Editor's note:
this column was originally published on Capital Essence's CEM News on October 22, 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 Tuesday October 23, 2007.
Stocks gained ground across the board Monday and hence confirmed our "
counter-trend rebound" notion.
Broader stock indicators finished higher, with tech stocks leading. The S&P 500 Index rose +5.70, or +0.38%, to 1,506.33, and the technology-dominated NASDAQ Composite Index rose +28.77, or +1.06 percent, to 2,753.93.
As a matter of fact, Monday trading action was very consistent to what we've predicted in our Friday evening "
Cubes Speculator Bulletin": "
buy the dip…expect a test of …$53, if the Q's manages to lure some bargain hunters around the $52 level".
The NASDAQ 100 Index ETF (QQQQ) reached as high as $53.12 after an initial lower move into the $52 level was quickly met with bottom-fishing interest. The newly in-the-money call option setup gained about +30% intraday.
The NASDAQ Composite Index (daily) chart above addresses a short-term time frame. The tech rich index bounced off support at the 50-day moving average. Expect things to be a bit sloppy at the level. Resistant is about 2770.
The S&P 500 Index (daily) chart above addresses a short-term time frame. Similar to the NASDAQ, the board market index had also bounced off support at the 50-day moving average. The action is, of course, encouraging. Resistant is about 1530. A clear breakout above this level indicates a retest of the bearish "key reversal point" about 1560.
In summary, Monday rebound from an extreme oversold condition is definitely refreshing though we aren't out of the wood yet. Until the bull mange to push the tape to above S&P 1540, expect things to be sloppy at current level.
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
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