Ahhhh..Morning Market Commentary for Tuesday, September 07, 1999
The non-farm payroll number released last Friday was judged benign and markets rallied across the board. For now, the markets are safe again and the game is on. However exciting last Friday's action was, a look at the December Treasury Bond futures finds that the daily chart is still locked in a trading range, with the Average Directional Index (ADX) confirming this sideways motion. Until bonds make a true break in either direction, they are still in a consolidation phase.
The Nasdaq 100 (NDX) index made a new closing high last week and is now the focus of attention in the financial media. We must caution that the NDX is in a test of top position on the weekly chart. To confirm that a new uptrend is in place, ADX should begin to move up together with new highs. From the chart, we can see that ADX peaked in late spring, and even though new highs were made this summer, they were marginal and were accompanied by a falling ADX, which is indicative of a trading range or consolidation action.
The S&P 500 Index did not make a new high last week, but our comments on the NDX apply equally to this index. Until new highs are made on a rising ADX, the SPX is still in a trading range pending test of top.
One interesting pattern to note on the weekly chart is the possibility of a broadening top formation. Technicians generally consider this pattern bearish but we will focus on the test of top for now.
In the end, what people want to know most about are the Internet stocks and their fate. We identified the head and shoulders top months ago. Since testing the (blue) neckline last month, the CBOE Internet index (INX) has been on a bounce and is now reaching a critical point. The 20-week exponential moving average is now directly overhead at 475. If this is truly the top, resistance should be near before sellers reappear. Alternately, many traders will view the pink line as the major downtrend line, and upon breaking 500, they will buy.with an initial target of the July highs at around 580.
Charts specific to these comments have been posted to
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