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December 2007

ChartWatchers

INFLATION'S BACK!

by Chip Anderson

Three consecutive economic reports have shown that inflation, after lying dormant for several years, has been rekindled. The Fed, surely armed with the economic data we've seen, decided to lower the fed funds and discount rates by another quarter point each. Slowing growth and a pick up in inflation is not what equity indices want or need. Is higher inflation here to stay or is it just temporary? Based on the Fed's action last week, the Fed likely believes this blip is temporary. They've said as much in previous meetings, acknowledging that commodity prices could continue to put upward Read More 

ChartWatchers

A HEAD-AND-SHOULDERS FOR DIA

by Chip Anderson

Is that a head-and-shoulders pattern taking shape in the Dow Industrials ETF (DIA)? While it has yet to be confirmed, traders and investors should keep a close eye on this chart in the coming weeks. The potential head-and-shoulders pattern extends from June to December. The left shoulder formed in July, the head in October and the right shoulder is currently under construction. Notice that DIA opened strong on Monday and finished the week near its lows. In fact, DIA formed a bearish engulfing this week by opening above the prior week's close and closing below the prior week's open. This Read More 

ChartWatchers

RETEST IN PROGRESS

by Chip Anderson

Two weeks ago I stated that the rally off the November lows signaled that a bottoming process had begun, and that, after the short-term rally topped, we should expect a retest of the November lows. Last week the rally was still in progress, and I told Ike Iossif during our interview that I still expected a retest, but that I also feared that the rally would extend j-u-u-u-s-t far enough to trigger a Thrust/Trend Model buy signal before prices reversed downward. As you can see on the chart below, sure enough, the rally topped on Monday (generating a T/TM buy signal), and prices reversed on Read More 

ChartWatchers

RETAIL WEAKNESS IS A BIG PROBLEM

by Chip Anderson

The two charts below demonstrate part of the reason why recent Fed moves haven't had much of a positive impact on the stock market. It has to do with negative fallout on retail spending resulting from the housing meltdown. The bars in Chart 1 plot the S&P 500 Retail Index, which has been one of the year's weakest groups. The RLX is on the verge of falling to a new three-year low. Its relative strength ratio (solid line) has already reached a five-year low. If the weak performance of retail stocks is a leading indicator of retail spending (which I believe it is), and if retail spending Read More 

ChartWatchers

OBJECTIONABLE PRICE OBJECTIVES

by Chip Anderson

Hello Fellow ChartWatchers! Every week we hear about a couple of message board posts that have appeared on some website somewhere which essentially says "StockCharts.com is saying that this stock will rise (fall) dramatically!" Here's a screenshot from a recent example: We said that? What? Huh? First off, let me state for the record that StockCharts.com is not in the business of predicting stock movements. We never have been and we never will be. We provide tools that help anyone make their own predictions using any method that they feel comfortable with. If you Read More