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  Weekend Stock Market Analysis

(11/27/04)

In the near term the Dow has held up well after rallying nearly 900 points from its late October low and has held support above its 20 Day EMA (blue line) which is now near 10400.  If the Dow can break above some minor upside resistance near 10600 then it should be able to rally back to its February high near 10750 (point A).  Meanwhile if the Dow comes under some selling pressure look for initial support at its 20 Day EMA near 10400.   If the Dow drops below its 20 Day EMA near 10400 then its next level of support would be in the 10200 to 10250 range which corresponds to its 50 Day EMA (green line) and 100 Day EMA (purple line). 

In the longer term the Dow still remains in a trading range between last February's high and its October low.  If the Dow can break above the top of its trading range at 10750 then it appears its next area of upside resistance would be at its 2001 high near 11300 (point B).  

The Nasdaq has been in an up trend since its mid August low near 1750 and so far has held support near its 20 Day EMA which is currently around 2050.  If the Nasdaq continues to rise in the near term look for its next area of upside resistance at its January high near 2150 (point C).  Meanwhile if some selling pressure develops in the Nasdaq look for initial support at its 20 Day EMA near 2050.  If the Nasdaq drops below 2050 then its next area of support would be at its 50 Day EMA (green line) near 2000.   

In the longer term the Nasdaq still remains in a trading range between last January's high and the low made in August.  If the Nasdaq can break above the top of its trading range around 2150 then its next area of upside resistance in the longer term would probably be at the high made in May of 2001 near 2300 (point D).  

As far as the S&P 500 it also had been in a trading range between the high made last March and the low that occurred in August which corresponded to its longer term 38.2% and 50% Extension Levels calculated from the early 2000 high to the October 2002 low.  However over the past three weeks the S&P 500 has been attempting to breakout of its longer term trading range and if it does follow through to the upside the next significant area of upside resistance would be near 1255 which is at its 61.8% Extension Level (point E).

Meanwhile in the near term if the S&P 500 comes under some selling pressure look for initial support at its 20 Day EMA which is currently around 1165.  If the S&P 500 drops below 1165 then its next area of support would be at its 50 Day EMA (green line) near 1143.  

As far as a few sectors the Banking Sector (BKX) appears to have formed a Cup and is now beginning to develop a small 2 week Handle (H).  If the BKX can break above the 104 level in the weeks ahead this would have a positive affect on the S&P 500 which is heavily weighted by the Banks. 

The Gold and Silver sector (XAU) appears to have formed the right side of a Cup over the past 11 months and now needs to develop a constructive Handle while holding support at its 10 Weekly EMA (blue line) near 104.

Meanwhile the Oil sector (XOI) has broken strongly out of its 6 week trading range (TR) and has made a new 52 week high.  A similar pattern occurred last September as the XOI broke out of an 8 week trading range (TR) and then rallied strongly for 4 weeks.   If the XOI continues to show strength in the weeks ahead then the Oil related stocks will continue to do well.

When searching for stocks to possibly invest in look for those exhibiting a favorable chart pattern such as the "Cup and Handle" pattern.  Last weekend I mentioned VPI as an Oil stock to watch if the Oil sector broke out of its trading range to the upside.  As you can see below VPI had developed a "Cup and Handle" pattern prior to breaking out this week.  

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