Post by TradingForGod on Sept 8, 2004 9:52:05 GMT -5
In our previous discussions about the Nasdaq I mentioned that the S&P and Dow were more bullish looking than the tech-heavy index. Given that, I wanted to take a look at the S&P 500 today so that you can see the differences.
The chart below shows the characteristic down channel we have seen before in the Nasdaq, but the channel is not as steep and the bounce has brought the S&P much closer to the top end. As a matter of fact, the Dow is RIGHT AT its down channel resistance line already. It’s already at a very key decision point.
The daily moving averages are in a bullish configuration with the 7-day MA above the 20-day which just crossed above the 40-day MA two sessions ago. This is the first time the MAs have been set up this way since late June. Daily momentum is strong right now too, with only a hint of the dreaded “momentum divergence” that might suggest a top. In addition, the ADX trend indicator is turning higher and is now at a reading of 23, indicating a trend (an UP trend) is strengthening. About the only real concern I have with the chart right now is the stochastics which are very overbought and suggest the need for some kind of pull-back. All in all, this chart suggests continued upside potential to at least the trendline at 1135ish.
HOWEVER, there is the issue of the Dow. It is already AT its trendline. It’s hard to see the S&P or the Nasdaq push higher if the Dow stalls here. Likewise, if the Dow breaks out, it suggests that the S&P should eventually break its channel as well. I don’t really like the Dow as an indicator since it is so narrowly focused (30 stocks), but a lot of people watch it so we need to as well. That means that the equity market is at a really important juncture here.
This is how I would play it:
If you are fully invested, I suggest you take 1/3 of your position off the table right now. If the Dow closes decisively above yesterday’s close you can put it back on. Until that happens, a bit of caution is warranted right here.
God bless!
TFG
The chart below shows the characteristic down channel we have seen before in the Nasdaq, but the channel is not as steep and the bounce has brought the S&P much closer to the top end. As a matter of fact, the Dow is RIGHT AT its down channel resistance line already. It’s already at a very key decision point.
The daily moving averages are in a bullish configuration with the 7-day MA above the 20-day which just crossed above the 40-day MA two sessions ago. This is the first time the MAs have been set up this way since late June. Daily momentum is strong right now too, with only a hint of the dreaded “momentum divergence” that might suggest a top. In addition, the ADX trend indicator is turning higher and is now at a reading of 23, indicating a trend (an UP trend) is strengthening. About the only real concern I have with the chart right now is the stochastics which are very overbought and suggest the need for some kind of pull-back. All in all, this chart suggests continued upside potential to at least the trendline at 1135ish.
HOWEVER, there is the issue of the Dow. It is already AT its trendline. It’s hard to see the S&P or the Nasdaq push higher if the Dow stalls here. Likewise, if the Dow breaks out, it suggests that the S&P should eventually break its channel as well. I don’t really like the Dow as an indicator since it is so narrowly focused (30 stocks), but a lot of people watch it so we need to as well. That means that the equity market is at a really important juncture here.
This is how I would play it:
If you are fully invested, I suggest you take 1/3 of your position off the table right now. If the Dow closes decisively above yesterday’s close you can put it back on. Until that happens, a bit of caution is warranted right here.
God bless!
TFG