Editor's note: this column was originally published on Capital Essence's CEM News on October 09, 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 October 10, 2007 .
Stocks rallied across the board Tuesday followed the release of the FOMC Minutes from the September 18th meeting and hence confirmed our "bullish bias" notion.
The Fed noted that future actions would depend on the economy and market developments. Although recent economic data and the behavior of the capital markets suggest that chances that the FED cut rates again in their next meeting is slim to none. The FOMC minutes also mentioned that inflation isn't a big threat as it used to be. And this had put some pressure on the greenback with the dollar index lost -0.39% for the day.
Today trading action had increased the chance for a test of recent low at 77.66. As mentioned, the short-term bullish bias remains intact as long as the dollar holds above the 77 level.
It worth notice that shares of Vanda Pharmaceuticals Inc (VNDA) – profiled on our "Swing Trader Bulletin" as a potential buy candidate – posted a remarkable +8% gain Tuesday after the President and CEO's upbeat remarks. Technically speaking, the stock is well positioned to test the 200-day moving average.
Let's take a look at the major indices:
The S&P 500 Index (daily) chart above addresses a short-term time frame. The "encouraging" FOMC minutes had helped to push the index to above the life time high printed last Friday. It worth notice that today trading volume was below average. This is not very bullish. Support is about 1540.
The Dow Jones Industrial Average (daily) chart above addresses a short-term time frame. Similar to the S&P 500, the blue-chips index had also broke out to a new high on low volume. Again, this is not very bullish. Short-term support is about 14000.
Bottom line: as noted above, today bullish breakout on low volume suggests that the breakout might not sustain. Though until or unless the bears manage to push prices to below last week's low, the bulls still have the upper hand.
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.
