Post by DJF on Oct 10, 2004 16:54:39 GMT -5
From early week optimism too end-of-week woes, the market did an about turn last week. Disappointing jobs data put a palor of gloom on the proceedings. Earnings for next week will be the key fundamental drive. Technically, we will be looking at the degree of support mid-September congestion will provide (the grey boxed areas on the NASDAQ, NASDAQ 100, and S&P). For the Dow, we will be interested in how the broadening wedge acts as support as it did in September. Are there any bullish undertones to this negative shift? On Oct 6th I said the markets had the edge, technically, versus oil. If you look at the chart for oil you will see it is well beyond all of its moving averages. Although the MACD trigger line is at a new high, it sits at resistance of its previous peaks. Unfortunately, I cannot plot the volume, but even without that it appears oil is in line for an intermediate term correction lasting at least a month, a good time to short oil stocks? The coverage in the mainstream media would be of note to a contrarian.
In the NASDAQ, the MACD trigger line and on-balance-volume are at new 6-month highs, but still have room to move to resistance, implying a strong up trend. The last attempted breakout in late July had the on-balance-volume confirmation, but not the MACD trigger line to support it. The volume pattern is strong - declining in downtrends and rising in uptrends. The last reaction high of 1,971 marked its first test of the 200-MA. The next test should be good enough to break it. The best trade plan is to sell, move to the sidelines and wait for the reaction at the 20-day and 50-day MA. The latter moving average (now at 1,864) was support in September and it should be again if we are to see an election rally.
The spanner in the works remains the Dow which has failed to show the bullish traits of the tech indices. The September-October rally has the looks of a bear flag; weak MACD and slow stochastics, with a slow rising on-balance-volume trend below resistance. The volume pattern does look bullish on the main chart, but the breakdown form the bear flag does not give much reason for optimism (other than the potential for support at the broadening wedge as illustrated in my public stockchart of the Dow).
The S&P is the strongest index on paper - but all is not 100% warm and cosy here. The recent breakout has the looks of a bull trap, as confirmed by a failure of the MACD trigger line to regain a prior breakout. However, the 200-day MA and 20-day MA are nearby and it will be interesting to see how these act as support on Monday. It has a strong bullish volume pattern. Close to resistance it is a better sell than a buy. Bulls should look to the 50-day MA as a potential area to re-enter as this was an area of support in September.
In the NASDAQ, the MACD trigger line and on-balance-volume are at new 6-month highs, but still have room to move to resistance, implying a strong up trend. The last attempted breakout in late July had the on-balance-volume confirmation, but not the MACD trigger line to support it. The volume pattern is strong - declining in downtrends and rising in uptrends. The last reaction high of 1,971 marked its first test of the 200-MA. The next test should be good enough to break it. The best trade plan is to sell, move to the sidelines and wait for the reaction at the 20-day and 50-day MA. The latter moving average (now at 1,864) was support in September and it should be again if we are to see an election rally.
The spanner in the works remains the Dow which has failed to show the bullish traits of the tech indices. The September-October rally has the looks of a bear flag; weak MACD and slow stochastics, with a slow rising on-balance-volume trend below resistance. The volume pattern does look bullish on the main chart, but the breakdown form the bear flag does not give much reason for optimism (other than the potential for support at the broadening wedge as illustrated in my public stockchart of the Dow).
The S&P is the strongest index on paper - but all is not 100% warm and cosy here. The recent breakout has the looks of a bull trap, as confirmed by a failure of the MACD trigger line to regain a prior breakout. However, the 200-day MA and 20-day MA are nearby and it will be interesting to see how these act as support on Monday. It has a strong bullish volume pattern. Close to resistance it is a better sell than a buy. Bulls should look to the 50-day MA as a potential area to re-enter as this was an area of support in September.