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Weekend Stock Market Analysis
(4/8/06)
The major averages were rather choppy this week and changed very
little from the week before. A longer term chart of the Nasdaq shows that
it has been in an up trend since the late Summer of 2004 as denoted by the solid
black line. However as you can see each time the Nasdaq has made a higher
high (points A to B) this has been followed by a pullback (points B to A).
Thus as long as the Nasdaq can continue to hold support along its
upward sloping trend line (black line) then the trend of higher highs and higher
lows will remain intact. However keep in mind at some point we could see
the Nasdaq go through another pullback and drop back to either its 200 Day EMA
(green line) or its upward sloping trend line (black line).  In the short term the Nasdaq broke
above its previous resistance area near 2333 eight days ago but so far has had a
difficult time following through to the upside. However so far it still remains above its 20
Day EMA (blue line) which is around the 2325 area. If the Nasdaq fails to
hold support at its 20 Day EMA next week then its next area of support would be
at its 50 Day EMA (green line) near 2300. 
As far as the S&P 500 it has
been basically moving sideways since mid March while holding support above its
50 Day EMA (blue line) near 1290. In addition the S&P 500 has a
smaller upward sloping trend line (black line) originating from the low made in
early February which comes into play around the 1290 level as well. Thus
the 1290 area appears to be a key level to watch over the next week or
two. If the S&P 500 can continue to hold support at or above the 1290
level then that would be constructive. However if the S&P 500 were to
break below the 1290 level then this could lead to a drop back to either its early
March low near 1270 (point C) or its early February low near 1255 (point D). 
Meanwhile the Dow has been
struggling since mid March which has coincided with a rise in the price of Crude
Oil (points E to F). The last time we saw a significant rise in the price
of Crude Oil (points G to H) the Dow dropped nearly 400 points in January
(points I to J). Thus any further rise in the price of Crude Oil could
continue to have an adverse affect on the Dow like we have seen in the past. 
Currently it appears the Dow has a
key support area near 11080 which coincides with its 50 Day EMA (blue line) and
upward sloping trend line (black line) originating from the October 2005
low. If the Dow were unable to hold support near 11080 this could
eventually lead to a drop back to its 200 Day EMA (green line) near 10800. 
Finally
if you aren't sure which stocks to invest in always focus on those that are
exhibiting decent Sales and Earnings Growth which have formed a favorable chart
pattern such as the "Cup and Handle" for example. Currently
a stock from our Top 100 list which has formed the right side of a 2 year Cup is
SWW. However SWW now needs to work on developing a constructive Handle
over the next 2 to 3 few weeks to complete its "Cup and Handle"
pattern 
Remember stocks breaking out of a
"Cup and Handle" pattern can lead to substantial gains. For
example CRDN formed a 10 month Cup followed by a 4 week Handle (H) and then
broke out of its Handle in late October of 2005. Over the next few months
CRDN then rose from $40 to $60 for a gain of 50%. 
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