Daily Chart Analysis

May 12, 2007: 2:24 PM CST

There was some damage done to the weekly trend on most of the Indexes this week.

nas-daily-trendlines.JPG

The Nasdaq clearly broke its rising trend (some have called this a rising wedge) and could serve as temporary resistance until broken (or resumed).

The 20 period moving average acted as support, and may continue to do so until proven otherwise.

dow-chart-may-12.JPG

The Dow also broke its breakneck trendline and price found resistance near the bottom of the former trend channel.  Support also is likely at the 20 period MA.

Notice how the slope of the trendline changed (I have drawn two angles as support) which indicates a possibly overheated market due for a slight correction or profit-taking (or shorts suckered in).

Aggressive shorts can initiate new positions, but remember that trends have higher odds of continuation than reversal, so it’s not necessarily a high probability trade to do so.  It is often best to let the market tip its hand and then play off the direction taken.

Technical damage was done, but clearly not enough to call for any bearish action yet.

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