AFTER MIDNIGHT
Market Commentary by Toni Hansen
May 3, 2004
Good morning... The new week begins tomorrow coming out of one of the strongest downside selloffs we've seen in the Nasdaq for quite some time. You very rarely see the market trend strong and long enough intraday that it holds the 15 minute 20 sma resistance for more than three days. Last week, however, the Nasdaq managed to pull it just past the norm, although the stronger Dow and SP500 held up better to fall into a range throughout most of Friday, allowing for that greater intraday correction to the trend move at least.
The day began at resistance when the indices opened up into their 15 minute 20 simple moving averages intraday. Within the first 15 minute of the day selling was kicking in as the market began to correct to the resistance and pull lower. The pace on the selling was decent enough that, as the 5 minute 20 sma support hit, the market stalled for only 15 minutes to form an Avalanche before continuing lower. It was slower than the prior afternoon's pull off lows though and, as a result, when the Nasdaq retested that prior price support the move stalled and the market began to pull higher again.
Without the pace turning over going into mid-day, the indices were destined to fall into a range. Prior highs in the SP500 and Dow served as resistance along with the 15 minute 20 sma again in the Nasdaq. The weaker Nasdaq had an easier time breaking to new lows though. It quickly retested the morning levels to break to slightly lower lows just before 12:30 ET. The action wasn't very exciting, however, because it did so so slowly that it wasn't able to manage a decent break. Instead the trend channel merely tightened as a 5 minute descending pennant formed, leading to a brief pull higher out of the 13:30 ET reversal period. From there the market fell more into a sideways range again before breaking intraday lows finally into 15:00 ET. Nevertheless, the SP500 and Dow still held the prior day's lows support zone going into the end of the day.
Heading into the new week, the market is starting to become pretty oversold on the daily charts. The Commodity Channel Index is coming close to the -200 levels. When the period is 15 on an oscillation between + and -200 the -200 level tends to indicate the market is oversold and +200 is overbought. There isn't a whole lot out there though for decent support nearby so you will really want to continue to be very cautious on the long side. An intraday reprieve to the selling is due, but on the weekly and monthly charts there is a great deal of room for the indices to continue to fall as the year wears on. As a result, corrections off support are likely to be slower and choppier and daily and weekly bear flags are worth watching for. Look for volume spikes into support to help indicate the start of such corrections when the selling pace is strong. |
