General Commentary
It's getting to the point where this market is just plain boring. Total volume traded on the Nasdaq is drying
up and it's becoming more common for say eight-point trading ranges on the index to drone ON and ON for
several consecutive hours. Note that's an eight point trading range on the index -- not long ago there were
particular issues (e.g. JNPR, CIEN, YHOO, AMZN... you name it) that could barely be confined to such
stability. Yet for better or worse, this is the way it is now and the way it's likely to be for some time.
As we noted yesterday, Briefing.com remains in the bullish camp though we're growing less confident in
our intermediate-term bullish outlook. Tuesday night, investors glimpsed notable earnings reports from the
semiconductor equipment group (Applied Materials - AMAT), the storage sector (Network Appliance -
NTAP), software (BEA Systems - BEAS) in addition to a quarterly report from market enigma Nvidia
(NVDA). As the leading semiconductor equipment company, the report from Applied Materials is most
likely to set the tone for Wednesday. While AMAT was less than screamingly bullish, the guidance was a
point of interest nonetheless. The company expects a flat October quarter with orders bottoming out
followed by "modest improvement" early next year. No need to mortgage the house just yet but that's the
kind of language market bulls would like to hear.
As an interesting aside, graphic chips maker Nvidia (NVDA) announced it will be cut in half the traditional
way -- via the very rare 2-for-1 split. Definitely beats the arduous and gruesome "cutting in half" most
technology issues have been forced to endure. It also serves as another reminder of the difference in
today's market. Two years ago, traders would position themselves for a 3-for-1 split out of Garbage.com.
Getting back to Nasdaq 1900's, there are a few points worth mentioning from a technical perspective.
Tuesday's failed rally attempt and close near the session's lows did little to inspire near-term enthusiasm.
Nonetheless, we see the Nasdaq as oversold on a near-term basis and continue to favor a move higher
even if it's modest. As for upside resistance, the immediate area higher continues to be cluttered with
potential resistance points. We'll keep it relatively simple this time and focus on two important levels: 1) the
well documented 2000 area which approximates gap resistance going back to April, represents
psychological overhead and served as Tuesday's intraday high and 2) the area around 2050-2057 which
approximates the convergence of the Nasdaq's 50 and 100-day simple moving averages in addition to
representing trendline resistance going back to the May highs. We aren't necessarily looking for the
2050/57 level soon, it's simply worth mentioning that things will get interesting if that area is cleared.
To the downside, there are three potential areas of support worth watching. Probably the strongest support
level is the first one which is in the 1950-1954 area. This has served as opening and closing support going
back to May and the Nasdaq has shown little inclination to head lower with two or three exceptions. The
second candidate is modest support at 1935 which represents the lower end of the 20-day Bollinger bands
and approximates intraday ventures into lower territory. These are followed up by stronger support in the
1890 area which approximates gap support going back to April in addition to a 62% retracement of the
entire Spring rally. The dry trading conditions, poor sentiment and general lack of interest in the Nasdaq
continue to favor a move higher in our opinion. But if the market decides to head lower keep those
downside support levels in mind.
Michael Ashbaugh Please feel free to direct comments to mashbaugh@briefing.com |
