Midweek Index Overview

Dec 6, 2007: 11:24 AM CST

It’s time to take a brief technical look at the stock market and see what’s happened and what may lie ahead.

From the top (using the Dow Jones Industrial Average), we are in a daily downtrend and are threatening to be in one on the weekly charts.

Prices have risen in the previous upswing to form a much more bullish posture than otherwise could be, and this could signal better times ahead.

Recall we have the potential “Santa Claus” rally ahead, which could take place around the Christmas holidays at the end of December, but keep in mind such a rally is never guaranteed.

  • Price sits currently (intraday) at the key horizontal line which has provided both support and resistance
  • Price managed to break above the 20, 50, and 200 period moving averages in two swings
  • Price found recent support at the convergence point of the 200 period and 20 period moving averages
  • We can expect – in the short term – that these levels (should they be retested) could hold again as support
  • Price made a positive momentum divergence, which hinted that a rally (upswing) was ahead. It is now complete.
  • To reverse the trend back to “up” on the daily chart, price would need to make a higher low then swing back above the recent higher high.

On to the weekly chart:

  • Broadening formation (bearish) still developing
  • Price crossed the weekly 20 period MA (bullish)
  • Price found support just beneath the weekly 50 period (one-year) moving average (bullish)
  • Momentum is making lower highs and lower lows (bearish)
  • Volume is confirming downswings (sell-offs) which is bearish
  • Price made a new momentum low (bearish)

Combine your analysis of the broader US Indexes with other interrelated markets such as the Bond and Commodity market to get a more holistic image of what the current conditions are at the moment.

Tread cautiously!

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