Editor's note:
this column was originally published on Capital Essence's CEM News on January 02, 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 Thursday January 03, 2008.
We've offered right here in the
previous Market Outlook that: "
[2008] is just a continuation of where 2007 left off…commodities are still in good position to go higher", crude oil and gold picked up where they left off in 2007 and ended the new year session as the best-performing sectors.
Crude futures for February delivery hit a contract high of $100 before settling the day at $99.45, up 3.6%.
Gold futures climbed to the highest level since 1980, with the contract for February delivery up $22.10 to close at $857 an ounce.
Chart 1.1: Crude Oil Index (daily).
As expected, oil tested the psychological 100 level today. So far, it held; though not for long. Support is around the area of ten-month rising trend-line, about 84.
We've noted in the previous "
Cubes Speculator Bulletin" that: "
sell signal confirmed… QQQQ traded like it wants to test the 200-day moving average."
The NASDAQ Composite Index dropped sharply Wednesday to close slightly below the 200-day moving average.
Any NASDAQ 100 ETF (QQQQ) put options traded could have earned about 100% intraday.
Chart 1.2: NASDAQ Composite Index (daily).
As noted above, the tech rich index pulled back into the area key moving average support after a retest of resistant around the 2700 level was met with aggressive sellers. It's important to keep the November's low, about 2550-2530, on your trading radar for a failure to attract buyers at this level shall set the stage for a retest of August's low, about 2386. Resistant is about 2700.
Chart 1.3: Dow Jones Industrial Average (daily).
The blue-chips index is still working on the bearish Head-Shoulder pattern. As mentioned, a sustain decline below the "neckline", about 12700, will set the stage for a test of support around the 2006 bullish breakout point, about 11640.
Chart 1.4: Standard & Poors 500 Index (daily).
The board market index is working on a massive broadening top pattern. This is one of most bearish technical pattern out there. A decline below the neckline, about 1370, will complete the pattern and hence suggests a retest of 2006 low, about 1220. Immediate support is about 1406. Short-term resistant is about 1490.
In summary: Wednesday's trading action had reconfirmed our "
continuation" notion – fresh money continues to flow into last year's winner, i.e., commodities, and shy away from the losers, i.e., financials.
And, no need to sugar coating, equity traded like it can't find any solid footing, so the path with least resistance, at the present time, is to the downside.
(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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