Editor's note: this column was originally published on Capital Essence's CEM News on October 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 Thursday October 25, 2007 .
The negative response to Amazon's earning report triggered a massive sell-off in the high-flying technology stocks that saw a 79-point drop for the NASDAQ Composite at its lows for Wednesday session. The Dow and S&P suffered considerably, too, decline 205 and 30 points, respectively, at their worst levels. Fortunately, helped by the late-day buying interest, both of the Dow and S&P had managed to get back to around the zero line by the closing bell.
Despite the overall weakness, shares of Bowater Inc (BOW) jumped more than +5% Wednesday, or more than +15% since profiled in our "Swing Trader Bulletin" on October 18, after the U.S. Justice Department conditionally cleared a merger between Bowater Inc. and Canada
Speaking of tech, Wednesday's trading action was pretty consistent to what we've predicted in our Tuesday evening "Cubes Speculator Bulletin": "market is setting up for a "mid-week reversal"…we suspect that "buy-the-dippers" could step in around $53. Expect a retest of the $54 level if the Q's holds this support." As expected, the dip into the $53 zone followed the morning lousy opening was met with an even more aggressive wave of buying interest that sent the NASDAQ 100 Index ETF (QQQQ) back into the $54 level by the end of the day. The newly QQQ Q call option setup gained about +30% intraday.
General speaking, tech investors shouldn't worry too much as long as the NASDAQ 100 (NDX) trades above support at the two-month rising trendline.
The S&P 500 Index (daily) chart above addresses a short-term time frame. The index had successfully retested support at last Friday's low. Technically speaking, this is bullish. An upside follow-through tomorrow will confirm this. Expect a test of short-term resistant about 1530 to follow shortly.
The Dow Jones Industrial Average (daily) chart above addresses a short-term time frame. Similar to the S&P, the blue-chips index had also held firmly above last Friday's low. Again, this is bullish. As mentioned, the index is well position to test the short-term resistant at last Friday's bearish breakdown point around 13800. Support is about 13400.
In summary, Wednesday's trading action indicated a bullish bias for Thursday trading session. Further, the overall picture remains bullish as long as the market holds above support at last Friday's low.
Until next time, good luck!
(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.
