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Weekend Stock Market Analysis
(10/1/05)
The price of Crude Oil has been in a solid up trend since late
2003 and has been holding support above its 40 Weekly EMA (blue line).
Also it has become obvious that higher Crude Oil prices have had an affect on the
Dow as since early 2004 the Dow has been stuck in a choppy longer term trading
range between its late October 2004 low near 9700 and its March 2005 high around
11000. 
During
the past two years each time the price of Crude Oil has made a significant
upward move it has gained around $20 (points A to B). Meanwhile after each
significant move upward the price of Crude Oil has then gone through an $8 to
$10 correction (points B to A). The past four weeks the price of
Crude Oil has found support near $63 after peaking in the lower $70's in
late August. At this point there appears to be two possible
scenario's for the price of Crude Oil. The first scenario would be for the
price of Crude Oil to maintain support near $63 and then eventually make another
significant upward move at some point similar to what occurred from early
January through late March and from May through late August. If this
scenario were to occur then this would likely have a negative affect on the
major averages. Meanwhile the second scenario would be for the price of
Crude Oil to break solidly below the $63 level leading to a drop back to its 40
Weekly EMA (blue line) near $57 at some point. If this scenario were to
occur then this would likely have a positive affect on the major
averages. 
As far as the major averages since
mid July the Dow has encountered upside resistance near 10700 but has found
support near 10350. At some point in the future I would imagine the Dow
will do one of two things. Either the Dow will break solidly above the
10700 area and eventually rally back to its previous early March high near 11000
(point C) or it will break strongly below the 10350 level leading to an eventual
drop back to its April low around 10000 (point D). As mentioned above
future movements in the price of Crude Oil will likely determine how the Dow
acts in the weeks ahead. 
The Nasdaq so far has held support
near the 2100 level which corresponded to its 38.2% Retracement Level
(calculated from the April low to the early August high) and also was a previous
area of upside resistance (brown line). If the Nasdaq attempts to rally in
early October look for initial upside resistance near 2190 with even stronger
resistance at its early August high near 2220. Meanwhile if the Nasdaq
comes under renewed selling pressure look for initial support near 2100.
If the Nasdaq were to drop below the 2100 area then its next area of support
would be at its 40 Weekly EMA (green line) near 2080. 
As far as the S&P 500 it has
held support just above its 40 Weekly EMA (green line) near 1200 during the past
month. If the S&P 500 attempts to rally in the early part of October
look for upside resistance in the 1240 to 1245 range. Meanwhile if the
S&P 500 comes under renewed selling pressure look for initial support at its
40 Weekly EMA near 1200. If the S&P 500 were to drop below 1200 then
its next key support area would be at its longer term upward sloping trend line
(brown line) near 1180. 
Meanwhile as I have talked about
before the S&P 500 has a significant upside resistance near 1254 which
corresponds to its longer term 61.8% Retracement Level (calculated from the
early 2000 high to the late 2002 low). Thus it's going to be interesting
to see if the S&P 500 will be able to break above its longer term 61.8%
Retracement Level in the weeks ahead. 
For
the month of September the Dow was up 0.8%, the Nasdaq was unchanged and the
S&P 500 was up 0.7%. At Amateur Investors September was a good month
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