BigTrends.com
Weekly Market Outlook
September 13, 2003
NASDAQ COMMENTARY
While the Nasdaq made a nice recovery on Thursday and held the line on Friday, it
wasn't quite enough to save the week. We still closed the week with about a 0.2%
loss. However, the close above the 10 day EMA lines remains a bullish indication.
More than that, the Nasdaq is still holding above the longer-term support line from
March (dashed), which has now become nothing less than miraculous.
As of the end of last week, the short-term trend is with the bulls, but we want to
keep an eye out for resistance at 1860. This is the level that we gapped under when
we failed to trade above Tuesday's low on Wednesday. These gaps are a strong
indication of fear and a need to sell, and we typically see these gapped levels come
back into play (eventually). The more important level to watch, though, is last
week's high around 1889. We're several points under there right now, so even some
buying next week won't push us back up to multi-month highs. We're reserving any
bullishness until we see 1890.
That's going to be tougher and tougher to do, though. The market is already
over-extended on a long-term basis, as valuations are still at multiples of 35+ (over
earnings). While that's not unheard of, it's still an indication that stocks are bit
pricy. And in the short-term, stochastics still says that we're slightly overbought.
Last but not least, we're still seeing a shift into higher volume losing days, and
lower volume buying days (see the lower portion of our chart).
The other side of that coin is that the best quarter for the year (for stocks anyway)
is just around the corner. The one thing that could work against the year-end
bullishness is an over-extended market. So in some respects, not only is a pullback
brewing, it may ultimately be advantageous to have a mini-capitulation in the coming
weeks.
As we said in the MidWeek Update, there are now more reasons to be bearish than there
are to be bullish even though the current trend is mildly bullish. But the 10 day EMA
line and the longer-term trend line (dashed) are still strong support levels.
NASDAQ COMPOSITE CHART
S&P 500 COMMENTARY
We got some surprising late day strength form the S&P 500 on Friday. It certainly
wasn't enough to offset the rough week, but don't be surprised if the bullish
momentum carries through into this coming week. The most important part of the chart
was the close back above 1015. That had been resistance for several weeks, so seeing
the market claw its way back above it is an indication that there are still some
willing buyers out there. The close above the 10 day EMA line is almost as important.
This bullishness is pushing directly against what the technical indications are
saying. Namely, the MACD (Moving Average Convergence Divergence) lines are saying
that we've got some negative momentum in development, and the stochastics lines are
saying we're overbought. Throw in the fact that we failed to take out Thursday's high
but did make a lower low, and you have some bearish ingredients.
The critical lines to watch at this point are two key resistance levels. The first is
the downward sloping green resistance line formed over the last three days. This is a
secondary resistance level, but at least should be noted. The more important
resistance level is 1031, where we topped out Monday and Tuesday. The importance of
this line is augmented by the fact that we also made a strong reversal pattern over
these two days. We opened near the low closed near the high on Monday, then opened
near the high and closed near the low on Tuesday. This is typical of a short-term
market peak, and sure enough, the pattern played out the rest of the week.
So while stocks may be generally headed higher right now, we're mildly bearish in the
bigger scheme of things until we get and stay above 1030. Support is at the 20 day
EMA line, which is currently at 1010.
S&P 500 CHART
BOTTOM LINE
Investors piled back on Friday, working to extend Thursday's gains. Don't be
surprised to see this carry through next week. Remember, we're still overbought,
which makes moving higher that much more difficult. Be sure to mark Monday's highs as
resistance on your charts, as that will be the ultimate test of whether or not this
rally can (and will) remain strong. And at the risk of sounding like a broken record,
we again remind you that there is nearly always some sort of correction around this
time of year. Exactly when is not quite clear, but still, don't dig in too deep just
yet.
Have a Great Tading 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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