On Monday of last week (the 27th) we made the second side of an 'island' reversal
pattern on our bar chart. In other words, there was one bar (from the 24th) that was
not overlapped by the low from the previous day, nor by any lows of any days since
then. This isolated bar is called an 'island' in the sense that an island is
unattached to any mainland. Generally, most gaps, including islands, eventually get
filled in. But as we have mentioned a couple of times since then, this one may be an
exception to that rule. As our chart indicates below, the intermediate-term support
line (lower dashed line) is now above that gap level of 1866.43, and still rising,
which means there will likely be support for the Nasdaq Composite before it's allowed
to fall back to that gap level again.
So what does that mean? It's pretty bullish in the bigger picture. This intermediate
term support line has been acting as support since March, so we know it's pretty
reliable as a safety net for any pullbacks. Likewise, we're seeing a parallel
resistance line, but since it too is rising, it's also bullish. The result is a
rising channel, framed by the two dashed lines you see on the chart. This channel is
actually a pretty important one to note for the short-term traders, as it marks good
buying opportunities as well as good selling points. We're going to assume that this
channel will remain intact until we have a clear reason not to do so.
In the meantime, we can see that there some selling going on that may in fact push us
all the way back down to the lower support line. This is why we stress the importance
of this bullish channel - it's a likely stopping point for any downturn. But, based
on the MACD lines that are again rolling over after making yet another lower high (se
the downward-sloping resistance line on the MACD chart), it does appear that stocks
are going to deflate, and we may see the Nasdaq Composite near 1880 in the next few
days. That's ok though - our intermediate outlook is still a bullish one. In fact,
until we actually get a close under the 10 day EMA, we're not even going to become
micro-term bears.
NASDAQ CHART
S&P 500 COMMENTARY
The bullish trend lines we're seeing for the Nasdaq also apply to charts of the S&P
500; they're marked with the dashed lines below. What we want to focus on here are
the shorter-term support and resistance lines, marked in blue. The upper blue line is
the horizontal resistance at 1055. Although we closed above that mark on Monday, we
gave that all back and closed under it again on Tuesday. We're also topping out there
today, which is not the first time 1055 has been intra-day resistance. The point is,
there's something significant about 1055.
On the lower end of the chart we have a pretty steep support line (blue), but as of
now, don't read too much into it. This is simply a continuation of the line marking
two short-term bottoms. It may end up being nothing, but if we do hesitate around the
1040 level, this may be the reason why. The primary support lines still lie at 1025
and 1010.
Like the Nasdaq, each recent MACD high has been lower than the previous one,
suggesting that each time we find new momentum, it's not as strong as the last surge.
And this MACD pattern now coincides with the 'overbought' condition on our
stochastics chart. Although being stochastically overbought isn't inherently a sell
signal, falling prices and a lower MACD can act as confirmation that stocks are
correcting their overbought condition by heading lower. Like the Nasdaq, the likely
landing pads for such a pullback are the lower support lines.
As of right now, the SPX is trading right at the 10 day EMA line, currently at 1047.
The 10 day EMA is one of our primary buy/sell signals, so where we close today will
be crucial in determining the next direction for the S&P 500 and stocks in general.
S&P 500 CHART
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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