We did indeed come back from the long weekend in a buying mood. Monday was huge,
Tuesday wasn't bad, and even today's selling isn't hurting us too much. But is this
the end of the line for the rally? With the exception of one hurdle for the S&P 500,
most technical charts are still indicating growing strength for the stock market
NASDAQ COMMENTARY
With the Nasdaq Composite at 14 month highs, it forces one to wonder if it's too good
to be true. Don't get nostalgic for 1999 just yet, as we see a decline in the works.
But for the time being, we've got some bullish momentum that could carry us a little
higher over the next few days.
The resistance at 1685 proved to be no problem this week, as we opened near there
Monday and haven't looked back since. In fact, we've made a higher high and higher
low each this week (so far). The next potential point of resistance is the top line
of our bullish channel (see dark dashed lines). We actually hit this level of
resistance today, pulling back after doing so. While falling back under resistance is
intuitively bearish, consider the bigger picture - we're still firmly inside that
bullish channel.
In fact, given that we're so far above our key 10 and 20 day exponential moving
averages, at least a minor pullback should be expected. How much of a pullback is
tolerable for us to still be bullish? With a close examination of the chart, you can
see that the 10 day EMA is crossing over the resistance line at 1685 today. As long
as the 10 day line acts as support, we'll maintain our position above the important
1685 level, so the 10 day EMA is the proverbial line in the sand.
We're again examining the stochastics chart, as both stochastic lines have crossed
into the 80+ 'overbought' area. Don't fear the overbought situation, as it actually
indicated strong bullishness throughout April and May (se chart). Our interpretation
is the same as then - it's a sign of strength rather than a reason to sell. The
official exit signal will come when both lines fall under 80.
We're seeing a similar sign of bullishness with our Directional Movement Index (DMI)
lines. (see bottom of chart). The official entry signals for DMI analysis come with
DMI line crossovers, but for us, ADX line (in gray) crossovers are just as
significant. With the bullish DMI+ line (blue) re-crossing the ADX line, we're seeing
a renewal of bullish strength. In other words, the bull run was just taking a
breather last week.
Support is at 1685. Resistance is at 1755.
Daily Chart of the Nasdaq Composite (COMPX)
S&P 500 (SPX) COMMENTARY
Like the Nasdaq, charts of the S&P 500 look generally bullish, with one major
condition. That condition is a cross above resistance at 1015. We topped out there a
couple of weeks ago, and haven't been able to reclaim that territory. Any official
bullishness is reserved until we can make a couple of closes above the critical 1015
mark.
Although it doesn't look like we'll get any help in that endeavor today, most other
technical indications are pointing us higher. We had been eying MACD charts on the
lookout for a cross under zero as a bearish signal. Instead, we found support at the
zero line and bounced higher. The recent cross of the MACD lines confirms the
newly-found bullishness, and acts as an official signal of short-term strength.
Stochastics is following suit. The %K line (green) just today found its way into the
80+ oversold region, and the %D line (red) is not far behind. When and if both of
these lines find their way above 80, we'll be interpreting it as a bullish event. The
stochastic chart for May and June will explain our unconventional rationale.
As we've been saying, our intermediate-term outlook is bearish. However, the
short-term trend is still a bullish one, provided we can get and stay above
resistance at 1015. The 10 and 20 day EMA lines should be your first support levels.
As we head into earnings season, volatility can really heat up, so be sure to pay
attention to breakouts above these resistance lines and breakdowns under key support
levels. The volatility is not entirely a bad thing - you just want to be sure on the
right side of that volatility.
Support is at 975 and 995. Resistance is at 1015.
Daily Chart of S&P 500 (SPX)
Se não receio o erro é porque estou sempre pronto a corrigi-lo
There's no bull side and no bear side. JUST THE RIGHT SIDE!
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