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Good Morning. This is Capital Essence's "Market Outlook" (the technical analysis of financial markets) for Friday August 17, 2007.
Equity market staged a big comeback Thursday, erased most of the day's losses as investors recover from latest credit crunch. The broader market index, S&P 500, gained 0.3 percent, erasing all of the session's early losses. The Dow Jones industrial average fell 15 points, regained virtually all of the day's losses, about 340 points. The tech-fueled NASDAQ Composite Index slid 0.3 percent, cutting bigger losses. In speaking of tech, Thursday trading action was very consistent with what we've predicted in our Thursday "Cubes Speculator Bulletin" around 12pm - 「the bulls had put on the brave face and tried to push the tape higher…the vertical drop appears to be out of whack and the market is due for a snap back rally」- after hitting as low as $44.39, the NASDAQ-100 ETF, QQQQ, snapped back and regained most of the early losses. Our newly September call option set up still carries a whopping 30% unrealized gains by the end of the day.
Contributed to the overall positive sentiment was a rebound in the financial stocks.
(click on image to enlarge)
As predicted, the Bank Index (BKX) printed a bullish double bottom pattern at the area of trendline support around 101. This is bullish, at least for now. An upside follow-through tomorrow will confirm this, and hence, increase the probability for a test of the 101 level in the upcoming days.
Let's take a look at the major index charts:
(click on image to enlarge)
The Standard & Poors 500 Index (daily) chart above addresses a short-term frame. As predicted, the index tested support at March's low, around the 1375-1360 level, today. So far, it held. This is bullish. Expect a test of resistant around the area of the 200-day moving average, around 1450, in the upcoming days.
(click on image to enlarge)
The Dow Jones Industrials Average (daily) chart above addresses a short-term frame. The blue-chips index printed a bullish long tail bar at the area of triple support (the March bullish breakout point + 200-day moving average + two-year trendline); and this is, of course, bullish. Support is about 12500. Resistant is about 13200.
Bottom line: general speaking, the market had found its short-term bottom. Although, this doesn't mean that the "credit crunch" is over. As a matter of fact, it had just begun.
