BigTrends.com
Weekly Market Outlook
July 12, 2003
Nasdaq Commentary
The great part about the Nasdaq's move to twelve month highs is that the Nasdaq
typically leads the rest of the market. While the index can't always carry the lion's
share of rallies, its current leadership certainly offers hope for the other trailing
indexes, such as the S&P 500.
We expected some resistance at 1750, and sure enough, we got it; our highest close
this week was 1747, on Wednesday. We did move as high as 1758 that day, but
considering we never closed above 1750, we plan on being challenged there again. As
the chart indicates, while it's a resistance line, it's at least a bullish (rising)
resistance line. You can also see that we're again well above our 10 and 20 day EMA
lines (red and blue, respectively). These are likely to continue acting as support
levels, although they really weren't tested this week. In fact, that divergence
between the moving average lines and the price bars has an important implication:
being that far above it means we could fall considerably, yet still be in a bull
trend. The Nasdaq Composite could drop 34 points Monday, and it still wouldn't be a
cause for panic.
Technical indicators are also still bullish. The MACD crossover from early this week
is still intact, and we closed the week out with accelerating momentum. The
accumulation-distribution is in agreement with the bullish mode. As long as it's
rising, investors are buying more than selling, and that buying trend is evident on
our chart.
The major resistance level, as we had mentioned, is 1750. As for support, keep an eye
on the 10 and 20 day EMAs at 1699 and 1669, but the major support level is now
resting at 1640.
Daily Chart of the Nasdaq Composite (COMPX)
S&P 500 Commentary
Although the Nasdaq is at twelve month highs, the S&P 500's lack of progress this
week towards highs three weeks ago doesn't exactly comfort the bulls. Yes, any time
you gain for the week it's bullish, but the S&P's chart isn't encouraging.
Our Directional Movement Index (DMI) lines indicate that the bull trend is weak, and
that there is almost as much selling pressure as there is buying pressure. That's why
none of the recent crossovers have 'stuck'. While the DMI+ line's (blue) position
above the DMI- line's (red) is a bullish signal, the low ADX line indicates little to
no trend strength. In other words, investors have waffled over the last couple of
weeks, at least for the S&P 500 stocks.
And what isn't highly evident on the price chart is clearly visible on the MACD chart
- momentum is falling. With both MACD lines making falling steeply towards zero, we
have to wonder if the rally has run out of steam. Should the MACD lines cross under
zero, that's actually an official sell signal. While we're still a few days out from
that even being a threat, it would most definitely be worth watching.
Resistance is still at 1015, where we hit highs three weeks ago. Support is at 990
and 970.
S&P 500 Chart - Daily
The Bottom Line
We've got a big economic data week ahead. Some of the data is important, while some
of it is not. A couple of the less meaningful figures include the N.Y. Empire State
Index, and business inventories. You can expect some nice trading volatility after
those announcements (especially the Empre State report), but don't look for much
long-term meaning there. The more important figures are CPI and Capacity
Utilization.Their results may actually have a lasting impact on the economy as well
as stocks.
We're still expecting a bit more bullishness ahead, yet we're gearing up for a
downturn to begin soon. As before, the early warning will come with closes under the
10 and 20 day EMA lines, but the S&P 500's failure to break above 1015 will also be
bearish.
Have a Great Trading Week Ahead!
Price Headley, CFA, President
With, James Brumley, Research Analyst
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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