Our big resistance level at 1350 was firmly broken last week, and since then the
Nasdaq Composite has stayed well above it. Besides that, the index moved above the
200 day moving average line. This is monumentally bullish, as we haven't managed to
do this and stay above it since the year 2000.
But don't start counting unhatched chickens. We've recently toyed with the 200 day
line, but haven't been able to stay above it in the previous two attempts from
December and January. Even today we are starting to see the momentum weaken as the
charts begin to roll over back to the downside. This chart pattern looks woefully
like the previous two passes - not just in terms of price charts, but also in terms
of technical indicators.
There is a downward sloping resistance line that we touched on yesterday and today,
so it's no surprise we're slowing here (see chart). Stochastic lines are drawing a
similar setup as they move into the 'overbought' region on the chart. Yes, it is
possible to stay overbought for quite a while as markets rally, but when's the last
time that happened in the last three years? (It was October of last year and November
of 2001. The only other time we stayed overbought for any length of time was in
February of 2000, before the bear market was upon us) The point is, this market is
more apt to reverse than it is to continue, and we're approaching the point here a
reversal would happen. Stochastics, although not yet an official sell signal, is
waving a red flag.
Resistance is at 1400 and again at 1460. Support is currently at 1350 where the 200
day SMA and the 10 day EMA are converging. We feel we're more likely to go lower at
this point.
Daily Chart of the Nasdaq Composite (COMPX)
OEX COMMENTARY
The S&P 100 was no different than the Nasdaq in that it broke through (or
obliterated) resistance levels.
What is noticeably different for the OEX is the fact that it has yet to actually
reach its 200 day moving average line. This isn't totally surprising, since the
tech-heavy Nasdaq is the first to make big recoveries while the blue-chip heavy S&P
lags. But the two indices are inter-related, and the fact that the OEX hasn't even
yet approached the 200 day line doesn't bode well for the Nasdaq or the S&P 100. (In
other words, the Nasdaq pass of the 200 day line may be a very errant move)
One of the similarities that the OEX does have with the Nasdaq is the downward
sloping resistance line. Yesterday and today we ran into it, and today's loss of
momentum is an indication of that resistance.
The other similarity the OEX has in common with the Nasdaq Composite is the
stochastic indication that the market is currently overbought, and ready to reverse.
Support for the OEX comes at 430. Resistance is at 440 and then again at 450, or the
200 day line. (continued)
Daily Chart of the S&P 100 (OEX)
Bottom line: Yes, previous military action has resulted in huge rallies. Yes, the
markets have already discounted markets prior to the military action. However, based
on our indications and the reality that stocks and the economy are still struggling,
investors are still skeptical. We certainly concede that the war can spark buying (as
it already has), but keep in mind that investors are remarkably better informed and
remarkably more hesitant than they were during the Gulf War rally of 1991. Our
thoughts are that a repeat of that scenario is not guaranteed. Pay close attention to
the resistance lines, as crossing them is bullish. At this point, we don't think
we'll cross them, but with the geo-political dynamics we're going to experience in
the next few days, anything is possible.
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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