momentum of the MACD Line.  The MACD Line - in turn - shows the change of momentum in the underlying stock.  In the case of CQP, the MACD Line has been moving up pretty steadily since early October (blue trendline).  Recently however the MACD Histogram has started moving lower and is now diverging significantly from the MACD Line.  This signals trouble for the stock - something that may already be appearing on the chart.

Support for the Dow? ($INDU)

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Today the Dow Jones Industrials closed below its 6 year low just under 7500.  What's the next important support level?  What's the one below that?  (and, gulp, the one below that?)  Here you go.  Let's hope those green lines on the right side of this chart stay green.

Bottom Feeding: Time for Asia Time? (TYM)

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Trying to catch a "falling knife" like Asia Time (TYM) is extremely risky in any market.  Doing it in today's market is pure folly.  And yet...  TYM is the only stock on any of the major markets to have its RSI rise back above 30 after staying below 30 for several days.  Today's big rebound (on good volume) continued yesterday's bounce (on relatively light volume) and made the RSI movement possible.  Strong resistance at 0.50 appears to limit the upside however.  While extremely risky, this is still a technically interesting stock to watch over the next couple of days.

Bollinger Band "Topo Map" ($INDU)

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Based on the statistical concept of Standard Deviations, Bollinger Bands graphically illustrate how "far away" prices are from their "average" value.  Traditionally, 2.0 standard deviations are used to determine where the upper and lower bands should appear.  In the chart above, I've layered 6 different Bollinger Bands on top of each other going from 2.0 deviations to 3.0 deviations forming two "bands of Bands."  The "deeper" prices go into either band, the more likely things will "snap back" towards the dashed average line.  That's good news since the Dow plunged deep into the lower band today.

Long-Term Log Scale Chart Provides Context ($INDU)

How bad is it?  How big was the Internet bubble?  How does the current decline compare to the 1987 crash?  It's all here in black and white (and red and blue).  On a log scale chart like this, movements of the same percentage appear to have the same height regardless of the point values.

The key take away here is that when the Internet bubble burst in 2002, the market went back to the "normal" rate of climb that it established after the crash in 1987.  The current economic crisis destroyed that trendline in mid-2008 and is therefore much more serious.

After the Head and Shoulders (NDN)

NDN has been falling after completing a classic Head & Shoulders chart pattern back in January.   Today was the first set of positive technical signals for the stock in quite a while - a bullish MACD crossover, a rising RSI line and a bullish Parabolic SAR signal.  While all of these signals can be premature, when combined with three up days after what looks like an exhaustion sell off, the odds of a turnaround taking hold increase.

While I have no idea what will happen with this particular stock in the coming days, this is a good example of the kind of technical setup that all technical traders search for.  Each trader's setup will be different, but most will contain elements of technical indicator crossovers, support and resistance analysis, chart pattern identification and volume study.

McClellan Summation Index Struggling to Stay Positive

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The McClellan Summation Index is a great market indicator that recently set some all-time record lows back at the end of last year.  Since then, it has bounced back into positive territory, but over the past couple of days a new decline has begun.  While not unexpected, that is disappointing since "according to the McClellans, the beginning of a new bull market is signaled if the NYSE-based Summation index first moves below the -1200 level and then quickly rises above +2500."

Anatomy of a Doji (STAA)

STAA put in a huge Doji on its daily chart today.  Technically, a doji is a candlestick where the open and the close are the same.  The huge upper shadow and relatively small lower candle makes STAA's Doji especially striking.  It is very close to being a "Gravestone Doji" - a doji with a big upper shadow and no lower shadow.

Doji's often signal a reversal.  We can see the reason for that by looking at the 10-min intraday chart for STAA:

STAA gapped up on the open and then quickly rose to its high for the day (2.74).  It then spent the rest of the day slumping back to its opening price.   By 3:30, it had moved below the open to the low of the day - 2.00.  A late day buy order brought prices back up the opening level - 2.04.

As we can see on the intraday chart, the quick move up followed by a lack of follow thru had two consequences - 1.) it probably depressed the STAA bulls and 2.) it created the big doji on the daily chart.  Which is why dojis often indicate reversals.