Keene Little : 7/8/2007 10:37:16 PM
Monday's pivot tables: Link
The rally last week was on weak volume and weak breadth. There were larger down ticks than up ticks and yet the averages managed to put in higher highs for the most part. Some data from past market action similar to the past week shows we should expect a pullback early in the week but then a likely continuation higher after that. The chart patterns leave open several possibilities which I'll show in the charts with the updated roadmaps.
The DOW appears to be in an ascending wedge pattern which would be bearish if true: Link
There's room to the upside, even as high as 13700, before it could run into trouble but first it has to get through its broken uptrend line from March, currently just above Friday's high and near 13640. A drop below the uptrend line from June 29th (say about 13600) could mean a steep drop before rallying again (light green path). The bearish pattern says once a top is in here then it'll be all down hill. It takes a break below 13316 to confirm the bearish case.
SPX continues to look very similar to the DOW and also has a potential bearish ascending wedge playing out. The top of the pattern and a Fib projection at 1538 make for an interesting possibility for an important high there: Link
A break below 1517 would say the leg up from June 27th has completed but not until a break 1493 do the bears get to claim any kind of victory. A pullback and continuation higher (light green) is still entirely possible.
Moving out to the daily chart on SPX shows the two possibilities that I see here--a continuation of the rally (could be choppy with a big pullback first this week) to a Fib projection near 1558 (for equality between the 1st and 5th waves in the move up from March) or else the current bounce will stop short of the June 15th high and turn right back down and sell off quickly. Breaking the uptrend line from March and then confirming with a break below 1484 would have the bears in control. Link
NDX was bullish last week but has pressed right to the top of a parallel up-channel, the top of which is the trend line along the highs since late April. While it could certainly immediately press higher I'm not sure I'd want to play it that way from here. Wait to see if we get a pullback, especially if it can hold above 1950, to get long. It takes a break below 1901 to negate the bullish uptrend. Link
The daily RUT chart shows its choppy mess and it too has pressed to the top of a large ascending wedge pattern, which is the trend line along the highs from May 2006. If it can break out higher then there's layered resistance all the way up to 890 otherwise I'm looking for at least a pullback. The pullback will need to hold above 820 to keep the bulls in control. Link
CME got a big pop higher on Friday and broke through some resistance. It looks like it has confirmed that it's on the bullish wave count: Link
I continue to watch GOOG for some clues for the tech rally and I see another push higher as needed to give it a completed 5-wave move up from June 29th and the trend line near 550 could make for a good upside target (to consider a short play) and then we'll see what kind of pullback starts (if it starts). Link