Editor's note:
this column was originally published on Capital Essence's CEM News on December 06, 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 December 07, 2007.
As expected, equity market picked up where it left off Wednesday, with a majority of major indices gained an average +1.50% for the day.
Contributed to the overall optimism was the decent November same-store sales from a majority of retailers but Target Corp (
TGT) – shares of the discount retailer dropped more than -7% Thursday.
The reason was that: hurt by higher food and fuel costs, increasing mortgage rates and tighter credit standard, low income folks (the majority of Target shoppers) are spending less this holiday season. This also explained the -3.39% drop in the deep discount retailers, Family Dollar Stores Inc (
DLTR) stock prices today.
However, the rich are getting richer, luxury chains such as Saks Inc (SKS) Nordstrom Inc (
JWN) are doing pretty well.
It worth noticing that shares of Nordstrom Inc, a subjected of our
bullish discussion a couple days ago, gained about 5% today on heavy volume. The stock appreciated more than +15% since profiled in our "
Swing Trader Bulletin" on
November 21, 2007.
Chart 1.1: Nordstrom Inc (daily).
Thursday rally had brought JWN directly into the area of 50-day moving average resistant. At this moment it's unknown whether this level can be taken out or not, though a walk above the 40 level will have the potential to turn the medium-term trend up and hence trigger all sorts of stops. This, if true, will have the power to fuel a run into the high-40's level.
In addition to the "seemingly bullish" retail data, President Bush's plan to help troubled homeowners had also gave the bulls another good reason, at least for now, to buy.
Chart 1.2: Dow Jones Industrial (daily).
The blue-chips index broke out decisively above the 13500 level. This is good but no cigar. As you can see, today's big advance had brought the index directly into the secret double resistant, around the 13600-ish level. Until the bulls manage to push prices above this level, expect a choppy tape. Short-term support is about 13200.
Chart 1.3: Standard & Poors 500 Index (daily).
Similar to the Dow, the S&P has also rallied into the secret double resistance, around the 1500-ish level. As noted above, the bulls might not have their cases until prices move above this level. Short-term support is about 1460.
In summary: Thursday trading action was, definitely, bullish; though with the technical hurdles remain firmly in place, the period of easy money is over.
(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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