Editor’s Note: The following article was written by Michelle Mai of Capital Essence. It has been reproduced with permission for the benefit of the S.M.R community.
Good Morning. This is Capital Essence’s “Market Outlook” (the technical analysis of financial markets) for Thursday July 26, 2007.
We’ve opined right here in our previous Market Outlook that “bargain hunters could raid the Street as soon as tomorrow” – see “Snap Back Bounce” July 25, 2007; equity market closed higher across the board Wednesday. As a matter of fact, Wednesday trading action was also consistent with what we’ve predicted in our Tuesday evening “Cubes Speculator Bulletin” – “technically speaking the “cubes” had reached a short-tem oversold condition after Tuesday sell-off and we’re, therefore, expecting a rebound into the $49.60-80 area tomorrow.” The NASDAQ-100 Index ETF (QQQQ) opened in a positive tone Wednesday and hit as high as $49.67.
It worth notice that the financial stocks did pretty well in Wednesday rebound (see chart below).
As mentioned, the financial stocks have been the “tells” for as long as I can remember and hence, they should be on your trading radar. Again, as goes the bank, so goes the tape!
Let’s take a look at major indices:
The Standard & Poors 500 Index (daily) chart above addresses a short-term frame. As expected, the board market index rebound nicely followed the successful test of support around the 50-day moving average area. As mentioned, this is a very important zone and it should be on your radar. Short-term resistant is about 1555.
The Dow Jones Industrial Average (daily) chart above addresses a short-term frame. Similar to the S&P 500, the blue-chips index also rebound nicely followed the test of support around the 50-day moving average area. Short-term support is about 13600. Short-term resistant is about 14020.
Bottom line: now that both of the “overbought correction” and “buy the dip” scenarios that we’ve discussed in the previous Market Outlooks had played out nicely, what’s next? Technically speaking, the upside should be given the benefit of the doubts. With that said, we shall hang on to the bullish stance as long as the majority of major indices hold above June’s low.
Until next time, good luck.
Note: Michelle Mai writes technical analysis for Capital Essence and is the editor of Capital Essence’s “Market Outlook” newsletter. To receive the daily edition, please subscribe. It’s now available at a monthly rate.
