Technical Analysis: Indexes Hit Resistance
by Paul Shread
January 23, 2003 - We're not sure how much more upside this rally has, but there's a chance it could top out here. Looking at the Nasdaq intraday chart (see first chart below), the index may have completed an ABC correction today: an opening 27-point bounce, a pullback and then a 28-point bounce into the highs of the day. In Elliott wave terms, that could constitute a complete correction of the recent five-day decline, with the index turning back down again. In the bigger picture, all the indexes (see the Dow chart, second chart) could be forming a wave ii correction of a bigger wave 3 down. If that's the case, wave iii of 3, or the strongest of all waves, could lie ahead. Given that we have a number of negatives here - "three black crows" and potential head and shoulders tops on the Dow, S&P and SOX (charts three, four and five) and sentiment that remains unsupportive - a strong wave down could well follow this consolidation. If 8250 on the Dow and 875 on the S&P are broken on a closing basis, the indexes could see 7450 and 800, the measured targets from those topping patterns. The SOX head and shoulders top projects to new lows on a closing break of 285. Today's highs of 8386 on the Dow, 890 on the S&P and 1393 on the Nasdaq must be taken out for this rally to have more potential. Even then, 1397 or 1401 could stop the Nasdaq (sixth chart). The market is at a critical juncture here, but the evidence suggests that it will resolve to the downside.
internetstockreport.com |
