Technical Analysis: So Close to a Bottom
The NYSE was just shy of a major bottom signal on Thursday.
September 18, 2008
By Paul Shread
internetnews.com
This is how major bottoms feel, like everyone's trying to get through the door at once, but the numbers don't quite support a major bottom just yet. For one, we had 89.5% upside volume on the NYSE — very impressive, but the gold standard for a major bottom is 90%, per Paul Desmond of Lowry Research, who's been studying major bottoms for a few decades.
Still, another 80% upside day tomorrow would be just as good, and the buying pressure was impressive enough that this rally could stick around a while.
It's also an important recovery of the major support lost yesterday.
All good signs for stock market bulls after the most intense bout of selling since 1974.
The Dow (first chart below) still has major support at 10,683-10,827 — and that level will remain important until the next four-year cycle low in 2010. To the upside, 11,250 and 11,400 are the next hurdles.
The S&P (second chart) faces resistance at 1225 and then 1250-1260. Support is 1163-1175.
The Nasdaq (third chart) faces resistance at 2250, 2300-2316 and 2350, and support is 2140-2155 and 2120.
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Stocks Soar on Hopes for Subprime Solution
The stock market had its best day in six years Thursday on reports that the government could dust off an old solution to the financial crisis on Wall Street, while Oracle had surprisingly good news for the tech sector after the close.
September 18, 2008
By Paul Shread:
internetnews.com
Stocks rocketed to their best one-day gains in six years on record volume Thursday on reports that the U.S. government could resort to a Resolution Trust Corp.-like solution to the 14-month old credit market crisis, similar to what the feds used to clean up the savings and loan mess of the 1980s.
Top U.S. financial officials were reportedly meeting with congressional and White House officials to discuss a solution to the crisis that has claimed a half-dozen of the nation's biggest financial companies, the biggest financial crisis since the Great Depression.
The plan could involve a fund to buy troubled loans from banks, according to news reports, which would help clean up distressed balance sheets. While the plan could raise concerns about burdening taxpayers, it's worth noting that RTC eventually turned a profit. Whether a new fund could be as fortunate remains to be seen, but the move — while not yet official — could go a long way toward calming markets and an economy in turmoil.
Bear Stearns, Lehman Brothers, AIG, Fannie Mae and Freddie Mac are just a few of the names that have been claimed by the crisis, which was caused by an imploding subprime mortgage market, heavily leveraged and unregulated debt instruments, and by credit ratings agencies that gave their blessing to the instruments only to pull the plug on the companies at the heart of it at the very end, when they had no chance to raise money. The final straw spurring the latest government action was the failure of AIG, the first such implosion in the 112-year history of the storied Dow Jones Industrial Average.
In recent days, the crisis has spread to money market funds, until now widely believed to be safe.
The stock market recovered most of Wednesday's losses on the news — but still remain more than 20% below their all-time highs set last year.
The Nasdaq rocketed 100 points, or nearly 5%, after touching a two-year low in early trading.
Dell (NASDAQ: DELL), Apple (NASDAQ: AAPL), Cisco (NASDAQ: CSCO), Nvidia (NASDAQ: NVDA), Yahoo (NASDAQ: YHOO), Adobe (NASDAQ: ADBE), Juniper (NASDAQ: JNPR), Google (NASDAQ: GOOG), eBay (NASDAQ: EBAY) and Research In Motion (NASDAQ: RIMM) were some of the sector's biggest winners.
After the close, Oracle (NASDAQ: ORCL) gave the tech sector more good news, rising 2.5% after beating earnings estimates on 18% sales growth and strong margins.
The Nasdaq soared 100 to 2199, the S&P rose 50 to 1206, and the Dow soared 410 to 11,019. Volume rose to 10.62 billion shares on the NYSE, and 3.95 billion on the Nasdaq. Advancers led by a 26-8 margin on the NYSE, and 22-7 on the Nasdaq. Upside volume was 89% on the NYSE, and 90% on the Nasdaq. New highs-new lows were 72-1041 on the NYSE, and 97-397 on the Nasdaq. |
