Archive for July, 2013

Dow Jones Industrial Average Approaches Long-Term Resistance

Posted in Dow Jones Industrial Average (DJI) on July 30th, 2013 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

Although this observation might be a bit early, it is worth pointing out that the Dow Jones Industrial Average (DJIA) is approaching a test of long-term trend line resistance currently at 16,030 (but rises over time). That level represents a 3.02% gain from Friday’s close. The real question, however, is whether this trend line resistance will be exceeded anytime soon, or prove to be a difficult resistance area instead.

With the DJIA up almost 19% on the year thus far, with a change at the helm of the Federal Reserve system likely in January, with yields on longer dated bonds trending higher and with stubbornly high petroleum prices at the moment, one might argue that the upside in equity prices is limited for the foreseeable future.

On the other hand, signs that economic conditions in Europe may be stabilizing or even improving, with Chinese officials suggesting that 7% growth is the “bottom line” for that nation’s business activity, and with inflation levels in the U.S. below the Fed’s targeted level of 2%, one could also argue that domestic economic growth should continue.

Nevertheless, a decline in top line corporate revenues, the approach of the implementation of “Obama care”, an increase in worries over potential of municipal bankruptcies and the handing of unfunded pension liabilities remain “dark clouds” over the economy and the marketplace.

From a technical point-of-view, trend line resistance currently at 16,030 amid overbought conditions should be a limiting threshold, particularly on the first attempt to breach it. Moreover, the bull market without a 20% correction has lasted 1,598 days, making it the 5th longest bull market in history. In the absence of accelerating earnings, these conditions suggest that a “pause” or even a “correction” could be “in the cards” sometime soon.


Is The NASDAQ Composite Index Due For A Correction?

Posted in NASDAQ Composite Index (IXIC) on July 25th, 2013 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

After a near test of long-term trend line resistance currently sitting at 3,660, two big cap tech stocks, Microsoft (MSFT) and Google (GOOG) posted disappointing Q2 earnings results last week causing the NASDAQ composite Index (IXIC) to dip by 0.66% on Friday. Although MSFT and GOOG fell by 11.40% and 1.55% respectively, with a number of other names including Apple (AAPL), Mattel (MAT), eBay (EBAY), NVIDIA (NVDA), Yahoo! (YHOO) and Intuit (INTU) posting losses of between 1.22% and 2.82% and with Intuitive Surgical (IRSG) plunging by an outsized 6.83%, the overall index did only fall by only 0.66%. That is because a number of healthcare, retail and data storage devise maker stocks posted healthy daily gains.

Still, with overbought conditions currently present on the NASDAQ Composite Indexes’ long-term chart, and with long-term trend line resistance sitting at the 3,660 level at the moment, further upside gains appear to be limited over the short run.

Nevertheless, U.S. economic conditions continue to show slow, but steady improvement despite higher gasoline prices, continued European woes, concerns over the economic health of China and growing municipal calamities highlighted by the city of Detroit. Back-to-school shopping, the “wealth effect” of both higher real estate and equity prices, and an improving jobs market could team up to keep consumer optimism positive for months to come.

Moreover, as long as Fed Chairman Bernanke and the FOMC believe that the unemployment rate is too high and the “risk” of an inflation surge is low, monetary policy will remain highly accommodative. This suggests that equity market corrections will likely remain limited as well. As a result, a test of former trend line resistance (now support) at the 3,309 level on the NASDAQ Composite Index could become a buying opportunity, if it were to unfold. A solid break below that support area, on the other hand, would imply that a broader correction could be in the works instead.