Charts of the Week, Monday June 19th, 2006
Charts of the Week are stocks that appear to be attractive candidates for short- to intermediate-term (2-6 weeks) returns based on analysis of their daily or weekly chart formations and underlying technicals. Support levels may be used as possible stops.
Analysis: NDX: This week's Charts of the Week feature a mid-year analysis of the S&P 500 and Nasdaq 100 indices, with the current markets at a very key point in time. The first chart of the weekly Nasdaq 100 shows the 4-year bull-market advance off the 2002 bear market lows. As you can see the first year was an accelerated, sharply rising angle, but for the last 3 years the S&P 500 settled into a more subdued angle of ascent with very distinct tops and bottoms showing a parallel channel. The recent decline took the Nasdaq 100 below key 1-year support and then plunged sharply to test last October's lows as well as the important, 3-year rising trendline from mid-year 2003. As you know the indices bounced off that important level, and currently remain in no man's land, between support and resistance, so the action of the next several days to couple weeks will be very important to determining the intermediate trend. Moving in a bit closer and reviewing the short-term timeframe you can see where distinct support and resistance lies, and that overhead resistance in the 1625-35 zone will remain formidable resistance. That's an area that is far from being tested at this point, although as can be seen from the third chart, which includes stochastics and RSI, the level that this index reached recently is a level at which several intermediate rallies begin going back the last 2-3 years, which can be viewed bullishly. See comments below next chart for further analysis.
Analysis: NDX: Further analysis shows that on the Nasdaq 100 overhead and very formidable resistance is around the 1630 area. That area remains about 60 points from here, but could be achieved next week if the market follows through and takes out the current several-week down-channel and moves out across the 21-day resistance on the daily charts. That would be an area to keep close tabs on, as a surge through that on heavy volume could reverse this entire intermediate decline. If the downside immediate support is broken in the 1510-12 area, areas to watch would minor price support at 1480 and more major price support at deeper levels down around 1400-05, then 1370-75, and then ultimately 1300-05. As for Fib retracements, a .382 retracement would be at 1392, 50% at 1278 and .618 all the way down to 1164, a level we don't expect to see.
Analysis: NDX:
Analysis: SPX: Moving over to the S&P 500 and comparing with the NDX, you'll see that a similar pattern developed -- a triple bottom at the major bear-market lows in 2002 and early 2003, which resulted in an explosive strong angle of ascent surge and thrust in 2003, setting off the recent 4-year bull market. As in the case of the NDX, the S&P 500 settled into a more subdued angle of ascent, with distinct tops and bottoms, the bottom of which was tested severely last week before the rally set in at around the 1220 area. A closer view in the 3-day chart going back three years shows the distinct angle of ascent, but also shows that the 2006 channel was broken on a very steep decline. That was followed by a snapback rally that failed and then lower lows that took out key support which was not the case in the Nasdaq 100. In both cases the longer-term trendlines did hold but before the rally took place. A view of the S&P chart, including stochastics and RSI, also reveals that the technicals are at levels at which the important intermediate rallies began, and that could be the possibility here as well. But a word of warning -- in both cases if the recent lows are taken out, it can result in much steeper declines and retracements. See comments next chart for further analysis.
Analysis: SPX: Further analysis of the S&P 500 shows lateral price support is in the 1166-1140 area, and much further beneath that at the 1085-1100 zone, and then 1060-65. Short-term resistance is at 1260 and then 1285-90. Fib retracements are as follows: a .382 retracement at 1114, a 50% retracement at 1048, and a .618 retracement at 978, a level we don't expect to see here. But I'm providing these statistical levels as reference points for future market price movement. The short-term downtrends have lasted about 6-7 weeks now and are currently testing the upper end of that channel and the 21-day declining moving averages. So key tests are ahead of us, and very key support lies beneath us at recent lows, which if violated could trigger much deeper declines. As a result we are moving to cash in our current portfolio and eliminating all long positions until a clear direction emerges.
Analysis: SPX:
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