Editor's note: this column was originally published on Capital Essence's CEM News on October 18, 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 Friday October 19, 2007 .
Stock finished mix Thursday with both of the S&P and Dow close slightly below the unchanged mark and the NASDAQ slightly above it. Overall, Thursday trading action was kinda "disappointed". After Wednesday sharp intraday bullish reversal, we were expected to see a great deal of excitement surrounding the successful test of support at the moving average area. Instead, the market traded as flat as a pancake Thursday. Such price action is indicative of an uncertainty among market participants. This of course won't last forever, though until the market defines where the line of least resistance lies, stay on the sideline ain't a very bad idea.
For whatever it worth, sentiment readings displayed a vigorous enthusiasm in a face of a record high oil prices. The latest Investor's Intelligence sentiment survey showed the highest bullish reading (62%) since December 2004. Bear in mind that this is a contrarian indicator – an extreme bullish reading demonstrates excessive optimism in the market and generally occurs near tops.
Let's take a look at the major indices:
The S&P 500 Index (daily) chart above addresses a short-term time frame. The board market index continues to base sideway around the area of moving average support. As mentioned, the index might have to put on a big "sale" – goes down to around 1525 – should it fail to attract buyer at current level
The Dow Jones Industrial Average (daily) chart above addresses a short-term time frame. The blue-chips had done virtually nothing today. Similar to the S&P 500, the Dow might have to go a bit lower – to around 13500 – if it fails to lure buyers at current level.
Bottom line: edging into October option expiration, while still believe that market should be able to draw buyers at current level as long as it holds above key support around Wednesday's low, we're taking the bullish bias with a grain of salt.
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.
