Weekly Chart Views

May 26, 2007: 9:36 AM CST

Here are some daily charts of recent market action from a momentum-divergence standpoint:

dow-may-26.png

  • Momentum is diverging, as buying pressure appears to be subsiding.
  • Market is pulling back to possible support at the rising 20 period MA (has it already found support?)
  • Chart is extremely bullish
  • Resistance (three ‘scraping’ candles) at round number 13,600.  If surpassed, expect further strength

This is a daily chart of the Dow since 2006.  
dow-year-may-26.png

  • Notice the steep change in angular momentum in the lengthy price swings
  • Ask how much buying power is out there to sustain this lengthy and steep angular rise (angle of 75 degrees)
  • Notice the momentum divergence in the price swings at the far right of the MACD oscillator
  • Nevertheless, we made annual new momentum highs recently (as well as price highs).

The Nasdaq (Six Months Daily)

nas-may-26.png

  • The Nasdaq’s momentum divergence is clearer than the Dow’s
  • Price made a new high yet momentum is not making new highs (in terms of swings)
  • Traders rejected the 2600 price value to the penny recently – it is resistance that must be cleared
  • Volume increased while price sold on momentum on Thursday (only to rebound a bit) = Bearish short term
  • Support appears to be at 2520 with the lower Bollinger Band and 50 period MA
  • A Head and Shoulders pattern (short-term) MAY be forming, but needs validation
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