Editor's note:
this column was originally published on Capital Essence's CEM News on October 28, 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 October 29, 2007.
Stock moved higher last week amid the late-week momentum that saw the Dow Jones Industrial Average rose 285 points or 2.1%, to 13,807 and the Standard & Poor's 500 gained 35 points or 2.3% to 1535.
Crude oil closed lower Friday down -3.21% to $87.56 per barrel after printing a record high of $90.55 on Thursday.
Just so that you know, invest in crude oil has returned about +22% since profiled
here on
August 27, 2007.
Technically speaking, crude seems to be vulnerable for a short-term correction. A decline to below $84.90 will confirm this. Support is about $81.
Let's take a look at major indices:
The S&P 500 Index (daily) chart above addresses a short-term time frame. The index is well position for a test of "previous-support-now-resistant" at the area of two-month rising trendline. At this moment, it's unknown whether the index can take out this level or not. A clear breakout above this level, however, will set the stage for a retest of October's high. Support is at last week's low about 1490.
The Dow Jones Industrial Average (daily) chart above addresses a short-term time frame. The blue-chips index printed a clear breakout above the 50-day moving average. This is bullish. An upside followed through indicates a retest of October's high. Support is at last week's low about 13400.
In summary, market is well positioned for a test of October's high ahead of the FOMC this week. Fed fund futures now price in a 92% chance of a 25 basis point cut on October 31 to 4.50%. There is a speculation that Bernanke & Co. could surprise the markets by slashing the benchmark rate by 50 basis point (just like what they did in September). And there's also another speculation that Uncle Ben might show the market tough love by leaving policy unchanged as the recent burst higher in crude caused inflation concerns. Evident in last week's unusual price action, volatility is soaring as speculation runs wild. All of these wild price actions had created the potential for steep corrections market wide.
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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