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Saturday, February 23, 2008 8:50:35 PM
Amateur Investors Weekend Stock Market Analysis (2/23/08)
http://www.amateur-investor.net/Weekend_Market_Analysis_Feb_23_08.htm
Over the past few months we have been hearing the word Stagflation. The Wikipedia definition for Stagflation describes a period of inflation combined with stagnation (slow economic growth and rising unemployment, possibly including recession). The last period of Stagflation occurred in the 1970's and was blamed on a huge rise in oil prices in combination with the central banks excessively aggressive monetary policy that was trying to avoid a recession.
A longer term chart of the Dow during this time shows that from the mid 1960's through the early 1980's it basically got stuck in a longer term trading range. Furthermore in 1966 the Dow was around 1000 (point A) and by 1981 it still was hovering around the 1000 level. Thus over a 16 period the Dow went basically nowhere during a Stagflation environment. This is why we don't want to see the development of Stagflation as that could have an adverse affect on the market for several years.
In the near term during the past 10 trading days the Dow has traded basically between 12550 and 12100 which is a key short term support area. If the Dow continues to hold support above the 12100 level and attempts to rally look for initial resistance near 12600 which is at its 38.2% Retracement Level and declining 50 Day EMA (blue line). If the Dow could rise above the 12600 level then its next area of resistance would either be at its 50% Retracement Level around 12900 or at its 200 Day EMA (green line) at 13000. Meanwhile if the Dow takes out the 12100 support area then that would lead to a retest of the January 23rd low just above 11600.
The S&P 500 has been trading between 1370 and 1320 the past 10 trading days as the 1320 level has been a key support area. If the S&P 500 remains above the 1320 level and attempts to rally look for initial resistance near 1390 which is where its declining 50 Day EMA (blue line) and 38.2% Retracement Level resisde at. If the S&P 500 were to break above the 1390 area then its next area off upside resistance would be at its 50% Retracement Level near 1420. Meanwhile if the S&P 500 tales out the 1320 level then that would lead to a retest of the January 23rd low at 1270.
As far as the Nasdaq it has been encountering resistance near its declining 20 Day EMA (blue line) for the past few weeks. If it can find a way to break solidly above its 20 Day EMA then it could rally back to its declining 50 Day EMA (green line) around 2430 or its 38.2% Retracement Level near 2450. Meanwhile if the Nasdaq fails to rally above its 20 Day EMA then that will eventually lead to a drop back to or below its January 23rd low near 2200.
http://www.amateur-investor.net/Weekend_Market_Analysis_Feb_23_08.htm
Over the past few months we have been hearing the word Stagflation. The Wikipedia definition for Stagflation describes a period of inflation combined with stagnation (slow economic growth and rising unemployment, possibly including recession). The last period of Stagflation occurred in the 1970's and was blamed on a huge rise in oil prices in combination with the central banks excessively aggressive monetary policy that was trying to avoid a recession.
A longer term chart of the Dow during this time shows that from the mid 1960's through the early 1980's it basically got stuck in a longer term trading range. Furthermore in 1966 the Dow was around 1000 (point A) and by 1981 it still was hovering around the 1000 level. Thus over a 16 period the Dow went basically nowhere during a Stagflation environment. This is why we don't want to see the development of Stagflation as that could have an adverse affect on the market for several years.
In the near term during the past 10 trading days the Dow has traded basically between 12550 and 12100 which is a key short term support area. If the Dow continues to hold support above the 12100 level and attempts to rally look for initial resistance near 12600 which is at its 38.2% Retracement Level and declining 50 Day EMA (blue line). If the Dow could rise above the 12600 level then its next area of resistance would either be at its 50% Retracement Level around 12900 or at its 200 Day EMA (green line) at 13000. Meanwhile if the Dow takes out the 12100 support area then that would lead to a retest of the January 23rd low just above 11600.
The S&P 500 has been trading between 1370 and 1320 the past 10 trading days as the 1320 level has been a key support area. If the S&P 500 remains above the 1320 level and attempts to rally look for initial resistance near 1390 which is where its declining 50 Day EMA (blue line) and 38.2% Retracement Level resisde at. If the S&P 500 were to break above the 1390 area then its next area off upside resistance would be at its 50% Retracement Level near 1420. Meanwhile if the S&P 500 tales out the 1320 level then that would lead to a retest of the January 23rd low at 1270.
As far as the Nasdaq it has been encountering resistance near its declining 20 Day EMA (blue line) for the past few weeks. If it can find a way to break solidly above its 20 Day EMA then it could rally back to its declining 50 Day EMA (green line) around 2430 or its 38.2% Retracement Level near 2450. Meanwhile if the Nasdaq fails to rally above its 20 Day EMA then that will eventually lead to a drop back to or below its January 23rd low near 2200.
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