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Sunday, May 11, 2008
Happy Mother's Day StockBandits!
After posting 3 consecutive advancing weeks, the buyers took a
breather last week as the overall market pulled back. The DJIA led the
way on the way down with a 2.3% decline, while the S&P 500 a followed
with a 1.8% dip. And although the tech-heavy NAZ lost some ground
(1.2%), it continued to show relative strength to the other indexes.
In looking at the bigger picture, the pullback we saw last week
was indeed healthy for the market. The major averages have found themselves
within rising channel patterns, or uptrends, since the March lows. More
recently, the upper boundaries of those channels were being challenged, which is
to say that the pace of the advance was starting to accelerate. Knowing that
markets which get too stretched in any one direction are more prone to reversals
than continuation, it was therefore healthy to see some corrective price action
kick in to bring the indexes lower within their channels.
It's important to point out that the type of downside price
action we saw was probably about as encouraging as dips can be. While falling
prices do not cater to the bulls, the fact of the matter is that last week's
decline came on diminished volume. Combined with the fact that the selling
intensity was mild and no panic was seen as cash was being raised, there seems
to be no urgent selling taking place. That should be encouraging to bulls, as
it signals that this may have been largely due to a needed rest on the part of
the buyers. We'll know more as this week begins to unfold, but for now this
market remains in an uptrend from the March lows and we do not yet have any
technical proof that a change of character has taken place.
Let's get to the charts and see what's going on out there.
First up tonight is the NAZ, which held up better than the
other averages last week once again. This index saw a slight decrease in volume
on the dip in price, returning to the midline of its uptrend channel. On Friday
a new low was set for the week, but by the end of the day nearly all the
session's losses had been recovered, pointing to the presence of some
dip-buying. Overall, this index remains in good health as the recovery process
continues, so we'll see if the buyers step back into the driver's seat in the
coming few days.
TCNet chart courtesy of Worden Brothers, Inc.
The S&P 500 gave back some ground last week, but volume
was light and most of the downside occurred on Wednesday. This index has
slipped into the lower portion of its channel, but continues to have room on
down to the lower rising trend line before the pace of this advance would become
threatened.
TCNet chart courtesy of Worden Brothers, Inc.
The DJIA lagged each of the other averages last week,
which can often times be the case for an index comprised of only 30 stocks.
With stocks like C, GM and AIG each posting double-digit
percentage losses, this senior index struggled from beginning to end as it
pulled back within its channel toward the lower boundary. Some additional room
is still in place before the lower trend line would be tested, but the bulls
will need to protect that area so it's sure to be an interesting week.
TCNet chart courtesy of Worden Brothers, Inc.
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