Editor's note: this column was originally published on Capital Essence's CEM News on September 19, 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 20, 2007.
As we've predicted right here in our previous Market Outlook "Tuesday FED induced rally had set the stage for a test of July's high. Although market might take some time to digest today's huge gain. With that said, expect prices to move sideway with a positive bias tomorrow" stock moved modestly higher Wednesday with a majority of major indices gained about 0.50% in average.
Contributed to the overall optimism was the buying enthusiasm in the energy sector as rising oil prices, November '07 futures contract gained +0.62 cents to 80.85/barrel on NYMEX, sparked a new wave of buying interest in the energy stocks.
Tomorrow, the market will be keeping a close eye on the testimony on the mortgage market from Fed Chairman Bernanke and Treasury Secretary Paulson before the House Financial Services Committee that will begin at 10:00 ET. When Bernanke and Paulson talk, especially about "mortgage", the Street is all ears.
Speaking of mortgage, the hosing index was the most bearish thing on Wednesday's green screen – the sector down almost 1% for the day. Although as far as the chart concerns, the sector had reached a short-term tradable low. With that said, as long as the index holds above the 155 level, there is a high probability for a test of August's high about 190-200 in the upcoming days.
Let's take a look at the major index charts:
The Standard & Poors 500 Index (daily) chart above addresses a short-term time frame. The board market index followed through to the upside after yesterday's bullish breakout from the one-month old pennant. Again, this is totally bullish. Keep an eye on July's high.
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 followed through to the upside today and hence, confirmed the retest of July's high, about 14K. Given the magnitude of the July-August decline, the upcoming test [of recent high] is very important and it should be on your trading radar.
Bottom line: expect huge price swing tomorrow as we're heading into the September triple witching expiration day.
From a longer term perspective, the path with least resistant is to the upside unless proven otherwise.
(By：Michelle Mai for Capital Essence)
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.
