The Dow Industrial Average has broken out of
the intermediate consolidation pattern, closing above resistance at [3], then
drawing into a narrow range at [4], before further gains at [5]. Volumes were
light until Friday [5] which experienced increased selling (signaled by the weak
close). Expect a test of resistance at 10900/11000. A pull-back that respects
10550 would add confirmation; while a retreat below 10550 would signal further
hesitancy.
The last year has established strong support at 10000/9750. There is also
strong resistance at 11000/11500, shown by price action from 1999 to 2001 and by
recent highs in 2005. I expect to see a lot more price action between these
levels before there is a clear breakout.
Twiggs
Money Flow (21-day) signals accumulation, with a strong rise above the zero
line. If the indicator rises above the recent high, without crossing below zero,
that would be a further bull signal.
Transport indicators have failed to follow through on recent bear signals.
Watch for a rally that could take out the recent highs: Fedex above 90.00
and UPS, similarly, above its May high.
The Nasdaq Composite is testing
resistance at 2100. A close above this level (the high of the January to March
consolidation) would signal resumption of the primary up-trend. Friday showed
increased resistance with strong volume and a red candle (weak close); so a fall
below 2050 should not be discounted, signaling a test of support at
1900.
The market appears to have more confidence in the (Dow)
heavyweights.
The S&P 500 shows even greater confidence than the Dow and is
close to testing resistance at the March high of 1225. A close above 1225 would
signal resumption of the primary up-trend.
Twiggs
Money Flow (21-day) displays a strong bull signal: a pull-back that held
above the zero line. A rise to a new 6-month high would
confirm.
