Editor's note: this column was originally published on Capital Essence's CEM News on September 25, 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 Wednesday September 26, 2007.
Equity market finished mix Tuesday with the Standard & Poor's 500 Index was off slightly to 1,517 and the NASDAQ-100 Index was up 19.58 points or about 1% to 2,076 just as we've offered in the previous "Cubes Speculator Bulletin": "Monday trading action is considered bullish given the overbought condition. The trend is up and it's not wise to fight it. There is a high probability for a retest of yesterday's high about $51." As a matter of fact, the NASDAQ-100 Index ETF (QQQQ) broke out to a new record high Tuesday and hit as high as $51.09 after the morning weakness was met by an aggressive wave of buying. The newly call option setup booked in a nice 20% in just 1 day.
Needless to say, today's bullish breakout had set a positive tone for tech stocks.
The NASDAQ 100 Index (monthly) chart above addresses a long-term time frame. As you can see, the recent bullish breakout had propelled the index into the area of a major overhead resistant. Bear in mind that an advance to above this level will set the stage for a test of '01 high about 2770, which is about 30% from here.
The Standard & Poors 500 Index (daily) chart above addresses a short-term time frame. Apparently, the board market index had successfully tested support at the area of the short-term moving average. This is bullish. As mentioned, keep an eye on the five days old pennant as these patterns tend to "resolve" in the direction of the overall trend. Again, a bullish breakout above the pennant's upper border indicates a test of July's high about 1555.
The Dow Jones Industrials Average (daily) chart above addresses a short-term time frame. Similar to the S&P 500, the blue-chip index had also form a small bull flag. As noted above, a bullish breakout from the flag indicates a test of July's high about 14K.
Bottom line: apparently, market is due for a big move. Today's trading action suggested that the path with least resistant is still to the upside. Combining these with the "quarter-end performance anxiety" suggests that the stage had been set for a test of July's high.
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.
