While many in the media have been preoccupied with the DOW piercing through the 10,000 level. It is easy to pin it's inability to do so on purely psychological reasons. Especially when the comparison is made regarding the amount of time that was needed to crack the four figure level on that index. But a close look at a monthly bar chart would show that upside resistance is really more at the 9800 level. Give or take a few points. Because the Dow made a series of higher highs for May and July of 98 and then again in Jan 99. Those higher levels ultimately push the breakout on the DOW to a higher point as well. So despite the fact that with the close on Friday we have over a 500 pt gain on the Dow this month - and that we are clearly at record levels. The DOW is STILL attempting to break through upside resistance. So the question I ask myself here - Is with prices right at that resistance point, what signals is the market sending us to how it's going to handle this area? There really are only three possibilities. Breakout - breakdown - Or the market can continue to consolidate sideways until there's enough momentum to push it higher. Looking only at market breadth many might say that the most obvious direction would be down. However, there are still many signs that a breakout in prices may be in store for us. Here are a couple of things that caught my attention on the charts that are worth keeping an eye on:
The tranports (index) has also worked it's way into a breakout position. Stocks like FDX have been very strong. Looking at a weekly chart you will see five weeks of consolidation between the low to high 90's. Watch the trading in this stock very carefully this week. It appears ready to attack its highs once again. Nimble traders can position themselves early - WITH very tight stops, if it pushes higher.
MRK - Has been breaking down after being a clear market leader. There is a small gap at 78 that needs to be filled. But if this market is to go higher, MRK is going to have to turn around very quickly. Continued weakness may be a message for the overall market as well.
CMB - Another market leader that has broken in the past weeks. Some of the gaps have been filled. So I would be expecting a quick turn around at these levels.
T - The pattern has been flagging for the past couple of weeks. This is another stock that needs some firming in prices. A breakdown this coming week could possible result in an even lower low. So this coming week is very important. BTW, this pattern is usually very bullish in that the consolidation often breaks with prices moving higher.
DELL - Perhaps second only to MSFT. This stock has been one of the true leaders during this whole advance. The charts shows an obvious breakdown in prices lately. According to Barron's, DELL is the No. 1 shorted stock on the NASDAQ. 60,000,000 shares short. Remember all those shares have to eventually be purchased to cover those postions. Could be one hell of a short squeeze. Prices need to firm.
INTC - Is just another stock that has to strengthen here.
These are just a few of the stocks that have been under pressure that need to firm if the market is to hit new highs.
On a more positive note MSFT has broken out this week into higher levels. P&G is another stock that has made a terrific move into new highs. WCOM, LVLT, RNWK, QWST have been profitable stocks. They have taken a short pause here but anyone with good trading skills can make a bundle on their next breakout.
The nutz have also been running lately. That rising wedge on AOL's chart has fooled some by breaking to the upside. AMZN and YHOO should be watched here to see how they handle their resistance levels. They are there right now. Some of the smaller stocks in the group that I've mentioned earlier that should be poised for a breakout OR breakdown in prices are BAMM, ONSL, AMEN and KLB. And on the more DANGEROUS side SLPT. At 1.62 it is considerably lower than the $8.0 of a few months ago. These stocks I mention purely on a technical basis. Remember their charts are saying something has to give. That break could indeed be down. Their outcome will most likely be affected by what happens in the overall market as a whole.
So these are a few of the issues that I will be keeping an eye on this week. IMO, with some of the major players already seeing their prices under significant pressure. We need to see an immediate move in many of these issues.
Have a good night.
SO |
