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Saturday, August 02, 2008 9:42:12 PM
Amateur Investors Weekend Stock Market Analysis (8/2/08)
http://www.amateur-investor.net/Weekend_Market_Analysis_Aug_2_08.htm
The market has been very volatile during the past several days with big moves in both directions. A 60 minute chart of the Nasdaq 100 going back 20 trading days shows it has been whipsawed all over the place but the end result has virtually been no change at all despite all of the big moves. This type of action is great for Day and Swing traders but not so good for those looking to Buy and Hold stocks or ETFs over a period of several days.
As far as the major averages the Dow which completed a 5 Wave pattern on July 23rd using a 60 minute intra day chart appears to be going through an ABC type correction. The key thing to watch early next week is whether the Dow can hold support along its newly developed upward sloping trend line (black line) originating with the July 15th low which is now nearing the 11250 area.
If the Dow can hold support at or above this trend line then look for one more move higher with upside resistance coming in near the 11700 level which corresponds to its 38.2% Retracement Level (calculated from the May high to the July 15th low) and declining 50 Day EMA (blue line) shown in the chart below. Meanwhile if the Dow drops below its newly developed upward sloping trend line (black line) then that could eventually lead to a retest of the July 15th low (point D) at some point in August.
The S&P 500 also completed a 5 Wave pattern on July 23rd and appears to be going through an ABC correction as well. If the rally from the July 15th low is going to remain intact the S&P 500 will need to hold support at or above its newly developed upward sloping trend line (black line) next week which is currently around the 1250 level.
If the S&P 500 holds support at or above 1250 and then makes one more move higher look for upside resistance to occur either at its 38.2% Retracement Level (calculated from the May high to the July 15th low) around 1290 or at its declining 50 Day EMA (blue line) near 1298 in the chart below. Meanwhile if the S&P 500 falls below its upward sloping trend line (black line) then that may lead to an eventual retest of the July 15th low (point E) at some point in August.
As far as the Nasdaq it has been trending higher since the July 15th low however it has been extremely choppy. The key short term support area to watch next week would be along its upward sloping trend line (black line) which is currently around 2295.
If the Nasdaq can hold support at or above the 2295 level then look for one more move higher with resistance coming in either near 2360 which is at its 50% Retracement Level (calculated from the May high to the July 15th low) or at its 61.8% Retracement Level near 2400. Meanwhile if the Nasdaq were to break below its upward sloping trend line then that may eventually lead to a retest of its July 15th low (point F) at some point in August.
The Nasdaq 100 has encountered strong resistance so far near 1875 which corresponds to its 38.2% Retracement Level (calculated from the June high to the July 15th low) and declining 50 Day EMA (blue line). If the Nasdaq 100 can break above the 1875 level and make one more move higher its next significant area of upside resistance would be at its 200 Day EMA (green line) near 1900. Meanwhile if the Nasdaq 100 falls below the 1800 level then look for a retest of the July 15th low (point G).
Finally for those that are looking for a signal that the market may reverse to the upside on a Short Term basis one thing that you can focus on is the # of Declining Stocks in the NYSE. When you see "3" days in a row in which the # of Declining Stocks has risen at or above 2000 that usually is a pretty reliable signal that at least a brief oversold bounce is going to occur. I have marked the most recent occurrences in the chart below with entry days denoted by the letter "E".
The table below shows all of the Signals so far in 2008 when the # of Declining Stocks in the NYSE has risen at or above the 2000 level "3" days in a row. As you can see the odds of getting a $1 to $2 short term profit in the SPY ETF are very high when this signal occurs. The last signal occurred on July 15th which was followed by a $6 gain in the SPY within 5 trading days.
