OptionSage submits:
In a recent article, "Was Last Thursday The Bottom?" , I wrote "It appears to me that we could rise up another couple of hundred points on the Dow before encountering a down-trending resistance line that began with the 14,000 peak and continued with the 13,600 rejection. Until that resistance is broken convincingly I remain unconvinced that we won’t test the lows again. On the other hand, a convincing break above the 13,400 level would be a very positive sign." The Dow has remained relatively flat in the past two days but the NASDAQ has risen higher to 2521. Recall 2525 was the low we hit following the initial correction from 2725. The possibility of encountering resistance at this level is high since it aligns with a downtrending resistance line (see chart below). Some of our favorite stocks, Google (GOOG) and Apple (AAPL), rose handsomely today, reaching $506.61 and $127.57 respectively. With rising stocks, Paulson declaring the economy is strong and volatility subsiding in recent days, are we back to the serene old days of marching to Dow 15,000? Let's take a look at the charts to find some answers….
The NASDAQ is approaching a downtrending resistance line and encountering an old support line at 2525 (which has the potential to act as new resistance). No bullish confirmations here…
Apple is at a critical juncture and the next couple of days should determine whether the stock will break back up or decline to new lows. No guarantees here either….
Google is also encountering a downtrending resistance line and doesn't have much room to the upside before needing to make a decision on which direction it will commit to.
Meanwhile our stock of the week has to be Research In Motion, which is up a whopping 20 points in just a few days. Did we profit from the rise? You betcha! Happy Trading was up over 100%+
Bottom Line: We are at critical resistance levels that MUST be broken if we are to resume our march higher. Thursday & Friday should be critical in determining the future direction of the market. Until we see those resistance levels broken, patience is needed, cash and hedging are smart! As Phil pointed out Treasury Bill Yields have fallen most since 1987.
SUMMARY: CAVEAT EMPTOR – BUYER BEWARE!
Trade Safely,
OptionSage
