|New Years Madness|
|Written by L.A. Little|
|Sunday, 08 January 2006 16:11|
The new year has come to Wall and Broad and prices exploded higher as a result. We did not know if they could breach the resistance areas or not but, if they did, the thought is that they would carry for a ways as a result. Well, carry it appears now so let's look at some targets.
To set targets we have to expand our charts to see where the historical resistance areas lie as near term resistance has been breached on all the majors expect for the DJIA. Here's a look at each.
No definitive breakout here yet but it looks like 11300 is the target now.
We have the breakout here, and the target now has to be that 1310 high we saw way back in April of 2001 on the way down from the 2000 highs.
The NASDAQ has minor resistance at 2330 but the next real resistance area is up around 2200. Look for this market to work towards that number now.
In the case of the Russell, there are no prior points of resistance to examine. When that's the case, you turn to projections. My favored method is to take the last two legs higher, measure from low to high (see highlighted areas), average the two together and then project from the last significant low. In the case of this chart, the average push has been about 125 points the last two legs higher. If you project that from the current leg's low that would suggest around 740.
When a market has the opportunity to consolidate a sufficient period of time, it can make a straight up move to the next point of resistance. This market did have a consolidation period (December) that was sufficient to support such a move if the money wants to chase it higher. That doesn't mean it will happen, but I would not be trying to work shorts on this market at this juncture. If you do, make them very short term and book your gains quickly.
Although there are longer term hurdles, the near term shows a market that you need to lean long into. Short term and, more importantly, the intermediate term trend is higher and it's not usually wise to fight the trend. I'll be looking to work the long end for the foreseeable future now that the market has proven itself. A trade back below 1270 SPX would give me pause. Barring that, we trade towards the targets.
|Last Updated on Monday, 30 July 2007 04:14|