Signal Entry Entry 5 Day $1 $2 $3 $4+
Date Date Price High Gain Gain Gain Gain
3/10/08 3/11/08 130.72 133.77 Yes Yes Yes No
6/24/08 6/25/08 131.72 133.40 Yes No No No
7/7/08 7/8/08 124.99 127.74 Yes Yes No No
7/15/08 7/16/08 121.45 127.80 Yes Yes Yes Yes
Keep in mind this is just one of several indicators you can use to determine when a short term upside reversal in the market may occur which would lead to additional signals during the year.
http://www.amateur-investor.net/Weekend_Market_Analysis_Aug_2_08.htm
The market has been very volatile during the past several days with big moves in both directions. A 60 minute chart of the Nasdaq 100 going back 20 trading days shows it has been whipsawed all over the place but the end result has virtually been no change at all despite all of the big moves. This type of action is great for Day and Swing traders but not so good for those looking to Buy and Hold stocks or ETFs over a period of several days.
As far as the major averages the Dow which completed a 5 Wave pattern on July 23rd using a 60 minute intra day chart appears to be going through an ABC type correction. The key thing to watch early next week is whether the Dow can hold support along its newly developed upward sloping trend line (black line) originating with the July 15th low which is now nearing the 11250 area.
If the Dow can hold support at or above this trend line then look for one more move higher with upside resistance coming in near the 11700 level which corresponds to its 38.2% Retracement Level (calculated from the May high to the July 15th low) and declining 50 Day EMA (blue line) shown in the chart below. Meanwhile if the Dow drops below its newly developed upward sloping trend line (black line) then that could eventually lead to a retest of the July 15th low (point D) at some point in August.
The S&P 500 also completed a 5 Wave pattern on July 23rd and appears to be going through an ABC correction as well. If the rally from the July 15th low is going to remain intact the S&P 500 will need to hold support at or above its newly developed upward sloping trend line (black line) next week which is currently around the 1250 level.
If the S&P 500 holds support at or above 1250 and then makes one more move higher look for upside resistance to occur either at its 38.2% Retracement Level (calculated from the May high to the July 15th low) around 1290 or at its declining 50 Day EMA (blue line) near 1298 in the chart below. Meanwhile if the S&P 500 falls below its upward sloping trend line (black line) then that may lead to an eventual retest of the July 15th low (point E) at some point in August.
As far as the Nasdaq it has been trending higher since the July 15th low however it has been extremely choppy. The key short term support area to watch next week would be along its upward sloping trend line (black line) which is currently around 2295.
If the Nasdaq can hold support at or above the 2295 level then look for one more move higher with resistance coming in either near 2360 which is at its 50% Retracement Level (calculated from the May high to the July 15th low) or at its 61.8% Retracement Level near 2400. Meanwhile if the Nasdaq were to break below its upward sloping trend line then that may eventually lead to a retest of its July 15th low (point F) at some point in August.
The Nasdaq 100 has encountered strong resistance so far near 1875 which corresponds to its 38.2% Retracement Level (calculated from the June high to the July 15th low) and declining 50 Day EMA (blue line). If the Nasdaq 100 can break above the 1875 level and make one more move higher its next significant area of upside resistance would be at its 200 Day EMA (green line) near 1900. Meanwhile if the Nasdaq 100 falls below the 1800 level then look for a retest of the July 15th low (point G).
Finally for those that are looking for a signal that the market may reverse to the upside on a Short Term basis one thing that you can focus on is the # of Declining Stocks in the NYSE. When you see "3" days in a row in which the # of Declining Stocks has risen at or above 2000 that usually is a pretty reliable signal that at least a brief oversold bounce is going to occur. I have marked the most recent occurrences in the chart below with entry days denoted by the letter "E".
The table below shows all of the Signals so far in 2008 when the # of Declining Stocks in the NYSE has risen at or above the 2000 level "3" days in a row. As you can see the odds of getting a $1 to $2 short term profit in the SPY ETF are very high when this signal occurs. The last signal occurred on July 15th which was followed by a $6 gain in the SPY within 5 trading days.
Signal Entry Entry 5 Day $1 $2 $3 $4+
Date Date Price High Gain Gain Gain Gain
3/10/08 3/11/08 130.72 133.77 Yes Yes Yes No
6/24/08 6/25/08 131.72 133.40 Yes No No No
7/7/08 7/8/08 124.99 127.74 Yes Yes No No
7/15/08 7/16/08 121.45 127.80 Yes Yes Yes Yes
Keep in mind this is just one of several indicators you can use to determine when a short term upside reversal in the market may occur which would lead to additional signals during the year.
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