The last couple of weeks have been volatile, to be sure. But markets really haven't
made any major moves, bouncing around in a fairly narrow range. For the Nasdaq, since
July 7th, that trading channel has been between 1675 and 1776. This is only about a
5.8% range, which is relatively small. This sideways movement could be considered
consolidation, as stocks and indexes take a break right before another big move. But
which direction will that move be pointed?
As you've read recently, our short-term expectation was a bullish pocket, centered
around earnings season. Further out, though, we were planning for a substantial
pullback. That hasn't changed: earnings season is still capable of launching stocks
higher for a couple of days, but earnings season can't fight off the bigger trend.
The timing of such a break, higher or lower, will still be cued by our support and
resistance lines.
The intermediate-term support line (dark dashed line) remains unbroken. As long as
the Nasdaq continues to close above it, we have to assume that the index will head
higher. However, notice that the 20 day exponential moving average line (blue) has
fallen under that support line. This is the first time we've seen this throughout
this entire rally, and it suggests that each surge above the 20 day EMA is
incrementally weaker. Eventually, those surges will completely falter, as we may be
seeing now. If the 10 day EMA line follows the 20 day EMA under our support line,
that would be another bearish signal.
The MACD lines still indicate negative momentum, and the actual 'momentum' indicator
is showing the same. A falling momentum line isn't completely a sell signal, but when
the momentum line falls under the zero line (as it is now), that confirms that a
declining trend is on place. As always, though, the official signal is a couple of
closes under the support line, and that has yet to happen. Until it does, we may see
continued sideways movement.
Support is at 1685, 1706 and 1710. Resistance is at 1744 and 1776.
Daily Chart of the Nasdaq Composite (COMPX)
http://www.bigtrends.com/images/073003otc.gif
S&P 500 (SPX) COMMENTARY
The S&P 500 has been even more range bound than the Nasdaq, trading between 974 and
1000 over the last two weeks (a 2.6% range). But for all of July the index has been
contained between 962 and 1015. The fact that we really haven't gone anywhere over
the last several days should come as no surprise.
Unlike the Nasdaq, the S&P 500 has already broken under most of its support levels.
The intermediate-term support line (dark dashed line) was breached two weeks ago, and
we haven't been able to get back above it. The 10 and 20 day exponential moving
averages have also acted as resistance as much as support over the last two weeks.
Today's cross under both of those lines is an official sell signal, but considering
we've crossed these lines several times (moving in both directions) recently, we'll
look for other confirmations of this sell signal. In the meantime, the 10 and 20 day
EMAs have also fallen below the intermediate-term support. In fact, the S&P 500's 10
and 20 day EMA's are particularly bearish in that the 10 day line (red) has fallen
under the 20 day line (blue) a couple of times in the last few sessions.
The MACD chart is still indicating negative momentum. If these lines cross under
zero, as they are set to do, this will be another official sell signal. Stochastics
has given a sell signal just today, as the %K line (blue) has crossed under the %D
line (red).
While we're getting multiple bearish indications here, the actual index has yet to
start falling. Rather, it's been treading water. This is why the support and
resistance levels are critically important at this point, since they will signal the
beginning of the impending downturn. The official sell signal will be a couple of
closes under 975. A close under 962 will confirm the downturn. The less likely
scenario is a continuation of the bullish rally, but a couple of closes above 1000
would be a buy signal. In that case, a close above 1015 would serve as confirmation
of any bullishness. As we've been saying, the downturn is the more likely of the two
possibilities.
Daily Chart of S&P 500 (SPX)
http://www.bigtrends.com/images/073003spx.gif
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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