Weekend Index View

Sep 23, 2007: 5:18 PM CST

Last week was a runaway win for the bulls, thanks to the Federal Reserve’s decision to drop interest rates by 50 basis points. Let’s zero-in on the charts and see what the current technical picture of the market tells us:

Dow – Daily

  • Volume was higher than exactly a month ago – a good sign
  • After a large volatility move, we expect consolidation (which we are seeing)
  • It “feels like” there should be a pullback and retest of the breakout zone, or at least the moving averages
  • Price found resistance just below Dow 13,900, and the index is about 180 points away from another lifetime high
  • The only zone of resistance is the ‘all-time highs’ at 14,000.
  • There are various zones of support below
  • We can now classify the Dow Daily chart as being in a confirmed uptrend again, after breaking above the 13,500 swing high.
  • Price is technically overextended beyond the Bollinger Bands – 90% chance of pulling back inside of them in the short-term

Nasdaq:

  • Price is also in a confirmed uptrend
  • Price broke above a significant trendline that has served as both support and resistance
  • Price is also at the upper boundary of the Bollinger Band – great chance of a retest downwards
  • Volume increased relative to the recent 20 trading days
  • The moving averages are now in a confirmed bullish orientation/pattern
  • Price sits 50 points away from a 7-year high

The Russell 2000:

  • Price broke above significant resistance from an established trendline.
  • Price broke above the flattening 200 period moving average – a major technical boundary
  • Price also is at the upper range of the Bollinger Band
  • Price “feels like” it will stay above the break and possibly retest the previous trendline at 840
  • A momentum divergence resolved nicely to the upside

Bonus Chart Google (GOOG):

I wanted to show the immense strength Google has shown over the past week. Five days in a row took price from $525 to $560 without a pause.

 

 

 

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