Simple Technical Analysis

Sorry - no chart today. I just would lie to add a few words to my previous post. Last week I pointed to the bullish indicators and possibility of the further development of the up-move. Yet, the same technical indicators started to change its sentiment already on Monday and on Tuesday all of them was bearish and pointed to the down market. As I mentioned already several times: the technical analysis is a constant process and it's recommended to monitor charts constantly to be able to react on the market changes in time.

By following my charts (the same technical studies as always) I may say that now I see begining of changes in the market sentiment away from strongly bearish: I see nice big volume surges during the price drop which may push the indexes higher, the SBV stopped its decline, McClellan moves up and it looks like it on its way to cross zero line, RSI moves up...

So, let's see what the next week will bring us...

SP 500 chart again

In the previous "S&P 500" post I've talk about mini-version of the October 2007 - March 2008 stock market crash. At the end of this week I may say that I saw further development of this scenario: the market continued its recovery on Monday and then stock market dropped again. The question is - will the market continue following the same pattern by moving now up???

S&P 500

Nice week! Why? In the conclusion of my last "Dow Jones" post I stated "I think the market may continue to move down, at least to the point when I see the negative MVO is back to zero line and when the McClellan oscillator becomes red(negative) and starts to move up. The Nasdaq 100 is not as oversold as the DJI and this is one of the reasons why I think we may face further drop." This week I saw exactly what I expected to see, that's why I consider this week as a nice week - from the beginning of the week the Nasdaq 100 pushed the market down and it reversed exactly when MVO become zero and when the McClellan oscillator started to advance and crossed zero line around 14:00 on June 12, 2008.

When I look at the recent drop (since the middle of May) it reminds me the mini-version of the October 2007 - March 2008 stock market crash. You may see on the S&P 500 index:

One of the points that that could parallel the recent drop with October 2007 - March 2008 market crash is that both of this moves down I could split in 3 stages.

During October 2007 - March 2008 market crash:

1. The S&P 500 and DJI indexes started to move down in the middle of October while the Nasdaq 100 index continued to move up until the beginning of the November. The Nasdaq was still bullish while the rest of the market was bearish.
2. Then the whole market moved down by the middle of January. The whole market was bearish.
3. After that the S&P 500 and DJI struggled to move up while the Nasdaq 100 continued to push the stock market down by the middle of March. The Nasdaq was still bearish while the rest of the market struggled with it.

The same in the recent move down:

1. The S&P 500 and DJI indexes started to move down on May 19, 2008, yet, the Nasdaq 100 has recovered from the initial drop by making new highs on June 5, 2008. The Nasdaq was still bullish while the rest of the market was bearish.
2. Then the whole market moved down. The whole market was bearish.
3. The last week the Nasdaq 100 continued to push the stock market down while the S&P 500 and DJI were fighting against this move. The Nasdaq was still bearish while the rest of the market struggled with it.

Coming back to my charts and my technical analysis, by the end of this week I see more positive then negative factors:

• SBV moves up and for me this is a bullish sign;
• I see a lot of red MVO over the last to week which for me is a good fuel for the market up move;
• The VIX (volatility index) is moving down which would points to the bullish sentiment;
• The MACD, Stochastics, RSI and Advance decline oscillator are in the up direction - I consider it as a good sign;
• McClellan is above zero (green) - another point in favor of the bullish market.

Today I see oversold market and today I expect the further recovery. However, tomorrow the market could become heavily overbought - that's why I consider that the stock market should be monitored and analyzed constantly. It could be come overbought tomorrow or in a month... Plus, I could be wrong and if I do not monitor chart constantly I could find out about that when it's already too late...

Nasdaq 100 Stocks

The NASDAQ 100 Index comprises 100 of the largest non-financial and non investment publicly traded companies which are listed on The Nasdaq Stock Market Exchange. The Index includes domestic and international companies across major industry sectors including telecommunications, biotechnology,  retail/wholesale trade, computer hardware and software. Together with DJI (see list of DJI stocks) and S&P 500 indexes, the Nasdaq 100 index one of the most watched indexes over the world. The QQQQ (Nasdaq 100 index tracking stock) is the most actively traded ETFs (Exchange Traded Funds).

