Editor's note:
this column was originally published on Capital Essence's CEM News on November 15, 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 Friday November 16, 2007.
Led by financial sector, equity market plummeted Thursday amid a renew credit worries. Contributed to the weaknesses were reports of more problems at Fannie Mae (FNM), expectations for additional subprime mortgage write-downs, a tame jobless claims data, and even falling oil prices. Yes, a decline in oil prices dragged energy stocks lower, which caused the S&P to trail other indices. The board market index lost 1.3% whereas the Dow Jones Industrial Average gave up just 0.9%.
Despite the overall weakness, shares of Ehealth Inc (EHTH) breakout to new high today, up more than 3% to $35.06. Chart 1.1: Ehealth Inc.
The stock is posting an amazing gain of more than +36% since profiled in our October 30 "
Swing Trader Bulletin" as a potential buy candidate.
Technically speaking, Thursday's bullish breakout had cleared the path for a run to the 40 level.
Support is about $30.
Chart 1.2: Bank Index.
The index followed through to the downside today after a test of the psychological 100 level was met with an aggressive wave of selling. The action had increased the probability for a retest of last week's low, about 90.
Chart 1.3: World Gold Index.
There was also notable weakness in the commodities today. COMEX gold for December delivery fell more than 3% to $787.70 an ounce. Thursday's decline had pushed the yellow metal back to support at the area of three-month rising trendline. A failure to attract buyers at this level will open the door for a test of previous bullish breakout point, about 730.
Chart 1.4: Standard & Poors 500.
The board market index decline further today after failing to take out the 1490 level. This is bearish. Bear in mind that a sustain decline to below Monday's low of 1438 will increase the probability for a retest of August's low, about 1370. Resistant is about 1490-1500.
Chart 1.5: Dow Jones Industrial Average.
Similar to the S&P, the blue-chips index also gave up almost 1% today after a test of resistant at October's low was met by sellers. As mentioned, this is bearish. Keep an eye on Monday's low for a failure to hold above this level indicates a retest of August's low, about 12517. Resistant is about 13500.
In summary: apparently, the stage had been set for a test of Monday's low. As mentioned, a walk to below this level will increase the probability for a retest of August's low.
(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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