Editor's note: this column was originally published on Capital Essence's CEM News on February 07, 2008. 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 February 08, 2008.
It was another roller coaster day of trade on Thursday, with the S&P saw a large 30 point swing from its session high to low. The action was, in fact, very consistent to the little "volatile swings" scenario that we've traced here in the previous Market Outlook when we wrote that: "the market is getting pretty close to the short-term oversold territory… so we wouldn't be surprise to see some sorts of volatile swings and sharp intraday reversals in a next couple of days." The market was, however, managed to the day with decent gains with eight of the ten economic sectors advancing.
Contributed to the overall optimism were the encouraging January retailer same-store sales. Speaking of retail, shares of Avon Products Inc (AVP), a subjected of our recent bullish discussion, added more than 3% Thursday on the heel of Tuesday 5% gains. Just so that you know, the stock gains about 12% since profiled on our February 1 "Swing Trader Bulletin" as a potential buy candidate.
Helped by strength in the specialized retails group, financial stocks turned higher Thursday with the KBW Bank Index rose 2.02% for the day.
Chart 1.1 – KBW Bank Index (daily).
It seems to us that the index is trying to establish a base around the area of 50-day moving average. The action is pretty encouraging. Expect some sorts of consolidation around this level. Support is about 85. Resistant is slightly below the 100 level.
Chart 1.2 - Standard & Poors 500 Index (daily).
Similar to the BKX, the S&P is also trying to build a bottom. The action was pretty consistent to the "higher low" scenario that we've noted right here in the previous Market Outlook: "the relative strength index (RSI) indicator suggests that we're pretty close to the short-term oversold territory, so it would not surprise us to see some kind of attempt to establish a higher low in a next couple of days." At this moment, it's unknown whether this level holds or not though a walk above February's high will turn the medium-term trend up and hence, increases the probability for a test of October's high. Support is about 1270.
Chart 1.3 – Dow Jones Industrials Average (daily).
The relative strength index (RSI) indicator had entered the oversold territory so it wouldn't surprise us to see some sorts of consolidations, which could be in price (i.e., prices moving slightly higher) or time (i.e., prices moving sideway) in a next couple of days. Support is around the area of January low, about 11640. Resistant is about 12700.
In summary: it seems to us that the market is trying to establish a higher low from here. However, unless the bulls manage to overcome the S&P 1400 level, the bears still have the benefit of the doubts.
Until next time, good luck.
(By: Michelle Mai for Capital Essence)
(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.
