Editor's note:
this column was originally published on Capital Essence's CEM News on October 30, 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 October 31, 2007.
Stocks finished mix Tuesday with NASDAQ 100 gained +0.19% to 2207.67 – a new multi-year high; while both of the Dow and S&P moved slightly lower amid some sort of profit taking activities ahead of Wednesday's FOMC policy announcement.
As a matter of fact, the tech rich index's trading action was very consistent with what we've noted in the previous "
Cubes Speculator Bulletin": "
market will be in a drift mode until the FOMC announcement on Wednesday afternoon… it could go a bit higher before moving lower" – the NASDAQ 100 ETF (QQQQ) broke to new high after the morning weakness was met with an aggressive wave of buying.
The stock reached as high as $54.56 (+$0.40) before gave up a bulk part of the gain to close slightly above the unchanged mark.
The recent call option set up gained about +46% in less than 3 days.
Technically speaking, investors should have nothing to worry as long as the NDX holds above the rising trendline.
The S&P 500 Index (daily) chart above addresses a short-term time frame. Not as lucky as its younger sister, the S&P 500 Index moved lower Wednesday after the test of resistant at the two-month rising trendline was greeted by aggressive sellers. A downside follow-through tomorrow indicates short-term trend reversal and a test of the 200-day moving average is, therefore, expected. Resistant is about 1545.
The Dow Jones Industrial Average (daily) chart above addresses a short-term time frame. Similar to the S&P, the blue-chips index also closed lower for the day after the counter trend rally from October 22 low ran into resistant. As noted above, a downside follow-through tomorrow indicates short-term trend reversal and a test of the 200-day moving average is, therefore, expected. Resistant is about 14K.
Bottom line: tomorrow will be an interesting, and possibly volatile trading session. Market will turn its full attention to the FOMC decision at 2:15 p.m. EST. A majority of market participants expect a 25 basis points cut. Anything above this is good for stocks and vice versa. Like usual, the reaction to the news is more important than the news itself. So, it'd be wise to keep an eye on the tape as well.
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
subscribe. It's now available at a monthly rate.
