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Market Analysis of
the Week From the VCM Research Department For June
26th, 2007 The Market Today We have previously looked at the NASDAQ on the daily
chart and on the intraday time frame. The NASDAQ has been the stronger part
of the market and the daily chart has actually still maintained a fairly
strong uptrend even during this pullback over the last few days. It is still
forming a higher low and still sitting above a rising 40 period moving
average. This has not been the case for the S&P 500. It has
clearly been weaker and broke its uptrend over two weeks ago at
"1".
This break of support from 10 days prior (solid green
line) and the break of the rising 20 period moving average broke the trend, and
the next rally formed a lower high (LH). We now have a multiple bar drop to
the prior support area at “1”. Overall this leads to a difficult
trading day. On one hand we are seeing many things saying we have a top in
place. We are already short the ‘market’ longer term by being
long the DXD (DOW Ultrashort ETF), but between the
SPY sitting on support and the QQQQ still maintaining an uptrend after a four
bar drop, we feel the odds for the next couple days are that we will see a
bounce. Also keep in mind that the FOMC meets today and Wednesday and that
announcement usually affects the market for over a half a day. As far as the bigger picture, the weekly chart of the
SPY is seeing congestion like we have not seen in this uptrend.
When single pivots form, it is much easier to get
through if and when it is challenged. During this multiple month rally we
have not seen a resistance area form like the one that has over the last five
weeks. We now have red bar – green bar – red bar and wide bars on
big volume going sideways. There is no real support until 146.00. While a
bounce is likely, it is quite possibly a shorting opportunity longer term. Trading idea: Traders of the E-minis or the QQQQ/SPY should
maintain a bullish bias going into the open and maintain it as long as the
intraday uptrends are maintained. The key is for the hourly bottoming tails
to hold at the open or on a retest of yesterday’s lows. The bounce may
very likely only go to the QQQQ 47.60 to 47.80 area.
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