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Weekend Stock Market Analysis
(7/15/06) The market had a lousy week as all three major
averages have dropped back to or below their lows made in mid June.
The Dow has dropped back to its 50% Retracement Level near 10700 calculated from
the low made in October of 2004. If the Dow is unable to hold support near
the 10700 level then its next level of downside support would be at its 61.8%
Retracement Level just below 10500 (point A). 
The Nasdaq which has been acting the
worst of the three major averages broke below its 50% Retracement Level
(calculated from the August 2004 low) this week. If the Nasdaq continues
lower then look for its next area of downside support at its 61.8% Retracement
Level near 1990 (point B). 
Meanwhile if the Nasdaq is unable to
hold support near the 1990 level then it may eventually drop back to the 1900
area which corresponds to its longer term 38.2% Retracement Level (point C)
calculated from the October 2002 low. 
As for the S&P 500 so far it has
held support at its 38.2% Retracement Level near 1220 calculated from the August
2004 low. If the S&P 500 is unable to hold support near the 1220 level
then its next level of downside support would be at its 50% Retracement Level
just below 1200 (point D). 
Furthermore if we take a look at a
longer term chart of the S&P 500 its 23.6% Retracement Level calculated from
the October 2002 low also comes into play near the 1200 level (point E) as
well. 
Finally two things to watch in the
weeks ahead are the price of Crude Oil and the Semiconductor sector. Once
again the price of Crude Oil is making a new 52 week high and has basically been
in an up trend since 2003 while holding support above its 40 Weekly EMA (blue
line). If this trend continues expect this to have a negative impact on
the major averages in the longer term. 
Meanwhile
the Semiconductor sector has really done a number on the Nasdaq as the
Semiconductor Index (SOX) has been in a downtrend since early January after
encountering strong resistance near the 560 level which was where it peaked in
the early part of 2004 (point F). In my opinion the SOX may have to retest the
low made in September of 2004 near the 350 level which also is close to
its 61.8% Retracement Level (point G) as well before we see a major bottom
occur. If the SOX does eventually retest the September 2004 then I would
expect the Nasdaq to continue lower as well. 
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