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NASDAQ Alert says strength is starting to build!

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Both the Dow Industrials and S&P 500 triggered upside alerts earlier and now the NASDAQ has joined in with a break of its 50- period MA on our 60-minute chart. We're going to post our comments from 10:30 directly below, then start the 11:30 comments below that. "Younger" traders should note the progression of alerts we're seeing, but stick to our "flight plan" and strategy as it unfolds.

10:30 Commentary

S&P 500 Alert!

The SPX triggered a preliminary upside alert that we had set at 1,335. Like a fighter pilot on alert, we're at the ready and getting ready for our first "mission" when we get clearance from the tower. Right now we've got the engine running and a clear runway.

Roger tower

OK, we're back. We just got word from the tower that the Dow Industrials have triggered an upside alert at the 10,640 level and tensions are growing. We need to get off the deck here and get up in the air. No word from NASDAQ yet, but our two of our strongest indexes have given us the heads up and we need to focus on those stocks that are breaking resistance or coming out of a base. Just like an army general, we want to focus on those troops that are breaking through on the front and offer them our bullish support.

S&P 500 Index Chart - 60-minute interval.

Our first alert to a potential upside move came when the SPX broke our 50-period MA (thin blue) at 1,335. We've "re-colored" some resistance/support lines to reflect the support we're starting to develop in the SPX. A break above ascending support/resistance (thick red trend) near 1,342 is our signal to start getting bullish. Our first launch should take us to a target of 1,360 and perhaps the 200-period MA (thin red) currently at 1,375. When we start reaching some targets we want to have our finger on the trigger and look to cause some damage (in the form of profits!)

"Momma Opossum, come in Momma Opossum"

Ooops, that was the tower. Looks like the Dow is making a move and has confirmed that a move is underway with the breaking of the 200-period MA (thin red). We've got to get off this crate if we're going to make some money! Buckle up, cause here we go.

Dow Industrials Chart - 60-minute interval.

Yesterday we developed the analogy that the Dow Industrials would behave like a female Opossum and just for fun, we've adopted that name for today's fighter pilot run. Little doubt here that the Dow is on the move and yesterday's alert has served us well. Today's break above the 200-period MA and favorable MACD should have bullish traders giving support. First sign of the "enemy" is at 10,800 and we'll assess our mission at that point. (I feel like I'm reliving my childhood today... this is fun!)

Flight plan revisited

OK, this "flight plan" is more that of the intra-day variety. If you're in charge of supervising the attack on the bears, we need to be checking on our stronger troops and those we've identified as weak. Lets take a look at the weak ones and see how they're fairing today. If they're gaining strength, we get the feeling the bulls are making progress.

Cisco Systems Chart - 60-minute interval.

The battle continues between the bulls and bears in CSCO and the stock is still profitable from our "short alert" given back near $51. When a bearish trade is still profitable, even though the NASDAQ is up 3.87% this tells us we're still making quick bombing runs in the technology area and getting out before we're fired upon! Is this one of those stocks we gave hint too earlier that the market just isn't interested in right now? We'd say there have got to be stocks that look better technically for trading in on the bullish side and it's weak technicals have given bearish traders an opportunity to make money on the downside and still cover here with a profit even though the major indexes are surging.

Ford Motor Chart - 60-minute interval.

Another stock we've characterized as "weak" is still trading right at our short-term downward trend line and this too should keep traders that are bullish watching resistance levels carefully. The market really looks like it is monitoring levels of resistance to make buy/sell decisions. A break above $24.50 could be a sign that this stock has started to digest all the bad news and that most of the damage is done.

11:30 Commentary

The recent upside alert and the breaking of the 50-period MA in the NASDAQ should be watched closely here. We've got a downward trending line of resistance that this index needs to get through and we're going to wait for a break. We'll not two times previous where this index has traded above this MA only to fail. Is the third time a charm?

NASDAQ Composite Chart - 60-minute interval.

While the Dow Industrials and SPX have moved through some short- term levels of resistance earlier in the day, the NASDAQ has just gotten above its 50-period MA. This is a sign of strength for a continued rally as more and more little "opossum" climb on the back of the Dow gains as we outlined yesterday. Traders that are following this type of domino effect should be on the right side of things today. Trade each stock on its own merits, but understand the number of upside alerts we've seen today and NEVER underestimate the power of a rally if short. At the same time, don't get carried away "chasing" stocks that are overextended. There have been times where it has been better to let the leaders take off and then begin identifying the "second tier" stocks that begin benefiting from the leaders move. We've seen the Dow, S&P 500 and now the NASDAQ trigger upside alerts and stocks will do the same thing. Observe the trend and participate as the chain of events unfolds. Wait for the break!

Dow Industrials Chart - 60-minute interval.

Any Army General that is monitoring his/her fronts isn't just focusing on one platoon. We've re-colored some levels on the Dow Industrials to show what looks like formidable levels of support beginning to build in the 10,400 to 10,600 range. Yesterday this index (our strongest) gave an upside alert and followed through today by breaking above the 200-period MA (thin red). Watch current levels closely and monitor the opponent (bearish traders). We say the opponent, but as traders we're constantly switching what army we're on. Recognize if it's the bulls or bears who have the upper hand and where their "troops" may be reinforced. Be willing to withdraw from time-to-time until a support team can back you up. If you trade tactical like an Army General thinks, you'll keep casualties to a minimum and profits will build.

S&P 500 Index Chart - 60-minute interval.

Just after the opening bell, the SPX had traders on alert with a break of the 50-period MA (thing blue). Soon after, the SPX broke an upward trending resistance level and that should have given bullish traders the go ahead to be bullish. Every pilot is looking forward at their targets and ready to "pull the trigger" if the opponent looks to be formidable. On the ground, a good platoon leader knows all the members of his/her platoon and monitors those that are "strong" and those that are "weak". If the weak ones are still keeping up the platoon progresses with the stronger members in the lead. If the soldier at the front starts to slow and raises his/her hand, we can envision the rest of the squad "kneeling" in the tall grass, looking ahead for danger and ready to retreat if necessary to an area of safety.

I was never in the military

OK, by now readers have a great idea that I've never been in the military. I'm sure I've probably butchered some terms, but hopefully some of the analogies are helping. Remember this day and enjoy. We knew there would be better times ahead for the bulls and today is shaping up to be one of those days. Those that stuck to a stringent discipline are still alive to trade and are to be congratulated. Those that didn't have an exit strategy months ago are awaiting anxiously above. Don't get too excited and work your way cautiously to their rescue!

-Staff Analyst

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