Keene Little : 7/4/2007 10:09:38 PM
Equity futures are up on Wednesday night (above Tuesday's close so that should stop anyone out of their short play against Tuesday's high) while bond futures are down. If bonds sell off some then the higher yields may dampen bullish enthusiasm in the stocks so be watchful of that.
The short play that I recommended trying on Tuesday was an attempt at catching a potential high at resistance and it looked like it might roll over/pull back. If the market gaps up again on Thursday it will gap up over resistance and could put price on the bullish price path (green) as shown on the updated DOW and SPX 60-min charts:
As shown with the bullish price path, if they jump up and then consolidate on top of their broken uptrend lines from March, then we should see both continue higher again after that. Alternatively, since it would be the 3rd gap up this week, it could be an exhaustion gap and the brief throw-over above resistance might be followed by a collapse back under it (gap n crap).
The NDX will be worth watching to see if it runs into resistance at the projection for two equal legs up at 1968.28 which on Thursday will also be the top of a parallel up-channel for price action since June 8th. If NDX can make it up through that level then next resistance will likely be found at the trend line that runs along the highs since May, currently just above 1980. Link
GOOG will be worth watching over the next several days to see if it can make it up to potential resistance near 540. It could certainly do a throw-over above the trend line along the highs from January 2006 and make it up to the top of what appears to be an ascending wedge from April/May, but the 5-wave pattern in the move up from June looks as though it could top out near 540: Link
If GOOG does top out soon then it could be a sign of the top for the Nasdaq as well so that's why I'm watching this one.
Because the RUT has such a choppy price pattern over the past 2-1/2 months I'm sticking with its daily chart to see where support and resistance might be: Link
Between the mid line of the parallel up-channel from March, where price has been stalled the past 4 days, and the trend line along the highs since May 2006, just above 851 (also the mid-June high), it seems the RUT could be facing some tough resistance here. While I show some pretty bullish potential here I'm having a hard time believing it could happen. The bearish divergences suggest the bulls need to be cautious here.