Mid-Week Index Overview

Oct 4, 2007: 12:32 AM CST

Wednesday has arrived and departed, and now it’s time for the Mid-Week Overview of the Major US Indexes!

I always start with the Dow:

  • Price broke to record highs (haven’t you heard it enough in the media?)
  • Price is seeming to complete a downswing (or counterswing)
  • Price is above a significant trendline area
  • Price is above all major moving averages, which are displaying a bullish bias
  • Momentum made a new high on September 17th which forecast the new price high
  • Momentum is now diverging relative to the price ‘swings’ which signals a potential loss of buying pressure
  • Volume has been declining on the recent swing up in price (bearish)
  • Price should find support at the 13,700 range should it retest this zone (odds seem to favor it)
  • Price is in a confirmed uptrend

Next is the S&P 500:

  • The biggest technical signal is that we have “Non-Confirmation” with the Dow Jones
  • The Dow is making new (lifetime) highs while the S&P is not
  • Price is above a trendline, but whether it holds will be determined soon if not tomorrow
  • The moving averages all signal bullishness
  • The New Momentum High of about September 18th forecast the new price highs as well
  • Momentum is now diverging, as is volume (identical to the Dow Jones)
  • Price is also in a confirmed uptrend

Realize that the Dow Jones is comprised only of 30 “Blue-Chip” companies that is supposed to represent all (most) of the US Economy, with some exceptions (utilities, etc).

The S&P is a much broader index that represents 500 companies. What this “non-confirmation” indicates is that money is just slightly supporting the larger capitalized, more established companies currently.

Look for price to attempt a test of the indexes rising 20 period moving averages at a minimum before resuming a strong upwards bias.

If price fails to retrace even to the 20 period EMA, odds favor a very strong upwards move in price as a result of that strength on the part of the buyers (and “short-coverers”).

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