What you need to know for trade next week -->
Barring some unforeseen event, it looks like we are going to
close out the week on a mildly positive note. Lets pull out our
crystal ball, and see what next week may hold for the broader
market indices.
Before we get started, lets revisit Fibonacci retracement
brackets for a moment. The basic premise behind these levels is
that stocks, indices, or commodities tend to retrace 50% of their
gains or losses. A 38.2% retracement is a mild correction, and a
61.8% retracement is a severe correction. Some times this
numbers work magically, but I tend to view them more as
psychological areas to monitor.
Dow Jones Industrial Average Daily chart
optioninvestor.com
The Dow has been in a downtrend since late May, and the declining
50 and 200-day moving averages helps to confirm that. To get our
retracement levels we can anchor a bracket to the 5/22 high, and
the 7/11 low. If the Dow fails to crack 10,580, our late week
rally will just be a mild correction in the overriding downtrend.
If historical tendencies hold, the Dow will retrace 50% of its
losses and rise to 10,752. The downtrend and 50-day moving
average will be dropping down to add extra resistance if and when
the Dow tests that level. We also have the heavy congestion area
between 10,580 and 10,752 to deal with. This area tried to be
support, but is now going to be tough resistance. If all that
can be overcome, 10,870 would be the last retracement level.
S&P 500 Daily Chart
optioninvestor.com
Today the S&P 500 has met resistance at the recent downtrend.
Barring a late day surge, that will the S&P 500's first order of
business Monday. Later in week it will have to fight its way
through congestion between 1,224 and 1,241. The 50-dma will be
dropping to make that move even harder. Break 1,260 by the end
of next week would be most impressive.
Nasdaq Composite Daily Chart
optioninvestor.com
The Nasdaq's chart isn't quite as clean. Closing above 2,080
today will close a gap, and take us past "mild correction status"
by retracing more than 38% of its losses. Everything could be
coming to a crux on Monday, as the downtrend, 50-dma, and 50%
retracement level all converge to attempt to quash any further
advances. If price prevails, and eventually clears 2,169 we go
from severe correction to broken downtrend. |
