The upturn is continuing for the Nasdaq Composite. Even with current levels well off
of today's high, we still haven't traded under yesterday's high, maintaining this
morning's bullish gap
As such, we're now cleanly above the key 10 and 20 day exponential moving averages.
This is bullish, at least in the near term. Once investors get excited about higher
prices and some strong earnings announcements, they may be lured in, which of course,
will only drive markets higher. The MACD crossover will only add fuel to that fire.
So, don't be surprised if the next few days continue to be great - we're expecting
April's bullishness to play out as it usually does.
What happens after that? Well, while markets are moving higher, they really haven't
been challenged yet. There's a lot of resistance ahead, which we'll be encountering
within a couple of days at the current rate. This is where the market's true colors
will be revealed.
Before becoming bullish, we'd like to see the Nasdaq trade above its 'resistance
zone' (see chart). This is the 1430-to-1465 level which has been a stopping point in
recent weeks. Getting above that would be bullish, but we're not optimistic that we
will.
Stochastics is also telling a similar story. With the Stochastic lines under the 80
threshold, yet moving higher, we still have some 'room to grow'. But as you can see,
each time Stochastic lines have entered the 80+ overbought region, we've pulled back
soon after.
Resistance is at 1430 and 1450. Support lines are at the 10 day EMA line (1381), and
again at the rising line (dashed) that was established in late March and mid-April.
Daily Chart of the Nasdaq Composite (COMPX)
S&P 500 COMMENTARY
We'll substitute the S&P 500 for the S&P 100 this week, to accommodate those who
follow the broader index. We'll also use a weekly chart to get a feel for the bigger
picture.
The great part about weekly charts is that they are a reminder of what's really going
on. And what is going on exactly?
Many of us have seen bullish charts in recent days, and hearing some strong earnings
reports makes us want to be buyers. But a snapshot of the 'bigger picture' may
discourage you. The S&P 500 is still struggling at its 200 day moving average, and
still has some resistance ahead of it.
Its first resistance line is the falling dashed line that was established in
December, January, and last week (see chart). That resistance is currently at 905.
But like the Nasdaq, the S&P 500 also has a resistance zone of its own, between 910
and 960. These highs were established over the last half of 2002 and the first months
of 2003.
Some have argued that we're at the bottom, and that "this time is different". Perhaps
it is, but it's highly unlikely we'll make a lasting rally if there are fewer and
fewer buyers. The accumulation-distribution line is telling us that were seeing more
selling on down days, and less buying on up days. The buying sprees we've had over
the last few days won't cure that long-term problem.
Support for the S&P 500 is at 860 and 840. Resistance is at 905 and 940.
Weekly Chart of the S&P 500 (OEX)
Bottom Line:
Don't get pulled in too deeply based on the last couple of days. Markets have been
strong, mostly based on earnings. But this is not new - markets are typically strong
in April based on earnings. This is usually just a lead-in to several months of
weakness that usually begins in late April and early May. For the near-term we're
looking for a decent move higher, but once we start getting into the resistance zone,
all bets are off.
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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