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Market Happy, Short Term Overbought

  • August 16, 2002
  • Dan Chesler


Since the market posted its 2.77 billion-share climax
reversal day on July 24, we’ve seen good performances in the broad
averages. Gains have generally come on rising volume (though not on as much
volume as I would prefer); breadth has been decent; and leadership groups such
as Biotech and Financials have held up throughout. 

All three major indexes, the S&P 500
(
$SPX |
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PowerRating),
Nasdaq 100
(
$NDX |
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News |
PowerRating),
Dow Industrials
(
$INDU |
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PowerRating), have crossed
important resistance levels, notably the downtrend line of the past three months
and the swing high of July 30/31 (see red horizontal
lines in charts). 

After posting respectable gains this week, however, the averages are
understandably short-term overbought. As can be seen in the three charts below,
the market is paying respect to one last significant resistance level in the
form of the 50-day average. For next week, it would not be surprising to see
some consolidation of recent gains before the market attempts breaching this
important resistance level.

Have a great
weekend. 


Dan

 

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