Good Morning. This is Capital Essence’s “Market Outlook” (the technical analysis of financial markets) for Friday July 20, 2007.
We’ve opined right here in our previous Market Outlook that “at this stage…the upside should be given the benefit of the doubt” – see “Upside should have the benefit of the doubt” July 19, 2007; equity market finished higher Thursday with the Dow finished just a hair above 14,000 for the first time ever amid positive earnings news. The tech-fueled NASDAQ Composite Index up 20.55 points to close at 2,720.04 – its highest level in over 6-1/2 years. In speaking of tech, we’ve noted in our previous “Cubes Speculator Bulletin” that “the bulls should have the benefit of the doubts walking into this Friday option expiration…We believe there should be enough buying power to generate a run to at least recent high @ $50.30” the NASDAQ-100 Index ETF (QQQQ) hit as high as $50.66 during Thursday session. Any call option traded could have made at least 20% intraday.
It worth notice that, financial stocks continued to slide for a second day in a row followed our negative comment on the sector – see “Watch out for a correction” July 18, 2007. While remains bearish on the sector, we expect the decline to slow down a bit tomorrow. Keep an eye on the Bank Index (BKX) 112-109 level (see chart below). As mentioned, a decline to below this level indicates that the financial stocks could be entering a secular bear market. And this is does not bode well for the board market.
Stock of the day: shares of Starbucks Corp. (SBUX), profiled in our “Swing Trader Bulletin” on Wednesday night July 18, jumped almost 5% Thursday after the world’s largest specialty-coffee retailer said that it will begin offering Starbucks-branded coffee-flavored chocolate products in the fall under a deal with Hershey Co (HSY).
Let’s take a look at the major index charts:
The Standard & Poors 500 Index (daily) chart above addresses a short-term frame. As expected, the board market index finished at a new high today followed a successful test of support at the 1540 level. Support is around 1540. Resistant is about 1600.
The Dow Jones Industrial Average (daily) chart above addresses a short-term frame. We’ve noted here yesterday that “[Wednesday] decline happened within a context of a long-term bull trend, [and hence,] there is absolutely nothing to worry about” – see “Upside should have the benefit of the doubt” July 19, 2007; the Dow finished at a new all-time high today. This is, of course, bullish. Support is about 13690.
Bottom line: apparently, the S&P got pin at 1550 into tomorrow option expiration day.
Until next time, good luck.
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.
