Our Introductory Holiday Special will expire on January 1st
Signup today and save 50% on all our Membership Packages 
which include our Stocks to Watch List and Daily Breakout Reports

Weekend Stock Market Analysis

(12/20/03)

Over the past four weeks the Dow and S&P 500 have been outperforming the Nasdaq as the technology sector has been under some selling pressure.  A look at the Semiconductors Holders (SMH) shows that this sector has been under selling pressure 5 out of the last 6 weeks accompanied by strong volume, however, so far the SMH's have been able to hold support at their 20 Weekly EMA near 38.50.  Meanwhile it also appears the SMH's could be undergoing a corrective 4th Wave for those that follow Elliot Wave Theory.  

Once again without getting too technical a brief example of a what an Elliot 5 Wave Pattern looks like is shown below.  Notice how Waves 1, 3 and 5 are upward moves with Wave 3 lasting the longest while Wave 5 is the shortest.  Meanwhile also notice that Waves 2 and 4 are corrective Waves which only last for a brief period of time before the upward trend continues.   If the SMH's are currently going through a corrective 4th Wave then based on Elliot Wave Theory there could be one more upward move (5th Wave) before a more substantial correction occurs.

If a 5th Wave does eventually develop in the SMH's and they can break above their previous resistance in the 44 area (point A) then in the longer term it's possible they could rally up to the 50-51 range (point B) which is the longer term 38.2% Retracement Level from the early 2000 high to the 2002 low.  In addition the 50-51 area also corresponds to the high made in 2002 as well.

Meanwhile if the SMH's fail to hold support at their 20 Weekly EMA near 38.50 then look for a quick drop back to their 40 Weekly EMA (purple line) just below the 36 level.

As mentioned in the beginning both the Dow and S&P 500 have been outperforming the Nasdaq over the past month.  The Nasdaq has been basically stuck in a trading range since October between 1880 and 2000.  Eventually the Nasdaq will break out of this trading range and make a substantial move in one direction or the other.  Of course the big question is which direction will it go?  At this point there are two possible scenario's.  If the Nasdaq can break above solidly above the 2000 level this could lead to a quick move up to the 2050-2100 range (point C).  The 2050 area corresponds to the longer term 23.6% Retracement Level calculated from the early 2000 high to the 2002 low while the 2100 level was near the high made in January of 2002.

Meanwhile if the Nasdaq breaks below the bottom of its recent trading range around 1880 which is also near its 20 Weekly EMA then it could quickly drop back to its 40 Weekly EMA (purple line) near 1760.   The Semiconductor sector will likely have a big impact on which direction the Nasdaq will trend in the weeks ahead so as talked about above watch the SMH's closely.       

As for the other two averages the Dow has been trending higher over the past 4 week and now has risen solidly above its longer term 61.8% Retracement (calculated from the 2000 high to the 2002 low) near 10000.  The Dow could run into some minor resistance near 10400 however there is a much more significant area of upside resistance near 10700 which is the longer term 76.4% Retracement Level and also coincides with the high made in 2002 (point D).    

Meanwhile it appears the Dow is still exhibiting a Wave 3 pattern and it will be interesting to see if it can rally up to the 10700 area in the longer term before a corrective 4th Wave occurs.  

The S&P 500 has risen solidly above its longer term 38.2% Retracement Level near 1065 and could run into some minor resistance as it approaches the 1110 area.   However there is a more substantial area of upside resistance in the 1155 to 1170 range (point E).  The 1155 area is the longer term 50% Retracement Level while the 1170 area was near the high made in 2002.

Meanwhile just like the Dow it appears the S&P 500 is also exhibiting a Wave 3 pattern and the question is will it undergo a corrective 4th Wave before it reaches the 1155-1170 area or after?

Finally when looking for stocks to invest in focus on those that have strong Sales and Earnings Growth.  ASVI is an example of a company which has done well this past year.  Notice how over the past 3 quarters it has shown a strong increase in Sales and Earnings Growth. 

Also notice ASVI broke out of a "Cup and Handle" pattern in early July and has been on a steady up trend since then as it continued to have strong Sales and Earnings Growth. 

How can a Premium Membership to amateur-investor.net benefit you as an investor?  I use principles derived from "CANSLIM" to search for stocks to put in my Top 100 List which are then ranked on several factors including EPS Rank, RS Rank, Group Strength, Accumulation/Distribution, Net Profit Margins and etc.  From my Top 100 List I then narrow the list down further by featuring those stocks which have developed a favorable chart pattern such as a "Cup and Handle", "Double Bottom" or "Flat Base".  These stocks are then included in my "Stocks to Watch List" which gives investors a quick reference to those stocks which may provide the best buying opportunities over in the weeks ahead.  Each stock in my "Stocks to Watch List" includes specific Buy Prices, Stop Loss Prices (very important) and projected Target Prices.  

Signup Today for a "Free" Trial Membership and see our complete list of Stocks
which are currently developing a favorable Chart Pattern such as the
"Cup and Handle" or "Double Bottom"

 
Amateur-Investor.net