Editor's note: this column was originally published on Capital Essence's CEM News on September 26, 2007. It's being republished as a bonus for the loyal readers. For more information about subscribing to CEM News, please click here.
Good Morning. This is Capital Essence's "Market Outlook" (the technical analysis of financial markets) for Thursday September 27, 2007 .
We've offered in the previous Market Outlook that "market is due for a big move. [Tuesday] trading action suggested that the path with least resistant is still to the upside"; stock rallied across the board Wednesday with Dow gained about +100 points or +0.72% to finish at 13878.
One stock that jumped up on the day was American Eagle Outfitters Inc (AEO) – a long holding of our "Swing Trader Bulletin" Portfolio. Shares of the apparel maker soared more than 5% Wednesday after a Wachovia Capital Markets analyst raised his rating on the teen retailer, citing stronger merchandise lines, improved margins and a good price for the stock.
As we've noted on the "Cubes Speculator Bulletin": "there are signs of very aggressive speculative actions in the high-beta stocks. Why? Fund managers are doing their best to beef up their numbers before the third quarter's curtain closes. More likely than not, we should continue to see the same action tomorrow." Unsurprisingly, the high-beta index, NASDAQ-100, continues to outperform its larger peers.
As you can see, the NASDAQ-100 Index printed another multi-year high today whereas the NASDAQ Composite Index is still trading below the July's peak. In fact, this kind of "split personality" market doesn't last forever though until then, the trend is up and we should respect it.
The Dow Jones Industrials Average (daily) chart above addresses a short-term time frame. Apparently, the blue-chip index is conducting a test of the "major" overhead resistant that runs from 13870-14000 today. At this moment, it's unknown that the bulls can successfully take out this resistant or not. Although a sustain breakout above the 14K level will spark an intermediate-term rally that might propel prices into the 15K level.
Bottom line: the short-term outlook is bullish until proven otherwise. Although keep an eye on the final Q2 GDP and new home sales reports, which are scheduled to release Thursday morning at 8:30 AM ET and 10:00 AM ET respectively, for they have the potential to move the market one way or the other.
Until next time, good luck.
