Wednesday, August 6, 2003
Issue Contents:
Each morning, I surf the usual sites. I always go to Google News to check on the world, just in case it somehow blew up while I was sleeping. This morning sees the tabloids come up with a new era of defense in the world of yellow journalism, with the National Enquirer challenging Ben Affleck to a lie detector test to prove their story wrong.
On the business front it is more interesting, as usual. It seems like the reception of Cisco's numbers is quite strange. In my car yesterday afternoon, the radio announcer said that CSCO missed the mark, while John Chambers was said to have noted that sales of routers had levelled off in a mature market. Meanwhile, back at WSJ, they reported that "Cisco posted a 27% profit rise and gave its most upbeat outlook in years. But it met rather than exceeded analysts' expectations, disappointing some investors." Go figure.
These are Paul's intraday stock picks for Wednesday. He will reveiw each setup for the Real-Time Trading Group at around 11AM Eastern.
BUY SIDE:
- CAT (looking for continuation)
- BRCM @ 21.19 (W test)
SHORT SALE:
- MRK @ 53.39 retracement
- EBAY @ 102.19 retracement
- NTAP @ 15.60 retacement
- QLGC (looking for continuation)
Prices above should be used as ALERTS.
****
[$INDU, Multiple TF] Dow Jones Industrial Average
We're going to take a multiple timeframe approach this morning and quickly go over support levels below. Back in March 2003 we anticipated that a higher low would be put in on test of the 2002 low. The upside target would be a test of the December 2002 high.
As of the end of June, the upside objective had been reached, and what we have here is a classic bear flag on the monthly chart, with resistance overhead between $INDU 9000 and the 20-month EMA. $INDU 9043, the December 2002 high is now going to be tested to see old resistance can become new support.
You can clearly see that this 9000ish area is an important level, since this was where sellers showed up before several times to sell the $INDU. Note that the 200-day MA is at $INDU 8558 below, another potential area of support.
On the daily chart, we already had the chop zone outlined for you from before. The low end of it is the July 1 low in the $INDU 8871 area, and that is also the ultimate downside target for the failed upside breakout last week.
[$NDX, Multiple TF] NASDAQ 100 Index
Same approach here for the $NDX, doing a drilldown from the monthly chart.
We expected the bounce to be a little higher on the $NDX monthly chart, simply because of the magnitude of the fall. Nonetheless, this is a sister pattern to what you see on the $INDU monthly chart. This is a rising wedge (big bounce) into the 20-month EMA. The first downside target is a test of the lower edge of the pattern, about $NDX 1145.
I left off the rising wedge pattern lines here so that we can see the first downside target on the $NDX weekly chart. The December 2002 high is in the 1155 area while the 200-day MA is in the 1100 area, both potential areas of support.
On the daily chart, we've noted the moves daily, and the first downside target of the 50-day MA was hit yesterday. There is no corresponding chop zone here on the $NDX compared to the $INDU.
[QQQ, Daily] NASDAQ 100 Index Tracking Stock
Stealth bear flag on the QQQ daily chart identified for subscribers last week is right on target.
They don't come much prettier than this!
...today. Nothing on the U.S. Economic Calendar as focus will shift towards interpreting numbers scheduled for release for the balance of the week in the context of next week's FOMC meeting.
[$SPX, Multiple TF] S&P 500 Index
This is the monthly chart of the S&P 500 Index.
It's similar to the $INDU monthly chart but it cleared the December 2002 swing high just a little more, but still is a classic bear flag in spirit.
On the weekly chart, we will be watching for the area in between the pink lines to see if broken resistance will become new support on this move down.
On the $SPX daily chart, we're almost at the lower end of the trading range, so do not be surprised if some buyers show up here first. Until the lower pink line in the $SPX 962ish area is broken, what we have here is a SIDEWAYS chop zone.
...so little time.
Will be back later to post. Many interesting things to report as we get closer to the FOMC meeting next Tuesday.