Editor's note:
this column was originally published on Capital Essence's CEM News on September 16, 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 Monday September 17, 2007.
We've opined in the
previous Market Outlook that "
the Dow's third attempt to cross over the 50-day moving average is likely to be greeted by sellers" – the blue chip index gave up as much as 100 points in Friday opening minutes. Prices, however, managed to bounce off the opening low and close around the flat-line. Contributed to the overall optimism was a weakening dollar.
The US Dollar Index hit a new multi-year low last week amid a looming rate-cuts hope.
Technically speaking, a breakdown below the long-term support at the 80-78 level will set the bearish tone for the rest of the year.
As
discussed, the specter of the lower rates sent gold higher last week, up about 1% and set to challenge the '06 high around $730. Spot gold gains about 25 points immediately followed our
bullish comment on the commodity.
Honestly, it's impossible to know what the FED is going to offer in their September 18 meeting. And here is a rough market consensus:
- A quarter percentage point cut will trigger a short-term selling.
- A half-percentage-point cut will encourage a fresh round of buying.
Although, bear in mind that, reaction to the news is more important to the news. With that said, be prepare though act accordingly.
Let's take a look at the major index charts:
The Standard & Poors 500 Index (weekly) chart above addresses an intermediate-term time frame. The board market index continues basing sideway beneath the "previous-support-now-resistant" level, around 1500. Support is about 1460. As
mentioned, a sustain move to above the "closely watch" 1500 level will set the bullish tone for the rest of the month. And a decline to below the 1460 level, meanwhile, will set the bearish tone.
The Dow Jones Industrials Average (weekly) chart above addresses an intermediate-term time frame. Similar to the S&P 500, the blue-chips index is also basing sideway on lower than average volume around the area of trend-line support. As noted above, a move to above resistant at the 13700 level will set the bullish tone for the rest of the month. And a decline to below support about 13K, meanwhile, will set the bearish tone.
The NASDAQ Composite Index (weekly) chart above addresses an intermediate-term time frame. Similar to its peers, the tech rich index is also basing sideway beneath the three-year rising channel's upper border on lower than average volume. Support is about 2500. Resistant is about 2675.
As a matter of fact, last week trading action was pretty consistent with what we've noted in the previous "
Cubes Speculation Bulletin" - "
price follow-through to the upside today so September 12 buy signal must be a beginning of the third buying wave – starting from August 16's low" - the NASDAQ-100 ETF (QQQQ) managed to overcome early weakness and closed within the positive territory.
Bottom line: Expect prices to move sideway from here into the Fed meeting. As noted above, market reaction to the Fed announcement will set the tone for the rest of the month. Now, go dust off your watch-list.
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
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