11/2/2008 6:35:29 PM
Welcome to the Advantage Report, this report summarizes the general market as well as the Nasdaq 100 and issues BUY or SELL signals when the conditions present themselves.
SPX Chart - Bigger Picture
In the bigger picture, the market remains range bound between 850 and 1000. A weekly close above 1000 should see a nice rally to the 1090 - 1100 level where it will meet the next level of resistance from the downtrend channel. On the downside it seems that the 850 level continues to provide good support.
SPX Chart - Smaller Picture
In the shorter term, Monday closed just below the important 850 level, making it look as though it was going to dive for new lows but that seemed to be just the impression it wanted to give as Tuesday produced one of the biggest up moves on record, adding 11% in a day!
Adding confidence to this recent move is that the market has been able to add to that move by the end of the week and we now have several indicators pointing to a bullish scenario. I'm waiting for one final piece of the puzzle to fall into place before issuing a full blown buy signal and I expect that early this coming week.
If this move continues and we close above 1000, the 50 DMA becomes the next target at around 1100 and things seem to be shaping up nicely for that to eventuate. There could however be another small move lower before that happens as happened in July (although small in this environment could be up to 70 points!).
For next week support on the SPX is 850 - 900 and resistance is 1000.
The VIX Picture
The VIX is now also confirming the bullish scenario discussed above. The chart shows the uptrend that began at the start of September has been broken. In addition the MACD along with divergences are also adding weight to bullish case.
While times are still tender and fear still remains at historic highs, we are starting to see signs of a stabilizing period ahead that could bring the VIX back to the 30 - 35 area. If the VIX does in fact make it down to that level, we'll be at 1100 or higher on the SPX quite easily.
NDX Chart - Smaller Picture
The Nasdaq has done some very nice work this week after posting a lower low a week ago. In fact the picture is looking quite bullish, these types of set ups don't happen all that often.
While your gut may be churning from the wildness we've been through and telling you to not take a risk, the road map that's being presented is making a compelling argument.
If the 1280 - 1300 region can hold, we're looking for a rise to at least the 50 DMA to 1550 level as a minimum target.
General Commentary:
The system is on a preliminary BUY signal on some of our indicators for both markets. The chances are good that we'll go into a full buy signal by early in the week. Please note, this is not an official buy signal at this point, this is a, "stay tuned and get ready to close shorts and go long soon signal".
We seem to be at a juncture in the market that hasn't happened since mid July and that turned out to be quite a good entry. This time could be even better, simply because of the magnitude of drop we've had and while fear still remains high, confidence is building which could provide a very nice lead up to Christmas.
Quote of the Week:
The quote this week is from Eckhart Tolle (also known as the father of "Now" by Oprah Winfrey), "You cannot BECOME successful, you can only BE successful."
Feel free to email me at angelo@stockbarometer.com with any questions or comments.
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Regards,
