Friday, September 15, 2006

Indexes At Interesting Junctures

The major indexes are both at interesting junctures right now. The SPX is right at its highs for the year, which were made back in May. A bullish scenario from here would be for the index to consolidate a bit around these levels, and then breakout to new highs on good volume.

Also, you can see that the 50-day moving average is in the process of breaking back above the 200-day average. This is a good sign to technicians. If the SPX does have a pullback, you want to see it find support at its now rising 50-day.

As for the Nasdaq, the COMP spent the last two sessions probing its overhead 200-day. Today, it has broken above this resistance. It would be bullish to see this key moving average begin to act as support, as opposed to resistance.

The markets look short-term overbought right now, but don't necessarily need to go all the way back to oversold levels. Some sideways consolidtion would be just as good to work off any short-term excess.

And under the surface, we should continue to be watching for individual stocks breaking out on high volume. Earlier this week, I highlighted a handful of stocks breaking above their respective 50-day averages. This is a good place to look for beaten down stocks that could continue to enjoy a rally.


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