Editor's note: this column was originally published on Capital Essence's CEM News on December 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 Wednesday December 19, 2007 .
Stocks finished higher Tuesday, a roller coaster session that saw strong earnings from Goldman Sachs and Best Buy offset by the ongoing concerns about credit market crisis. For the day, the Dow Jones Industrial Average added 0.5% - the blue-chip index was down about -75 points at its low of the day and up more than +100 points at its peak. The broader S&P 500 Index added 0.6%. The tech-rich NASDAQ Composite gained 0.8%. Small caps led Tuesday advance with the Russell 2000 Index rose more than 2%.
Chart 1.1: Russell 2000 Index (daily).
Key support at the August/November's low was tested and held. This is bullish. An upside follow-through tomorrow will increase the probability for a test of December's high, about 790. At this juncture, only a sustain decline below the 730 level can wreck the positive development and argue for lower prices.
Chart 1.2: Standard & Poors 500 Index (daily).
The index tested and held above the late November's gap support around the 1430 area. Technically speaking, Tuesday's trading action had set the stage for a test of the double resistant around the 1490-1500 level. Support is around 1430-1400.
Chart 1.3: Dow Jones Industrial Average (daily).
It should be noted that despite Tuesday's flip, the blue-chips index is still traded below the 200-day moving average. This doesn't look very good. With that said, until the bulls manage to take out this level, things remain poor looking forward. Resistant is about 13340. Support is around the area of November's low, about 12700.
In summary: general speaking, there were some sort of positive development in equities. While we are not looking for a big, bold bottom, we'd say that the tradition Santa rally is still in full swing.
(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.
