Editor's note: this column was originally published on Capital Essence's CEM News on October 10, 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 11, 2007 .
As we've opined right here in the previous Market Outlook "Tuesday's bullish breakout on low volume suggested that the new highs might not sustain", equity market finished lower Wednesday amid a batch of disappointing earnings and updates from the likes of Alcoa (AA), Boeing (BA), Chevron (CVX), Valero (VLO ) and International Paper (IP).
Despite the overall weakness, the NASDAQ held ground throughout the session, up 8 points to finish at 2811, a new multi-year closing high. As a matter of fact, Wednesday's trading action was pretty consistent with what we've predicted in our previous "Cubes Speculator Bulletin": "the overall trend is up and you better respect it. A move to above $53.16 will confirm a test of the long-term resistant at $53.50". The NASDAQ 100 Index ETF (QQQ Q) hit as high as $53.57 Wednesday afternoon immediately after Tuesday bullish broke out above the $53.16 level. Recent call option setup holds an amazing gain of +104% in just 4 day.
Crude oil rose +1.3% to $81.30 per barrel after Bloomberg reported that Turkey Iraq
Our bullish outlook on the commodity has certainly been no secret. As a matter of fact, oil had gained about +15% immediately followed our positive comment.
Recent pullback found support around the July's high. This is bullish, positioning oil to extend its uptrend. And as we've said back in August 27: "from a long-term perspective, energy will be a relative secular winner".
Let's take a look at the major indices:
The S&P 500 Index (daily) chart above addresses a short-term time frame. As expected, the board market index moved lower Wednesday. Though seemingly vulnerable at current levels, the bullish bias remains intact as long as the index holds above support at the three-month rising trendline. Short-term support is at last week's low about 1540.
The Dow Jones Industrial Average (daily) chart above addresses a short-term time frame. The blue-chips index continues to base sideway at the area of recent bullish breakout point on lighter volume. Technically speaking, this is bullish, positioning the Dow to extend its uptrend. Short-term support is at last week's low about 14000.
Bottom line: though seemingly vulnerable at current levels, the overall technical backdrop remains constructive as long as the indices hold above support at last week's low. And as we've said back on October 5: "the larger picture remains unchanged – we have a strong market that is poised for a breakout to new high".
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.