Below you may see the list of the Nasdaq 100 Stocks (companies from the index basket) as of June 14, 2008. This is an outdated listing, yet it may give you the picture of what companies are selected into the Nasdaq 100 index. For real and most recent listing I would recommend visiting the Nasdaq web site.

Ticker	Company		Index Points
ATVI	Activision, Inc.		0.15
ADBE	Adobe Systems Incorporated		1.09
AKAM	Akamai Technologies, Inc.		0.19
ALTR	Altera Corporation		0.4
AMZN	Amazon.com, Inc.		0.98
AMGN	Amgen Inc.		0.45
AMLN	Amylin Pharmaceuticals, Inc.		0.16
APOL	Apollo Group, Inc.		0.74
AAPL	Apple Inc.		1.28
AMAT	Applied Materials, Inc.		0.6
ADSK	Autodesk, Inc.		0.13
BIDU	Baidu.com, Inc.		0.35
BBBY	Bed Bath & Beyond Inc.		0.39
BIIB	Biogen Idec Inc		0.5
BRCM	Broadcom Corporation		0.25
CHRW	C.H. Robinson Worldwide, Inc.		0.17
CA	CA Inc.		0.2
CDNS	Cadence Design Systems, Inc.		0.03
CELG	Celgene Corporation		0.77
CEPH	Cephalon, Inc.		0.05
CHKP	Check Point Software Technologies Ltd.		0.3
CTAS	Cintas Corporation		0.18
CSCO	Cisco Systems, Inc.		1.02
CTXS	Citrix Systems, Inc.		0.11
CTSH	Cognizant Technology Solutions Corporation		0.39
CMCSA	Comcast Corporation		0.66
COST	Costco Wholesale Corporation		0.57
DELL	Dell Inc.		0.56
XRAY	DENTSPLY International Inc.		0.11
DISCA	Discovery Holding Co		0.1
DISH	DISH Network Corporation		0.06
EBAY	eBay Inc.		0.35
ERTS	Electronic Arts Inc.		0.37
EXPE	Expedia, Inc.		0.14
EXPD	Expeditors International of Washington, Inc.		0.08
ESRX	Express Scripts, Inc.		0.12
FAST	Fastenal Company		0.14
FISV	Fiserv, Inc.		0.04
FLEX	Flextronics International Ltd.		0.34
FMCN	Focus Media Holding Limited		0.12
FWLT	Foster Wheeler Ltd.		0.49
GRMN	Garmin Ltd.		0.07
GENZ	Genzyme Corporation		0.79
GILD	Gilead Sciences, Inc.		1.51
GOOG	Google Inc.		3.14
HANS	Hansen Natural Corporation		0.16
HSIC	Henry Schein, Inc.		0.07
HOLX	Hologic, Inc.		0.13
IACI	IAC/InterActiveCorp		0.25
INFY	Infosys Technologies Limited		0.12
INTC	Intel Corporation		1.45
INTU	Intuit Inc.		0.32
ISRG	Intuitive Surgical, Inc.		0.51
JOYG	Joy Global Inc.		0.41
JNPR	Juniper Networks, Inc.		0.15
KLAC	KLA-Tencor Corporation		0.28
LRCX	Lam Research Corporation		0.06
LAMR	Lamar Advertising Company		0.04
LEAP	Leap Wireless International, Inc.		0.2
LVLT	Level 3 Communications, Inc.		0.14
LBTYA	Liberty Global, Inc.		0.19
LINTA	Liberty Media Corporation		0.32
LLTC	Linear Technology Corporation		0.18
LOGI	Logitech International S.A.		0.2
MRVL	Marvell Technology Group, Ltd.		0.6
MCHP	Microchip Technology Incorporated		0.09
MSFT	Microsoft Corporation		3.12
MICC	Millicom International Cellular S.A.		0.61
MNST	Monster Worldwide, Inc.		0.09
NTAP	NetApp, Inc.		0.28
NIHD	NII Holdings, Inc.		0.49
NVDA	NVIDIA Corporation		0.04
ORCL	Oracle Corporation		1.93
PCAR	PACCAR Inc.		0.9
PDCO	Patterson Companies Inc.		0.03
PAYX	Paychex, Inc.		0.32
PETM	PETsMART, Inc.		0.05
QCOM	QUALCOMM Incorporated		2.3
RIMM	Research in Motion Limited		2.22
RYAAY	Ryanair Holdings plc		0.33
SNDK	SanDisk Corporation		0.08
SHLD	Sears Holdings Corporation		0.36
SIAL	Sigma-Aldrich Corporation		0.17
SIRI	Sirius Satellite Radio Inc.		0.26
SPLS	Staples, Inc.		0.3
SBUX	Starbucks Corporation		0.41
STLD	Steel Dynamics, Inc.		0.62
SRCL	Stericycle, Inc.		0.16
JAVA	Sun Microsystems, Inc.		0.12
SYMC	Symantec Corporation		0.28
TEVA	Teva Pharmaceutical Industries Limited		0.17
DTV	The DIRECTV Group, Inc.		0.55
UAUA	UAL Corporation		0.08
VRSN	VeriSign, Inc.		0.2
VRTX	Vertex Pharmaceuticals Incorporated		0.25
VMED	Virgin Media Inc.		0.28
WFMI	Whole Foods Market, Inc.		0.07
WYNN	Wynn Resorts, Limited		0.46
XLNX	Xilinx, Inc.		0.63
YHOO	Yahoo! Inc.		0.04

