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Weekend Stock Market Analysis
(7/8/06) The market failed to follow through this week
after the big upward move which occurred on June 29th. The Dow has
encountered resistance just below where the last brief oversold rally stalled
out at in early June near the 11275 area and has dropped back below its 50 Day
EMA (blue line). If the Dow continues lower in the near term look for
support either at its 200 Day EMA near 10980 or at the low made seven trading
days near 10890 (point A). If the Dow were to drop below the 10890 level
then look for a retest of the mid June low near 10700 (point
B). 
The Nasdaq encountered resistance
this week at its 50 Day EMA (blue line) near 2190 and looks like it may
eventually retest the mid June low near 2065. 
Meanwhile a longer term chart of the
Nasdaq shows that the 2065 area is at the Nasdaq's 50% Retracement Level
(calculated from the Summer 2004 low to the April 2006 high). If the
Nasdaq were unable to hold support at the 2065 level then the next area of
support would either be at the October 2005 low near 2025 (point C) or at its
61.8% Retracement Level near 1990 (point D). 
As talked about in the past future
movement in the Nasdaq will likely depend on what the Semiconductor sector
does. A longer term chart of the Semiconductor Index (SOX) shows it
completed a bearish Double Top pattern in early January after encountering
resistance at its previous high made in early 2004 near 560 (point E). If
the SOX is unable to hold support at the low made in October of 2005 near 420
and continues its downward trend then it may eventually drop back to 350 to 380
range. 
The 380 level (point F) is very
close to the SOX's 50% Retracement Level (calculated from the September 2002 low
to the highs made in the early part of 2004 and 2006) while the 350 level (point
G) is near the SOX's 61.8% Retracement Level. If the SOX does eventually
drop back to the 350 to 380 range at some point then Nasdaq will likely continue
downward as well. 
As for the S&P 500 it stalled
out this week near the 1280 level and has dropped back below its 50 Day EMA
(blue line). The key support level to watch in the near term is at its 200
Day EMA (green line) near 1260. If the S&P 500 breaks below the 1260
level then look for a drop back to where it found support at a few weeks ago
near 1237 (point I). 
Finally for those watching the price
of Crude Oil it appears it has developed one of two possible chart
patterns. One could say the price of Crude Oil has developed a
bullish Double Bottom pattern and may now consolidate for a few weeks before
making another significant move higher which may have a negative affect
on the market. 
Meanwhile one could also argue the
price of Crude Oil is developing a bearish Double Top pattern as well which
could eventually lead to a significant sell off. If this occurred then
this may have a positive impact on the market. 
If the price of Crude Oil eventually
makes another move higher then the Oil sector stocks may continue to do
well. For example TRMA from our current "Stocks to Watch List"
has developed a potential Double Bottom pattern and we will be watching to see
if it can develop a constructive Handle over the next few weeks before
attempting to make another move higher. 
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