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(3/17/07)
The market sold off again this week after undergoing an oversold
bounce the previous week. All the major averages have now tested support
at their 200 Day EMA's and these will be critical areas to watch. The
Dow dropped back to its 200 Day EMA (blue line) near 11950 on Wednesday but was
able to bounce off this key support level. It will be important for the
Dow to hold support near its 200 Day EMA during the next few weeks. If the
Dow were to break below its 200 Day EMA then its next support level would either
be at its 50% Retracement Level near 11750 or at its 61.8% Retracement Level
around 11500. Meanwhile if the Dow is able to hold support near the 11950
area and attempts to rally look for upside resistance at its 20 Day EMA (green
line) near 12295. 
The
S&P 500 also held support near its 200 Day EMA which was around the 1365
level and near its 38.2% Retracement Level as well. Thus it
will be important for the S&P 500 to hold support near the 1365 level in the
weeks ahead. If the S&P 500 breaks below the 1365 level then its next
area of support would either be at its 50% Retracement Level near 1340 or just
below the 1320 level which coincides with its 61.8% Retracement Level and rising
400 Day EMA (purple line). Meanwhile if the S&P 500 is able to hold
support around 1365 and attempts to rally look for initial upside resistance near its 20
Day EMA (green line) around 1405. 
As
far as the Nasdaq it did briefly drop below its 200 Day EMA (blue line) this
week but held support at its 38.2% Retracement Level near 2332. Thus it
will be important for the Nasdaq to hold support at its 38.2% Retracement Level
in the weeks ahead. If the Nasdaq were to break below the 2332 level then
its next area of support would either be at its 50% Retracement Level near 2375
or at its 61.8% Retracement Level near 2210. Meanwhile if the Nasdaq
does hold support at its 38.2% Retracement Level and attempts to move higher
look for initial resistance to occur at its 20 Day EMA (green line) near 2405. 
As
we have seen in the past after the Nasdaq has made a substantial move higher for
several weeks and gained from 25% to 26% this has been followed by a rather
steep correction of 14% to 15%. The last two times the Nasdaq has gone
through a correction it took from 13 weeks to 17 weeks before a bottom
occurred. Currently the Nasdaq has only been in a correction for 3 weeks
and dropped around 8% so if the previous pattern continues then we may have to
wait for several more weeks before it makes a major bottom. 
Finally although corrections are
never fun to go through they do give investors a chance to figure out which
stocks may lead the market higher in the future once a bottom does occur.
For example DKS has held up well of late and has formed a Double Bottom
pattern. Now what we would like to see over the next 3 to 4 weeks is for
DKS to develop a constructive Handle before attempting to make another move
higher. 
For those interested in our Premium Membership Services which
includes our Daily ETF Signals you can signup for a Free 30 Day Trial
Membership. In 2006 as shown below all of our Strategies pretty much doubled that of the
major averages. Click
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Amateur
Investors (AI) Performance vs the Major Averages
| Year |
2006 |
|
AI Long Term Strategy
|
+30.0% |
|
AI Short Term Strategy
|
+32.5% |
| AI ETF Daily Strategy |
+46.0% |
| Dow |
+16.3% |
| Nasdaq |
+9.5% |
| S&P 500 |
+13.6% |
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