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Sunday, June 15, 2008 3:29:01 PM
Amateur Ivestments Weekend Stock Market Analysis (6/14/08)
http://www.amateur-investor.net/Weekend_Market_Analysis_June_14_08.htm
The major averages bounced from Thursday into Friday from oversold conditions however they are still exhibiting rather bearish looking chart patterns.
The Dow which has developed a Double Top pattern bounced off the 12100 level on Thursday which was just below its 61.8% Retracement Level calculated from the January low to the May high. If the Dow follows through to the upside early next week look for resistance to occur at its 20 Day EMA (blue line) near 12450. During the past few weeks the Dow has been stalling out near its 20 Day EMA when it has bounced from oversold conditions (points A).
The Nasdaq is also exhibiting a potential Double Top pattern as well but bounced off its 38.2% Retracement Level (calculated from the mid March low to the early June high) near 2400 on Thursday. If the Nasdaq follows through early next week to the upside look for possible resistance to occur at its 20 Day Moving Average (blue line) near 2480.
The Nasdaq 100 is also exhibiting a potentially bearish looking Double Top pattern as it held support on Thursday just above its 38.2% Retracement Level (calculated from the mid March low to the early June high) near 1910. If the Nasdaq 100 follows through early next week look for upside resistance to occur at its 20 Day Moving Average (blue line) near 1990.
As far as the S&P 500 so far it has held support above its 61.8% Retracement Level (calculated from the mid March low to the May high) which was around the 1325 level. If the S&P 500 follows through to the upside early next week I expect it will encounter strong resistance in the 1375 to 1380 area which is where its 20 Day EMA (blue line) and 50 Day EMA (green line) reside at.
Meanwhile one thing to watch next week is the price of Crude Oil. After its big two day rise from June 5th through June 6th (points B to C), in which it rose over $15, the price of Crude Oil went through a consolidation period this week. This type of action is not uncommon after such a big move over a short period of time. My guess is the price of Crude Oil will make another substantial move before much longer out of this consolidation pattern which will have a significant affect on the market. If the price of Crude Oil breaks out to the upside I expect this will have a negative affect on the market. Meanwhile if the price of Crude Oil were to break to the downside instead then that may have a positive affect on the market.
Finally when attempting to time upside reversals in the market there are several things you can look at. One method which has never failed since the late 1990's is by combining the 2 period Relative Strength Index (RSI) with the # of Declining Stocks in the NYSE. What you want to look for is when the the # of Declining Stocks in the NYSE closes "3" or more consecutive days at or above the 2000 level and the 2 period RSI makes 3 consecutive closes in a row below the 65 level. The last occurrence happened on December 17th, 2007 which was followed by a 5 day rally in the SPY (points D to E) for a gain of just over 4 points.
The table below gives all of the signals for this strategy going back to 1998 involving the SPY. The purchase price was based on buying at the open of the next trading day once a signal occurred. Since 1998 there have been 13 signals with the average gain of +3.80 points in the SPY within 5 trading days.
http://www.amateur-investor.net/Weekend_Market_Analysis_June_14_08.htm
http://www.amateur-investor.net/Weekend_Market_Analysis_June_14_08.htm
The major averages bounced from Thursday into Friday from oversold conditions however they are still exhibiting rather bearish looking chart patterns.
The Dow which has developed a Double Top pattern bounced off the 12100 level on Thursday which was just below its 61.8% Retracement Level calculated from the January low to the May high. If the Dow follows through to the upside early next week look for resistance to occur at its 20 Day EMA (blue line) near 12450. During the past few weeks the Dow has been stalling out near its 20 Day EMA when it has bounced from oversold conditions (points A).
The Nasdaq is also exhibiting a potential Double Top pattern as well but bounced off its 38.2% Retracement Level (calculated from the mid March low to the early June high) near 2400 on Thursday. If the Nasdaq follows through early next week to the upside look for possible resistance to occur at its 20 Day Moving Average (blue line) near 2480.
The Nasdaq 100 is also exhibiting a potentially bearish looking Double Top pattern as it held support on Thursday just above its 38.2% Retracement Level (calculated from the mid March low to the early June high) near 1910. If the Nasdaq 100 follows through early next week look for upside resistance to occur at its 20 Day Moving Average (blue line) near 1990.
As far as the S&P 500 so far it has held support above its 61.8% Retracement Level (calculated from the mid March low to the May high) which was around the 1325 level. If the S&P 500 follows through to the upside early next week I expect it will encounter strong resistance in the 1375 to 1380 area which is where its 20 Day EMA (blue line) and 50 Day EMA (green line) reside at.
Meanwhile one thing to watch next week is the price of Crude Oil. After its big two day rise from June 5th through June 6th (points B to C), in which it rose over $15, the price of Crude Oil went through a consolidation period this week. This type of action is not uncommon after such a big move over a short period of time. My guess is the price of Crude Oil will make another substantial move before much longer out of this consolidation pattern which will have a significant affect on the market. If the price of Crude Oil breaks out to the upside I expect this will have a negative affect on the market. Meanwhile if the price of Crude Oil were to break to the downside instead then that may have a positive affect on the market.
Finally when attempting to time upside reversals in the market there are several things you can look at. One method which has never failed since the late 1990's is by combining the 2 period Relative Strength Index (RSI) with the # of Declining Stocks in the NYSE. What you want to look for is when the the # of Declining Stocks in the NYSE closes "3" or more consecutive days at or above the 2000 level and the 2 period RSI makes 3 consecutive closes in a row below the 65 level. The last occurrence happened on December 17th, 2007 which was followed by a 5 day rally in the SPY (points D to E) for a gain of just over 4 points.
The table below gives all of the signals for this strategy going back to 1998 involving the SPY. The purchase price was based on buying at the open of the next trading day once a signal occurred. Since 1998 there have been 13 signals with the average gain of +3.80 points in the SPY within 5 trading days.
http://www.amateur-investor.net/Weekend_Market_Analysis_June_14_08.htm
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