Markets Rally From Short Term Support Levels

DJIA - 44.43, -0.34% SP500 - 0.54, -0.04% NASDAQ Comp. + 6.63, +0.27% Russell 2000 + 3.62, +0.49% The broad indices pulled back in early trading and then rallied with the Nasdaq Composite and Russell 2000 closing up, the S&P flat and the DJIA down slightly. There were several big movers in our stock list that we post on from day to day. All four indices had large white candles on Monday and each of the bounced near the S1 short term support level. The DJIA bounced near the mid-section of Monday’s large white candle and closed at its 20 DMA. There was a higher low and a lower high today resulting in an inside day. The S&P bounced today off both the mid-section of Monday’s large white candle and the old horizontal resistance (new support) from late January, early February through late April. Today’s candle formed both a higher low and a higher high. The Nasdaq Composite also bounced off the mid-section of Monday’s large white candle. Today’s candle formed a higher low and higher high and a new high close. This is the highest close in the Nasdaq since January 7. Today’s candle could be viewed as a potential hanging man (short-term bearish formation). If a pullback does occur it likely will be a short-term counter trend move. Dave’s Insight: Candles are one piece of technical information and should be interpreted in context of all the technical information on the chart. The Russell 2000 index was the strongest of the four broad indices on Tuesday. Its early morning pullback stayed well above the mid-section of Monday’s large white candle. Today’s candle was also a higher low and higher high and a new high close. The RUT closed above its January February resistance for the second straight day. Today’s close is the highest close since January 3. I’ll be sharing some price targets on these indices starting tomorrow so stay tuned to Chart Signals for even greater insight. I have been commenting in my advanced technical analysis audio commentary for the past three years and again last night to a separate audio audience on the importance of the PHLX Semiconductor Index (SOX) price action to the Nasdaq price action. Here is the bottom line. Since technology has chips inside, the strength or weakness of “chip” stocks has a significant influence of any sustainable trend in the Nasdaq index. The SOX was up 3.19 points or +0.79% today, more than the four broad indices. This was a higher low and higher high and a new high close. Also this is the highest close since December 31. In fact today’s close was just 1.73 points below the December 31, 2007 close. In other words the SOX could go positive year to date as early as tomorrow if it moves just 2 points! This suggests a probable continuation of the recent uptrend in the Nasdaq. Moving Up: FSLR, FWLT, CLF, CNX, SCHN, AAPL, X, JASO, MEE, DRYS, BIDU, IBM, DECK, ESRX, BRCM, PCLN Moving Down: POT, CF, GS, MOS, LEH, STRA, MA, MON, IPI, CELG, RIMM, MS, MER Intermediate Term Market Trend: Up Short Term Market Trend: Up