Editor's note:
this column was originally published on Capital Essence's CEM News on January 14, 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 Tuesday January 15, 2008.
We've
offered in the previous Market Outlook that: "
the market is at or very near a short-term tradable low" – stocks rallied Monday with the Dow Jones industrial average rose 171 points or 1.4% as traders realized that last week's selling was overdone.
Contributed to the overall optimism were a strong earning report from
IBM and continue strength in commodities and commodities related stocks.
As predicted, commodities picked up where they left off last week with gold futures scored another record close at $910 a troy ounce.
U.S. light crude oil for February delivery rose $1.55 to $94.24 a barrel on the New York Mercantile Exchange.
It worth notice that, the airlines managed to hang on to early gains on the face of higher energy prices, up 2.19% for the day.
The action is pretty encouraging, at least in a short-term.
Chart 1.1: Airline Index (daily).
As you can see on the Amex Airline Index versus S&P 500 ratio chart (the yellow line on the lower panel), the group is showing signs of life lately though it's still underperformed the boarder market index on a long-term basis. With that said, we believe the airline is due for another run into the high 30's (around December's bearish breakdown point) before the rally runs out of steam.
Chart 1.2: Standard & Poors 500 Index (daily).
The index printed a small pennant, or diamond pattern to be exact, on the daily chart. Technically speaking, a move above last Thursday's high of 1430 will trigger all sorts of stops, which, we believe, will have enough power to fuel a run into the 1470 area. As always, we must stress that, a failure to hold above last week's low of 1378 on closing basis is indicative of a retest of last spring's low, about 1363.
In summary: Monday's rally had confirmed our "
short-term bottom" notion and hence, increased the likelihood that the market will shoot straight up for the remaining of the month.
Though this is depended upon the S&P's ability to recapture and hold above last week's high.
Until next time, good luck.
(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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