Editor's note:
this column was originally published on Capital Essence's CEM News on December 03, 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 December 04, 2007.
We've mentioned right here in the previous Market Outlook that: "
the manic nature of the market recently suggests that it'd be wise to remain skeptical", stocks kicked off the month of December on a negative note, finishing near their worst levels of the session.
For the day, the Dow Jones industrial average lost 0.4%, the broader S&P 500 Index lost 0.6% and the tech-fueled NASDAQ Composite Index lost 0.9%.
As a matter of fact, today's trading action was very consistent to what we've offered in the November 28 evening
"Cubes Speculator Bulletin": "
a failure to take out the $52 level before the end of the week will increase the chance for a retest of recent bullish breakout point, about $50", the NASDAQ 100 ETF (
QQQQ) followed through to the downside Monday after Friday's bearish reversal and reached as low as $50.82.
The QQQQ December 51 Put Option (QQQXZ) gained about 50% in just 2 days.
The report that Berkshire Hathaway (BRK.A) purchased $2.1 billion in junk bonds from power producer TXU Corp.'s (TXU) $3.9 billion offering gave the utility sector a nice lift Monday.
Chart 1.1: Utility Sector Index (daily).
Utility broke out to new high today. This is bullish. Technically speaking, today bullish breakout had set the stage for a test of the 600 level. Bear in mind that a sustain advance above this level will have the power to fuel a rapid move into the 700 level. Support is about 490.
Chart 1.2: Standard & Poors 500 Index (daily).
As
expected, the board market index continues to trade below the 200-day moving average as resistant.
The action doesn't bode well for the bulls.
Again, expect things to be sloppy until the index manages to close above the 1500 area. Support is about 1400.
Chart 1.3: Dow Jones Industrial (daily).
The blue-chips index is basing sideway around the area of support at the 200-day moving average.
This is encouraging.
However, as
discussed, the tape would remain choppy unless the index closes decisively above key resistant, around the 13500 area. Support is about 12700.
In summary: while the short-term perspective remains uncertain, the utility's bullish breakout on Monday has painted a positive tone on the long-term picture because it reflects a trend in which capital is attracted to the debt market wreck.
(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.