Dow Jones

Crazy week - drop down - strong recovery on Thursday - even stronger drop on Friday. I have mentioned in my last "Technical Analysis" report about oversold market and we saw the decline. Yet, the Friday drop was somewhat unexpected. Majority of the technical indicators were bullish after the market close on Thursday. The Friday's crash proved one more time the importance of the intraday charts monitoring. Even if the market makes a strong move against the position, those of the traders who watch the charts on intraday basis have time to close the position in time with acceptable losses and even in some cases with small profit.

The Friday drop was very scary for many traders - I see very high volume on that day. It looks like many traders were dumping their positions in the fear of the recession. I think the memory is still fresh about October 2007 - February 2008 volatile stock market.

Even the Nasdaq 100 and the S&P 500 indexes still close to its high levels (the Nasdaq 100 is only about 3% and the S&P 500 is about 5% below it's highest levels), even the S&P 500 and the Nasdaq 100 is still far away from the January 23rd and March 17th lows, the Dow Jones Industrials scares everyone. Over the last couple of weeks the DJI index has dropped for about 7% and it's only about 4% to the January and March resistance levels.

I do not think we have right to say the the stock market is in the recession based on the Friday crash and strong decline in the Dow sector. If we take a look at other US indexes we will see that the Dow 30 is the only index that substantially moved down:

• Nasdaq 100, Nasdaq Composite, Amex Composite, Dow Jones Transport, Dow Jones Utilities, S&P 400, S&P 600 and the Russell 2000 are still at the top and very close to the May highs;
• S&P 500, NYSE Composite, S&P 100, Russell 1000 and Russell 3000 have dropped, yet still far away from the January resistance level.

I think it's a little bit premature to create panic based on the Friday's drop. We had strong two months recovery (since the middle of March to the middle of May) and it's in the nature of the stock market to release some oversold pressure.

By looking at my technical indicators I see the growing oversold pressure which may push the market up. I see nice volume surges during the market down move on May 21-22, on June 3-4 and on June 6. Especially, I see strong oversold levels on the DJI. Yet, I think the market may continue to move down, at least to the point when I see the negative MVO is back to zero line and when the McClellan oscillator becomes red(negative) and starts tomove up. The Nasdaq 100 is not as oversold as the DJI and this is one of the reasons why I think we may face further drop.