Editor's note: this column was originally published on Capital Essence's CEM News on September 24, 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 Tuesday September 25, 2007.
As predicted, stocks opened on a positive note Monday morning with the NASDAQ-100 Index (NDX) broke out to a new multi-year high. The high was, however, greeted by an even more aggressive wave of selling. The tech rich index managed to close in the positive territory, up 8 points to 2057, though well below the intraday high of 2072.70.
As a matter of fact, the NASDAQ 100 Index (NDX) trading action was very consistent with what we've noted in our "Cubes Speculator Bulletin":「an advance to above $50.60 indicates a test of the third target about $51.」The NASDAQ-100 Index ETF (QQQQ) climbed as high as $50.96 followed a bullish breakout above the $50.60 level this morning. Any call option traded could have made about 30% intraday.
Let's take a look at the major index charts:
The Standard & Poors 500 Index (daily) chart above addresses a short-term time frame. It worth notice that the board market index had formed a small pennant. Should the text book stands true, these patterns tend to "resolve" in the direction of the overall trend, which is up in this case. With that said, a bullish breakout above the pennant's upper border will increase the probability for a test of July's high about 1555.
The Dow Jones Industrials Average (daily) chart above addresses a short-term time frame. The blue-chip index continues to base sideway near high as the market digesting last week's gain. Technically speaking, the action is completely normal and bullish. Short-term Resistant is about 13880. An advance to above this level indicates a test of July's high about 14K. Short-term support is about 13739. Bear in mind that a decline to below this level suggests a test of support at recent bullish breakout point.
Bottom line: Trader should keep an eye on the small S&P pennant. As mentioned, a bullish breakout from the pennant's upper border will set the stage for a test of July's high.
Until next time, good luck.
(By: Michelle Mai)
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.
