Today we're finally starting to see answers to the question 'Will the Nasdaq start
making new 52 week highs again?' So far, the answer has been 'no', but the day isn't
over yet. The levels we were watching were the highs from September 19th, which was
1913.74 for the Nasdaq Composite. At the time that was an eighteen month high, but
since then, we haven't been able to go any higher
With today's high of 1914.33, we're now seeing that there is some pretty strong
resistance around 1914, having made a top there in the last two weeks. We hit that
line early in today's session, and ended up pulling back into negative territory for
the day as of the time of this writing. This is no surprise, as it's never easy for
investors to push stocks up to new highs. Being stochastically overbought (both
stochastic lines are above 80) only makes it that much more dangerous to keep buying
stocks. As regular readers will know, we frequently view being stochastically
'overbought' as a bullish occurrence, like it was in August and September. But this
time we have to consider that we're struggling with making new highs, and hitting
clear resistance. Meaning, this time we may have to concede that being overbought
just means that stocks are plain overbought.
As of right now, there are not any clear cut answers. The market is truly at a
pivotal point, and where we close today is going to be highly important. As of now
we're not above resistance at 1914, which is bearish. However, we stil have about
four hours left to go before the close, so we may yet see a break to new highs. If we
do that, then the outlook will lean towards bullishness. As always, we advise seeing
two closes above resistance lines to confirm any market strength.
On the other hand, failing to break above 1914 doesn't necessarily mean things will
be bearish either. It may take several days of sideways movement to establish a base
at these levels before investors feel confident enough to resume buying. So, you do
have to allow for a little volatility here. Early warning signals for any downside
would come with two consecutive days of lower lows and lower highs. A cross under the
10 or 20 day EMA lines would also be relatively negative.
NASDAQ CHART
S&P 500 COMMENTARY
The same chart scenario we see with the Nasdaq is playing out with the S&P 500 too;
we can't seem to break above September 19th's high of 1040.29. And like the Nasdaq,
we got confirmation of this today after we ran up to 1040.08 and pulled back shortly
thereafter. Getting above this resistance would be bullish, but failing to get above
it wouldn't be inherently bearish. Like before, we may need to establish a base here
before taking stocks to the next level.
As for technical indicators, there's something for everyone. The bulls see the MACD
crossover from a few days ago as a buy signal, and they're right. The bears see that
stochastics says stocks are overbought, and they're right too. This is one of those
times when the technical signals conflict, and one must choose whether to use the
trend indicator or the oscillator. For us, we're leaning towards the stochastic
oscillator, partially because we're also currently seeing strong resistance at 1040.
But we're also fairly pessimistic for the short-term simply because October is a
historically rough time of year. With the Nasdaq up by over 40% for they year, and
the S&P 500 up over 17% for the year, stocks are likely to cool off. That's ok - we
need a breather, if only to make the fourth that much better. October ends the worst
six months for the year and begins the best six months, and we expect this time to
not be much different. Look for a bottom in the coming days, but plan on some
strengthening towards the end of the month to kick off a strong year-end rally.
S&P 500 CHART
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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