It seems as if everybody is gearing up for favorable news from the Federal Reserve
this afternoon. Odds are that they'll get it, but that's no guarantee that it will be
recover losses over the last few days and push us back into bullish trend lines
NASDAQ COMMENTARY
While things went from bad to worse earlier this week, we're seeing a bullish spark
today as investors are buying in anticipation of a Fed-induced rally. The Nasdaq
Composite is showing the greatest strength of tall the indexes, yet is still the only
one trading under its important 10 day exponential moving average.
At this point, much of our technical analysis would be moot, since most of today's
action is centered around an interest rate cut. While we are already seeing some
buying, another cut would most likely push us even higher by the end of the session.
Even then, though, we still have technical resistance points that could prove to be
problematic. The most important of these resistance levels for the composite is 1685,
where we topped out three times in the last three weeks. Until we clear that hurdle,
we don't have much reason to be overly bullish.
In the less likely event that we get no rate cut whatsoever, there will be a lot of
disappointed investors. This of course will lead to selling, and thus reinforce the
technical sell signals that were given over the last few days. As we see in the chart
below, MACD is still indicating a negative momentum divergence, and we have firmly
broken under our accumulation-distribution support line.
That said, we're largely in a 'wait-and-see' mode until later this afternoon. Our
only caution at this point is simply that investor reactions to major economic
announcements are usually over-reactions. This kind of volatility is great for
traders, but that knee-jerk reaction may not sustain itself too long. That's why
we're continuing to watch the key 10-day EMA line, support at 1585, and resistance at
1685.
Daily Chart of the Nasdaq Composite (COMPX)
S&P 100 (OEX) COMMENTARY
We'll take a look at the OEX today, simply to highlight the important levels where
the index is finding support as well as resistance.
Unlike the Nasdaq, the S&P 100 never closed under its 20 day EMA line (in blue).
Although we did see some trades slightly under it from yesterday and Monday, the 20
day line has been an encouraging boundary. That's the case to an even greater degree
today, as we never even traded under the 20 day average.
On the other hand, we're having a tough time getting and staying above the 10 day EMA
line (in red). We have traded above it today, but as of the time of this writing, are
still just slightly below it. Adding to this resistance around the 10 day line is the
fact that it's resting right around the 500 level. As we have said before, big round
numbers are psychological support and resistance levels, so it's no surprise that
we're dancing on each side of 500 today.
As we had indicated in the Nasdaq commentary, even pushing higher today after a
favorable Fed announcement isn't necessarily a reason to start buying for the
long-term; we still have resistance at 512 that we'd like to breach before we're
convinced that stocks will ultimately head higher.
Support is at 495 and again at 490. Resistance is at 500 and 512.
Daily Chart of S&P 100 (OEX)
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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