Editor's note: this column was originally published on Capital Essence's CEM News on November 13, 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 November 14, 2007 .
As we've predicted right here in the previous Market Outlooks that "latest actions in the [financials and home builder] suggested that the market is at or getting pretty close to a tradable bottom" and "fear is mounting as market reaches a short-term extreme oversold condition. This is a situation that, often, precedes a meaningful bounce", stocks surged Tuesday, with the Dow climbing nearly 320 points or 2.46% The S&P 500 index added 2.9% and the NASDAQ Composite added 3.5%.
Unsurprisingly, financials, home builder and technology were the leading sectors in Tuesday's big rally. In speaking of technology, the NASDAQ 100 ETF (QQQQ) was also big winner today, up more than +4% right after we've opined in the previous "Cubes Speculator Bulletin" that: "the market is due for an oversold rebound".
Chart 1.1: Bank Index.
The banks added on to recent gains, up +4.83% today on the heel of yesterday +1.18% gain. The index is approaching the layer of short-term resistant that runs from 98-100. A failure to take out this level is very bearish and a retest of last week's low is, therefore, inevitable. Support is about 90.
Chart 1.2: Dow Jones Home Construction Index.
As predicted, the home builder bounced nicely today, gained +4.79%. However, expect things to remain sloppy until the bulls manage to push prices above the six-month falling trendline.
Chart 1.3: Standard & Poors 500.
As the volatility index suggested, the board market index rebound nice today, up almost +3%. Resistant is about 1490-1500. Watch out for the sneaky bears around this area. Support is about 1400.
Chart 1.4: Dow Jones Industrial Average.
The blue-chips index post a second-biggest, single-day advance of the year today after a decline to the lower border of the three-month rising channel was met by an aggressive wave of buying interest. This is bullish. Resistant is about 13500. Support is about 12975.
In summary: while Tuesday's trading action was positive, it doesn't indicate a new direction for the market going forward. With that said, expect things to remain sloppy until the bulls manage to push prices above the S&P 1490.
(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.
