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Good Morning. This is Capital Essence's "Market Outlook" (the technical analysis of financial markets) for Thursday August 09, 2007.
We've opined right here in the previous Market Outlook that "the market is at a cross road – if the rally has some legs, then we'll see further strength near term" – see "Cross Road" August 8, 2007; equity market added on to previous gain Wednesday with the NASDAQ Composite Index rose more than 50 points or 2% to finish at 2612. This is impressive. As a matter of fact, today strong performance was very consistent with what we've predicted in our "Cubes Speculator Bulletin" a couple days ago – "expect a test of the $49 level as soon as Wednesday. We'll take some money off the table around this area." The NASDAQ-100 ETF (QQQQ) hit as high as $49.06 today. Any call option traded could have made more than a 100% today.
Overall, it was a very strong day on the Street and so our "Swing-Trader Bulletin" with Cepheid (CPHD) soared almost 15% to a new high. The position has an amazing unrealized gain of almost 20% in just 3 days. Advent Software Inc (ADVS) jumped almost 9% to a new high. We've took a partial profit of 20% today when the stock hit our first target @ $44. Accuray Inc (ARAY) added on to previous gain, up 2.63% to finish at $20.71. This position has an unrealized gain of almost 10% in just a week. Research in Motion Ltd (RIMM) gained almost 4 points to $226.01. Starbucks Corp (SBUX) also gained more than 2% to finish at $27.72 followed our positive comment on the stock.
Despite what was the S&P 500's best three day performance since March 2003, our short positions are doing extremely well with Service Corp (SCI) down about 3% to $11.59. Gardner Denver Inc (GDI) dropped 4.50% to $37.80. The position has an unrealized gain of almost 10% in just 2 days. Aside from the 20% gain from ADVS, we've also took home a nice 10% profit from the Cash America Int' (CSH) short position.
Let's take a look at the major indices charts:
The Standard & Poors 500 Index (daily) chart above addresses a short-term frame. As expected, the board market index broke out above the 1490 level today amid another round of short covering rally from the financial sector – its most influence sector. General speaking, Wednesday advance was more than just refreshing – it felt really good! However, we ain't out of the wood yet as long as the index trades below the 50-day moving average. Short-term support is about 1460. Bear in mind that a decline to below this level suggests a retest of last week's low. Short-term resistant is about 1510.
The Dow Jones Industrials Average (daily) chart above addresses a short-term frame. The blue-chips index took out the resistant at the area of 50-day moving average. This is bullish. However, the index appeared to be oversold on a short-term basis. Expect small correction or consolidation in the upcoming days. Short-term support is about 13150. Short-term resistant is about 13600.
Bottom line: the bulls had, definitely, regained some momentum after Wednesday advance. However, as noted above, they are going to have a difficult time around the S&P 50-day moving average area, which is about 15 points from here.
Until next time, good luck.
