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Weekend Stock Market Analysis
(12/3/05)
The market took a breather this week and pulled back slightly
after being up solidly the previous five weeks. Once again the weakness in
the price of Crude Oil could be one of the catalysts for this latest rally like
has occurred in the past. As you may remember the last two times
a significant pullback occurred in the price of Crude Oil (points A to B) the
Dow rallied strongly (points C to D). The thing I will be watching closely
in the weeks ahead is whether the price of Crude Oil can rise above its 10
Weekly EMA (blue line) or whether it will continue to encounter resistance at it
like has occurred since early October. As long as the price of Crude Oil
continues to encounter resistance near its 10 Weekly EMA and remains in a
downtrend then the major averages should continue their upward trends.
However if the price of Crude Oil were to rise above its 10 Weekly EMA and begin
to rally strongly then this could eventually lead to some selling pressure in
the major averages. 
As far as the major averages the Dow
is holding support above its previous upside resistance area (point D) and
rising 20 Day EMA (blue line) as it has encountered some resistance at its early
March high just below 11000. As long as the Dow can hold support at or
above the 10700 level then its upward trend from the mid October bottom should
continue. 
Meanwhile if the Dow can rally above
the 11000 (point E) then its next level of major resistance would be around
11400 which is where it stalled out at in 2001 (point F). 
The Nasdaq pulled back early in the
week but held support above the 2220 area which corresponded to its early August
high and rising 20 Day EMA (blue line). Thus as long as the Nasdaq can
hold support at or above the 2220 level then its upward bias should remain
intact. 
In the longer term if the Nasdaq
continues higher it really hard to say where its next area of upside resistance
may occur at. Based on longer term Retracement Levels its 38.2% Retracement
Level (calculated from the early 2000 high to the late 2002 low) is around 2600
(point G). However the Nasdaq would have to rally another 300 points or so
to reach this area from its current level so it may eventually stall out
somewhere below this level possibly near 2400. 
The S&P 500 pulled back slightly
this week but was able to hold support just above the 1245 level which
corresponds to its early August high and rising 20 Day EMA (blue line).
As long as the S&P 500 can hold support at or above the 1245 area then its
upward trend from the mid October bottom should continue. 
If the S&P 500 continues higher
through the end of the year into 2006 its next area of upside resistance may
occur in the 1315 to 1360 range. The 1315 level is where the S&P 500
stalled out at in May of 2001 (point H) after an oversold bounce occurred.
Meanwhile the 1360 area (point I) is at the S&P 500's 76.4% Retracement
Level (calculated from the early 2000 high to the late 2002
low). 
Finally if the major averages can continue higher through the end of the year
and into 2006 continue to focus on those stocks which are
breaking out of a favorable chart pattern.
This past week THOR from our Stocks to Watch List broke out from a Cup
and Handle pattern accompanied by good volume.
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