BigTrends.com
Weekly Market Outlook
October 4, 2003
NASDAQ COMMENTARY
We'll be focusing most of our attention today on the S&P 500 chart below, but there
are plenty of things worth pointing out on the Nasdaq chart as well. First and
foremost, the 10 day EMA line has crossed back above the 20 day EMA line. This is an
important buy signal that ended up being given on a heavy volume day.
In fact, the general volume trend has been a bullish one. With the Chaikin line
crossing above zero Friday, we're getting another important buy signal. Regular
readers will know that the Chaikin line is a volume-weighted momentum line. The
reason we're so interested in volume is that ultimately it will determine the
strength and longevity of a trend. If volume increases as the trend develops, we know
that more and more people are pushing the trend in that direction. If instead volume
tapers off as the trend goes on, we know that the trend is soon going to run out of
participants, and will reverse. With the Chaikin line crossing over the zero line on
the same day we got the 10 day EMA cross over the 20 day EMA, we can see that some
new bullishness is brewing.
We have two primary concerns at this point. The first concern is the gap we made on
Friday. It's rare for a gap to go unfilled, meaning the Nasdaq should eventually fall
back and trade between 1842.55 and 1864.54. However, it's certainly possible that
this time will be an exception, and the gap will remain unfilled. We won't be
convinced of that, however, until we get and stay above September's high of 1913.74.
In fact that high is our second primary concern. Closing above that level will be
about the only way we can convince the majority of traders that they need not expect
to fill the gap. If instead investors sense weakness as we approach that high,
there's a good chance that the resulting sell-off will indeed fill the gap, creating
a self-fulfilling prophecy.
Given a choice, we'd rather see a slight fall back to the 10 day EMA line to test it
as support. This would not only fill the gap and alleviate that concern, but it would
also serve as testament that Friday's strength wasn't a fluke. But we'll settle for a
close above 1914.00.
NASDAQ CHART
S&P 500 COMMENTARY
The number to watch for the S&P 500 is 1040. That's where we topped out twice in a
row in September, and more importantly, that's about where we topped out Friday
before giving back a large portion of that day's gain. For whatever reason, that
seems to be the line in the sand, and until we get above it it will be tough to be
fully bullish.
This week's bullish pop wasn't a total surprise - we were oversold in the midst of a
generally bullish trend. In fact we got the stochastic buy signal right about the
time the upturn began, when both stochastic lines crossed back above the 'oversold'
threshold (at 20). From here, however, it still appears there's some room left for a
little more upside, since neither of the stochastic lines is yet in the 'overbought'
area on the stochastic chart. The MACD lines haven't even yet given a buy signal,
although we'll probably get that crossover with any strength at all this coming week.
the point is, the technicals are saying we're closer to the beginning of this bullish
surge than we are to the end of it.
But as we said, we're reserving any strong bullish opinions until we see a close
above 1040. We retested resistance there on Friday, and the shape of Friday's bar
wasn't particularly compelling. We ended up giving most of Friday's gains back by the
end of the day, which means investors we're basically unwilling to go any further. It
also shows a lack of confidence to hold stocks over the weekend, which ultimately has
bearish implications since people were acting more like sellers than they were
buyers.
S&P 500 CHART
BOTTOM LINE
We're expecting the highs from September 19th to be the final test for the current
bullish swing. Failing to get above there may be a setup for a downturn. If on the
other hand we do get above there, then we may get a jump on the fourth quarter
strength. We will, after all, be at twelve month highs (if not better, depending on
the index), and that should encourage a lot of folks to get in while they can.
There is room for upside from current levels, and we certainly have some momentum.
You may also want to keep in mind that it's very unlikely that we'll see losses in
both September and October. Having taken a loss in September, this does point to a
bullish October. In fact, this is typically the month that we hit a bottom and
kick-off the best three months of the year. But again, the highs from September 19th
are going to be the critical levels to watch.
Have a Great Trading Week Ahead!
Price Headley, CFA, CMT, 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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