Friday, October 05, 2007

Good news / Bad news

An expected jobs report figure sparked the market into life, helping some indices nick past troublesome resistance while firming up support in others.

The Nasdaq had spent the last couple of days testing 2,725 support - Friday's push to new highs confirmed this level as support and there should be no further test of 2,725 support if this breakout is true (i.e. future risk can be defined by 2,725). The index has a new projected target above 3,000. Friday's gains also saw an upswing in money flow - confirming the importance of August lows as major support:

The S&P had been slow to match the gains of the Dow, but the index ended the day at a new closing high for the year. Not only that, there is now a new projected upside target for the index:

The Dow also has a new projected target:

It is not all fun and games however. Small caps continue to languish, and although the Russell 2000 saw solid gains on Friday, it is still below 2007 resistance and heavily influenced by the (bearish) 200-day/50-day MAs "Death Cross". Without the participation of small caps the rally won't last long - suggesting the current leg up is an end phase rally for the cyclical bull:

The two real troublesome indices are the under-performing semiconductors:

and Dow transports:

But even within these indices there is good news and bad news. The semiconductors are trapped in a 2-month consolidation and have experienced none of the strength of the Nasdaq and Nasdaq 100 as they rallied towards new highs. On the flip side, the semiconductor index has maintained a bullish trend with its 50-day MA trading above its 200-day MA. On the other hand, the transports, like small caps, have experienced a "Death Cross" from the cut of the 200-day MA by the 50-day MA - but Friday did see a consolidation breakout which at least sets the index in the right direction towards 2007 highs.

With the traditional bullish election year fast approaching there is a good chance this long standing cyclical bull market will roll into another year. The flies in the ointment are the lack of participation by small caps and the lackluster action of semiconductor index and the transports - but at least these indices are moving in the right direction, even if they remain some distance from new 2007 highs.

P.S. Trade Ideas data: "Top-8" list in a bullish 2 minutes. "20-appearance" list in an also bullish 49 minutes.