The current uptrend can be summed up in one word - persistence. At each slight
pullback, buyers step in and buoy prices just a little higher. They're certainly not
going to do that forever, but as long as they are we're going to continue to go with
the bullish flow.
NASDAQ COMMENTARY
The Nasdaq Composite keeps knocking on the door of 1650, which would be a new high
close for the index over the last 52 weeks. True, we did get above 1650 on Friday of
last week, but that was the same day we gave all of that gain back (and then some) to
close the day at a loss. The closing level we're really interested in getting across,
on a daily basis, is last Thursday's close at 1646.01. As far as the bulls are
concerned, a close above 1650 would be even more meaningful.
The composite is finding nice support at the 10 day exponential moving average line
(in blue), so be sure to take note of that level on your charts. Currently at
1607.61, the 10 day EMA line will rise slightly with each day of gains, so be sure to
adjust accordingly.
The MACD chart is confirming the strength of the uptrend by continuing to move
higher, but its struggle to do so is becoming more apparent. As a bull trend is
accelerating the faster line (in blue) will pull away from the slower moving average
(in red). As the chart shows, the two are actually converging, suggesting that we're
running out of steam. If the two lines cross, that would serve as a sell signal to a
lot of folks. Of course, we're concerned about that too, since sellers are what bring
the market down. But until that happens, we're assuming the trend will continue.
We're showing the stochastics chart again, but now for a different reason. As we've
said, the official sell signal would come when the two stochastic lines fell under
the 80 threshold. This actually occurred Tuesday, but the market didn't confirm the
signal with a lower close. In fact, stocks went much higher that day. This is an
example of why we combine range-trading indicators with trend indicators, such as
MACD. The range-trading oscillators, such as stochastics, attempt to spot points of
reversal, but if the market is in a strong trend, there will obviously be no (major)
reversal. The very fact that the indicator failed is a testament to the strength of
the current uptrend. All the same, we'll continue to watch stochastic charts, as they
can still indicate exit points when the trend comes to a close.
Support is at 1606 and again at 1545. As for resistance, this is still not crystal
clear, thanks to last Friday's spike up to 1684.06. We'll use 1650 and 1685 as
resistance for the time being.
Daily Chart of the Nasdaq Composite (COMPX)
S&P 500 (SPX) COMMENTARY
We're using the daily S&P 500 chart to illustrate a couple of different key points,
but most of the analysis from the Nasdaq commentary applies here as well.
The first point is the same one we made last week - that investors use round numbers
as benchmark levels. While last week the key kevel for the Dow was 9000 (which it
crossed), this week the S&P 500 is facing the 1000 level (red dashed line). It's no
real surprise that we peaked above it last Friday and ended that day well under it -
many people were prepared to start selling at that level. Until we get firmly above
it or fall firmly below it, expect the continued turbulence.
The second key point here is simply the placement of the lower resistance line (the
bottom dashed line). Currently the index is at 985, but even with a fall to 950, we'd
still be inside the uptrending channel. Such a fall may be a very short-term bearish
opportunity, but the intermediate-term trend would still be bullish. The point is,
don't over react until we get a close under that support line.
The MACD chart is still bullish like the Nasdaq's, but we are much closer to a MACD
sell signal with the S&P 500. While this is cause for concern, again don't be spooked
by that crossover - it's happened several times over the last couple of months and
stocks have recovered each time. In fact, the rising accumulation-distribution line
still shows that the buyers are lining up. As long as there are more buyers than
sellers, stocks will be heading higher, so this accumulation-distribution line will
be worth keeping an eye on.
Support is at 975, or the 10 day EMA line (solid red line), and again at 950. We've
also plotted a couple of resistance lines; the first falls right at 1000, and the
upper one falls at 1015.
Daily Chart of the S&P 500
Bottom Line: The bull trend is still in motion, but momentum certainly looks to have
weakened over the last few days. That said, the trend is the trend, so we're going to
remain bullish until we get decisive evidence that stocks are headed lower. Our first
hint at that weakness will be a lower closing on a weekly basis. As of the time of
this writing, the indexes are pretty much where they closed last Friday, so the next
two days are going to be important.
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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