A Little Index Overview

Apr 5, 2008: 9:31 AM CST

With the exception of Tuesday’s “April Fool’s” 3% stock market move, the rest of the week experienced tame trading. Let’s take a quick look at some of the index charts to see where last week’s action left us:

For the S&P 500, price crested and closed 4 days in a row above the key 20 and 50 period moving average. It’s possible these areas will now shift from resistance into initial support, adding a little fuel to the bullish fire.

On the other hand, volume is declining on the recent market rally, adding doubts – however – to its staying power. These conflicting signals are confusing to traders.

Let’s not forget that the market is currently in a ‘trading range’ or flat trend between 1,400 and 1,260. Until either of these levels are taken out, we should perhaps expect a little more consolidation as traders take in new information and ‘bet’ accordingly.

Let’s peek at the NASDAQ chart:

The chart is showing similar signs of life which are encouraging to the bulls. Momentum (via the oscillator) is trending up and price is now closing above the key 20 and 50 period moving averages as well.

I drew a mini bull-flag on the chart which has now completed its target. Price has formed an indecision “doji” candle on this timeframe, which could precede a short-term reversal (just to test prices a little lower).

The bulls currently have a little bit more going for them than last week, and short-sellers must be aware of that.

The tides may indeed be turning but always look to the risk, no matter what position you decide to take.

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