Editor's note:
this column was originally published on Capital Essence's CEM News on December 20, 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 21, 2007.
Stocks finished higher after another roller coaster day of trading with the Dow Jones Industrial Average gained about +0.3%, the S&P 500 Index rose nearly 0.5%.
It worth noticing that of the nine sectors traded high, tech (NDX, +1.90%) continue to lead the market for the third straight session amid strength in Oracle (
ORCL) and Apple (
AAPL).
You've gotta
hold 'em – yes, it seems to us that Wall Street is holding firmly to the bullish ["
Santa rally"] bet.
Speaking of tech, Thursday's trading action was very consistent to what we've predicted in our Wednesday evening "
Cubes Speculator Bulletin": "
QQQQ seemed to found support around the $49.50 level. Expect a test of the $51 level tomorrow."
The NASDAQ 100 ETF (QQQQ) reached as high as $50.96 Thursday after the brief intraday pulled back was met with an aggressive wave of buying interest.
Any call option traded could have earned about 50% intraday.
Chart 1.1: NASDAQ Composite Index (daily).
So far so good, the index traded like it wants to test the double resistant around the 2700 area. Support is at the area of August/November's low, about 2540. As mentioned, a failure to hold above this area will wreck the positive outlook and hence, put the bear into the driver side of the market.
Chart 1.2: Russell 2000 Index (daily).
The small caps index added about 2% immediately after our December 18
bullish comment.
So far so good, it seems to us that the triple resistant around the 780-790 level will be tested sooner rather than later.
At this juncture, only a sustain decline below the 730 level can wreck the bull case and argue for lower prices.
Chart 1.3: Standard & Poors 500 Index (daily).
The board market index traded a bit higher after a decline into the area of late November's bullish breakout gap was met with buyers.
As
mentioned, there is a high probability for a test of the double resistant around the 1490 level though this is not expected tomorrow.
Short-term support is about 1435.
By the way, tomorrow is the option expiration day and it seems to us that the index got pin at 1460.
Chart 1.4: Dow Jones Industrial Average (daily).
The blue-chips index printed a small bear flag right beneath the 200-day moving average. Although admittedly bearish looking, we wouldn't migrate to the bear's camp unless the index tumble below Tuesday's low. That said, a sustain decline below the 13092 level will set the stage for a test of November's low, about 12700.
In summary: from a short-term perspective, things look positive going forward with the technical background supports further upside.
(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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