Back in Saturday's Weekly Market Outlook we first mentioned that the Nasdaq was going
to be something of an underperfomer in relation to the rest of the market. We're not
going to gloat, as that stance is only three days old, but so far that's how things
are playing out. The Nasdaq is down 1.4% for the week while the S&P 500 is basically
flat. The Dow is actually up about 0.7% for the week. And none of it is really a
surprise - charts were telling a similar story days ago. The weakness of the Nasdaq
chart is particularly evident.
First, take a look at where the composite is in relation to its 10 and 20 day moving
averages; it's the only index to be under both of those key lines. In fact, the 10
day line (red) is under the 20 day line (blue). This is usually a sell signal,
although those crossunder signals have been somewhat ineffective lately. All the
same, it is a sign of general weakness. In the middle portion of our chart we can see
the MACD lines winding lower after topping in September. Those four peaks, each lower
than the last, have established a falling resistance line that has now forced the
faster MACD line (blue) under the zero level - a confirming sell signal. In the
lowest portion of our chart we've re-plotted the accumulatoin-distribution line. As
you can tell, it's still pointed lower, telling us that there is more selling than
buying of these Nasdaq stocks. In fact, the accumulation-distribution line is already
lower than it was at Saturday's analysis. (For a complete explanation of the
accumulation-distribution line and our analysis of it, click:
http://www.bigtrends.com/document.jsp?documentid=1498 )
Yet, the support lines are holding up, and as long as they are, charts are still
technically bullish. On the other hand, it's hard to be a confident bull when all
other technical analysis tools are indicating weakenss. We'll hold off on taking a
firm stance on the Nasdaq until the end of this week. By then charts should have a
little more clarity.
NASDAQ CHART
&P 500 COMMENTARY
While the S&P 500 may be down a little bit today, the chart of this index is about
all a bull could ask for. We're finding support at the 10 day moving average lines
(the Nasdaq can't even get above its 10 day line), and we're seeing some major upside
pressure put on the rising resistance line. And even after the Saddam-spike-and fall
on Monday, the S&P 500 has resumed making new highs
For the sake of comparison we'll again add an accumulation-distribution line to our
S&P 500 chart. Look in the middle of the chart. Like the index itself, it too is
still going higher, so we know that this bull run is not hollow and lacking the
volume we want to see.
Back in October we wrote a TrendWatch regarding the ADX portion of a DMI chart
(called "Something's Brewing", click here to view it:
http://www.bigtrends.com/document.jsp?documentid=1399 ). At that point in time the
market had been moving mostly sideways, and was somewhat difficult to trade. That
lack of a trend had actually been evident for quite sometime before that, in that the
S&P 500's ADX line had been held under the 25 level for the four months prior to
that. The reason it was important in October was simply that the ADX was on the rise
again and threatening to reach 25, telling us that a decent trend was actually
brewing. But the ADX line never actually crossed 25, nor did the trend ever really
take off. Instead, the index just continued chopping around, inching higher along the
way.
However, the ADX line did finally cross above 25 earlier this week. This is a very
important sign that the market is actually moving, and that the movement is actually
a strong (read 'tradable) trend. As of now it happens to be a bullish trend, but
that's not even the big concern. We're just glad to see tradable movement, either
bullish or bearish. In fact, with such a strong rise in stocks recently (and a high
ADX) any pullback could be equally strong, which again would provide a nice trading
opportunity. The point is, we're finally seeing the type and duration of movement
that is favorable to you swing-traders.
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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