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arthur
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PostPosted: Fri Jan 14, 2005 4:29 pm    Post subject: General Market Reply with quote

SPX rallied above 1,160 multi-year resistance (which was strong resistance) late last year. Currently, 1,160 is a strong floor. However, SPX created gaps (not shown) at 1,163 and 1,137. There is also a gap at 1,190. The four-month daily chart, with Fibonacci levels of the sustained rally late last year, shows SPX fell to the congestion area created in mid-Nov to early-Dec. Currently, SPX is below its 10, 20, and 50 day MAs, and the 50 day MA may be major resistance (along with the gap at 1,190). SPX has been making lower highs and lower lows recently, and the heavy selling into the close suggest the downtrend will continue. SPX may trade e.g. between 1,160 and 1,190 for several weeks. The market's negative or neutral reaction to positive news makes me cautious. Next week, I expect SPX to hold 1,175 and close the gap at 1,190.

Fibonacci levels tend to work better for Nasdaq (see second chart, which is a longer term chart than the SPX chart). Currently, resistance is at major MAs and recent two big down days. Nasdaq could easily test the 61.8% Fibonacci level at 2,023. It's uncertain if earnings and earnings expectations will be strong enough to prevent a correction, rather than consolidate. It may be best to wait (i.e. stay heavy in cash and risk little) in case the market overreacts to downside.



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