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Weekend Stock Market Analysis

(12/6/08)

After the big sell off on Monday the market basically traded nearly sideways in a choppy fashion the rest of the week.  Looking at a Daily Chart of the S&P 500 it appears it has completed its 2nd Elliott 5 Wave pattern to the downside and is beginning a potential corrective zig zag rally similar to what occurred last Spring as highlighted by the purple rectangle.   

On a short term basis the S&P 500 held support this week near its 50% Retracement Level (calculated from the 11/21 low to the 11/28 high) just below the 820 level and is developing a consolidation pattern (brown lines).   If the S&P 500 can rally above the 900 level it's next area of upside resistance would be in the 945 to 955 range which corresponds to its 50 Day EMA (blue line) and downward trend line (purple line) connecting the October 14th and November 4th highs.  Meanwhile if the S&P 500 is unable to rise above the 900 level and comes under more selling pressure once again look for support near the 820 level next week.

As for the Dow notice it also held support near its 50% Retracement Level near 8175 (calculated from the 11/21 low to the 11/28 high) as it developed a consolidation pattern (brown lines).  If the Dow can rise above 8800 its first area of upside resistance would be at its 50 Day EMA (blue line) near 9075 while the next area would be at its downward trend line (purple line) connecting the October 14th high and November 4th high near 9400.   Meanwhile if the Dow is unable to rally above the 8800 level next week then look for support at its 50% Retracement Level near 8185.

The Nasdaq is also developing a consolidation pattern (brown lines) as it held support near the 1400 level this week.  If the Nasdaq can rise above the 1535 level then look for resistance to occur either at its downward trend line (purple line) near 1620 or at its 50 Day EMA (blue line) near 1670. 

Meanwhile if the major averages are going to make another move higher next week watch the Banking Index (BKX).  The BKX has rallied back to its downward trend line (black line) near the 48 level.   If the major averages are going to move higher next week the BKX will have to break above this downward trend line with the next area of resistance around 52 which is where its 50 Day EMA (blue line) and 38.2% Retracement Level (calculated from the late September peak to the November 21st low) reside at. 

So far in 2008 our ETF Strategies have worked the best with our SPY ETF which tracks the S&P 500 up +33% versus the S&P 500 which is down -40% for the year.

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