Editor's note:
this column was originally published on Capital Essence's CEM News on November 27, 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 November 28, 2007.
Stocks showed good resilience Tuesday amid strength in the financial sector that saw the BKX rose +2.60%. Contributed to the overall optimism were news that Abu Dhabi Investment Authority is going to invest $7.5 billion for a 4.9% stake in Citigroup (C) and lower commodities prices. Energy stocks were taking it on the chin today with crude oil dropped more than $3 or -3.36% to $94.42. The decline was largely driven by talk of increased production from OPEC.
Chart 1.1: Oil Index (daily).
Apparently, the upleg that started early this year may have reached the exhaustion point. Technically speaking, a failure to hold support around the 90 level will complete the bearish double top pattern and test of support at previous bullish breakout point around 80 is, therefore, expected.
Similarly, gold stocks also suffered as the yellow metal lost more than 10 points or -1.23% to $812.94.
Chart 1.2: Gold Index (daily).
Gold has printed a potential bearish double top pattern on the chart. A decline below 773 will complete the bearish double top pattern and test of key support around the 730/40 level is, therefore, expected.
Chart 1.3: Standard & Poors 500 Index (daily).
The index may have found some sorts of support at the area of August's low. This is encouraging. An advance above 1447 will set the stage for a test of resistant around the 1465 level. The index has a layer of support that runs from 1400 to 1360.
Chart 1.4: Dow Jones Industrial (daily).
The blue-chips index seemed to be stabilize around the area of key support at the 12800 level. This is encouraging. An upside follow-through tomorrow will set the stage for a test of resistant around the 13200 level. Support is about 12720-12500.
In summary: one day rally does not make a bull market, general speaking, but Tuesday's trading action suggested that market could be at major turning point. An upside follow-through tomorrow will confirm this.
(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.
