Strong Bounce in Nasdaq, Russell and Keys Stocks to Watch on Tuesday

DJIA + 68.72, +0.55% SP500 + 9.42, +0.68% NASDAQ Comp. + 36.57, +1.50% Russell 2000 + 10.29, +1.42% Oil closed at $128.85 down $3.34 As I mentioned in Monday’s post after a big down week last week it would be typical to see a short term rally. Well we saw it today. On the heels of some surprise housing data, the Commerce Department reported that new home sales rose 3.3% in April. This was the first rise in six months and it was widely expected to see another drop in sales. Alan Greenspan was quoted in The Financial Times he thought there was “a greater than 50% probability of recession, that probability had receded a little and the probability of a severe recession has come down markedly.” The DJIA rally was very modest and closed at the R1 level of Friday’s candle still below its 50, 30 and 200 DMA’s and below its January and February resistance level. Today’s bounce came at the S1 level of the April 1 large white candle. Remember the DJIA broke a double top support and has a 12,294 price target as posted last week. The S&P bounce came at its 50 DMA and closed just above the R1 level of Friday’s candle. The S&P made a lower low on Friday and is still below its 30 and 200 DMA and its January and February horizontal resistance level. Watch closely to see if this rally makes a lower high. The Nasdaq Composite hit its 30 DMA on Friday closed just above it and bounced higher today. Today was a large white candle that closed above both Friday and Thursday’s highs and closed above the R1 level of last Wednesday’s large black candle. It is above its 30 and 50 DMA’s and below its 200 DMA. It is also above the horizontal resistance from January and February which is acting as new support. The Nasdaq made a 100% retracement to its May 9 low and if it rallies to a lower high could potentially form a head and shoulders top, although this is not the only potential outcome. Dave’s Insight: Think several moves in advance like a master chess player. The Russell 2000 closed above Friday’s high with a large while engulfing type candle. It closed above its 30 DMA on Friday and bounced higher today. It is above its 30 and 50 DMA and below its 200 DMA. Today it closed above its horizontal January resistance. So today is another breakout. Friday’s low was above its May 9 low so this is a higher low and still represents an up trend. Due to the divergence between the DJIA, S&P and the Nasdaq and Russell, we maintain our intermediate term neutral trend reading. If markets rally on Wednesday we will shift our short-term reading to up. Today’s Action Stocks to Watch for Tuesday Channeling: FSLR, JASO moved lower BRCM, CAT traded near support DECK bounced Up Trending: AAPL, RIMM, SOHU, SOL bounced CNX, FWLT traded near support Down Trending: GRMN, GS, LEH, MER, MS traded near support Moving Up: STRA, BIDU, MA, AAPL, RIMM, DECK, CLF, IBM, V, MTL, AMZN, ESRX, GS, NKE, LEH, SOHU Moving Down: FSLR, POT, MOS, CF, X, DRYS, USO, AGU, MON, IPI, BTU, JASO, CNX, SCHN Intermediate Term Market Trend: Neutral Short Term Market Trend: Down