Friday, what started out to be the best day of the week ended up being the worst day
of the week as the Nasdaq Composite gave up over 18 points from Thursday's close.
Still, though, the week gave us a gain of over 17 points, so we can't complain too
much.
As before, we're remaining bullish till we have a clear reason not to be. Understand
that we can still see some pretty good-sized declines and still be bullish - the
support line (dashed) tells that story. Our support line is drawn from the lows of
March 12th, April 14th, and May 21st. With the current support line at 1535, we could
lose 92 points off of Friday's close at 1627.42 and still be in a bullish channel.
You can see that the support line is rising, so as time passes, you'll have to adjust
that support line higher.
Fortunately, we may not even have to test that low, if the 10 day and/or 20 day
exponential moving averages can serve as support. Since March's low, the 10 and 20
day EMAs have sometimes acted as support, and sometimes not. The point is, don't
panic if we close under them, but do take note when and if we do, since that
straight-line support isn't far below.
Technically we still have momentum in our favor, as the MACD lines are still showing
a positive momentum divergence. However, that momentum did start to slow on Friday.
We're not going to be worried until we get a negative momentum divergence, (or a MACD
cross-under).
Stochastically we still look overbought, and therefore a correction is still looming.
As always, it's possible to stay overbought, but the longer we stay overbought, the
more likely a pullback becomes. Don't forget that our official exit signal will be
the stochastic lines fall under 80; that will be better evidence that the decline has
started.
As stated, support is at currently 1535, as well as the 10 and 20 day EMA levels.
Resistance is less clear, but around 1685.
Daily Chart of the Nasdaq Composite (COMPX)
S&P 500 (SPX) Commentary
For the sake of continuity, we'll again examine a weekly chart of the S&P 500,
although the interpretation is essentially the same as that of the Nasdaq Composite
chart. In other words, despite Friday, we're still bullish till we have a good reason
not to be.
Not surprisingly, the problem point for the S&P 500 came the same day it hit the 1000
mark with an intra-day high. If you read Thursday's Daily TrendWatch, you'll know
that the market has a tough time crossing big round numbers (both above and below),
so Friday's big reversal was not a shock. Until we decisively move above or below it,
you can expect the continued choppiness around the 1000 level. The horizontal
resistance is marked with a red dashed line on the chart.
As we had mentioned, we're bullish till bearishness is verified, which would come
with a close under the lower support line at 930 (see dashed lines). As with the
Nasdaq, the implication is that we could see a substantial drop, and still not break
under our bullish channel lines.
Keeping our MACD and DMI charts adjusted for weekly data, we can still see that the
bull trend is intact. The weekly MACD lines are still indicating a positive
(improving) momentum divergence, and the rising ADX line (in grey) indicates that the
high-low trend is increasingly bullish. It may not feel right based on Friday's
action, but the indicators are still bullish, so we are too.
All the same, watch for a close this coming Friday under this previous week's close
at 987.76. If we do close the week out a loss, that is cause for concern.
Support is currently at 964 and 930, with resistance at 1000 and 1020.
Weekly Chart of the S&P 500
The Bottom Line
Economically we got another mixed bag; unemployment is incredibly high, yet nobody
was surprised at the 6.1% figure. Factory orders dropped significantly, yet the ISM
services reading at 54.5 was far better than anyone could have hoped. We have a
pretty busy week ahead for economic data, so be sure to note the economic calendar
above.
The bias is still bullish, and will be as long as we continue to make gains (no
matter how small) on a weekly basis. We are expecting a pullback soon based investor
complacency and over-confidence, but until we technically start that decline, we're
going to trade with the trend rather than against it.
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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