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Strategies & Market Trends : Technical Analysis With Charts

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From: Return to Sender	5/12/2007 10:55:29 PM
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Amateur Investors Weekend Stock Market Analysis (5/12/07) amateur-investor.net The Dow has continued its remarkable run since the mid March bottom and now has had 6 consecutive up weeks in a row. Looking back over the past 5 years it has been a very rare occurrence to see the Dow up 6 or more weeks in a row which has only happened twice (points A to B). In both of these cases the Dow eventually peaked 3 to 6 weeks later (points C) which was then followed by a puulback that lasted several weeks (points C to D). Thus although the Dow may still continue higher in the near term it's possible we will eventually see the development of a multi-week pullback within 3 to 6 weeks if history repeats itself. In the near term the Dow still remains well above its rising 20 Day EMA (blue line) which is now around 13100. As long as the Dow holds support above its 20 Day EMA then its up trend from the mid March low will remain intact. Meanwhile the Nasdaq tested a key support level this week around 2533 which was near its 20 Day EMA (blue line) and previous resistance area. As long as the Nasdaq can hold support at its 20 Day EMA then the rally from the mid March low will remain intact. However if the Nasdaq were to break below its 20 Day EMA then that would lead to a drop back to its 50 Day EMA (green line) near 2500 which would signal a reversal of its current up trend. As far as the S&P 500 it also has held support above its 20 Day EMA (blue line) this week which is now nearing the 1490 level. As long as the S&P 500 stays above its 20 Day EMA then the rally from the mid March low will remain intact. However if at some point the S&P 500 were to break below its 20 Day EMA then that would be the first sign of potential reversal of its current up trend with the next support level at its 50 Day EMA (green line) near 1464. Also keep in mind the the S&P 500 is nearing its all time closing high of 1527 which occurred on March 24 of 2000. Thus I expect the S&P 500 may encounter significant resistance near this level in the weeks ahead much like occurred with the Dow in 2006 when it got close to its previous all time high. Finally when looking for stocks to invest in many times after a significant move higher they will then consolidate for a period of time and develop a Flat Base before making another move higher. For example FWLT from our Top 100 List made an upward move in January and February (points E to F) and then developed a 7 week Flat Base (FB) before breaking out in early April and making another move higher.

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