Tuesday, August 21, 2007

Charts of Nasdaq, Dow, S&P, and Russell 2K

The above daily chart is of the quad Q's (QQQQ) the tracking stock of the Nasdaq. I have noted what I believe is a head and shoulders formation which should give us a target of $43.50. (distance of neckline to head subtracted from neckline break). Also notice the current rally is taking us to the broken trend line (red) and while we could rally to the neckline to kiss it from underneath I suspect we may fail sooner rather than later. The volume on this rally is lousy and is indicative of a bear market rally rather than the start of a new leg up. I am adding to my QID position here.

The Spiders (SPY) daily chart above paints a similar picture to the QQQ's. In addition to the resistance of the broken trend line (green) we have the 200 day ma as another bear ally.

The above daily chart of the diamonds (DIA) shows another head and shoulder formation. This is the strongest index as the hedge fund valets out there seek refuge in the liquid multinationals. This will be small comfort when the U.S. economy rolls over as those expecting the global economy to carry everyone is shallow and wishful thinking. We are buyer every one's goods and the global economy is more interconnected now than ever. I was always taught that when the U.S. gets a cold Canada gets pneumonia. I believe the global interconnection we have now makes this premise apply to the world. At some point the Asia countries will develop a thriving consumer class but for now it is not enough to offset the demise of the U.S. consumer. I am adding to my DXD position here as well.

The final chart of of the tracking stock for the Russell 2000 (IWM). This looks like a continuation rectangle. As I noted it is contained by 80 and approximately 73.50-74. A break below this lower lever of the rectangle would imply a move to 67.50-68. Conversely and break above $80 would indicate a move up to 86. The tape will tell us. Good trading to you all.

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