This Level Should Provide A Bottom On The Nasdaq

  • October 5, 2004
  • Mark Melin


Monday Recap: The
major indices hit important resistance yesterday.  For its part, the cash S+P
moved to test the 1140 level out of the gates, gapping higher on the open to
reach the highs of the day in the morning.  The broad-based index backed off,
then moved higher again to attempt to re-test the highs.  When buyers couldn’t
push the S+P past 1140, sellers took control to move the index to close at 1135,
up some 3.67 on the day.



The NASDAQ moved to test its 200-day moving average at 1964.72, an important
point of resistance.  I didn’t expect the tech-index to move past this level on
the first try, and in fact when buyers couldn’t push past this point, sellers
took control and took the index down to close at 1952.40, up 10.20. 



Late last week we predicted
that the Dow would march towards 10250 this week.  That happened at the start of
the week, as the cash Dow gapped higher then spent the balance of the day
consolidating lower in a defined downtrend channel to ultimately close just
above support at 10216.



Prediction for
Tuesday:  I suspect that the next few days could be spent trading in a
range.  On both the NASDAQ and S+P we’ve hit significant resistance at the
200-day MA and 1140 respectively, and I expect that these may be the tops of the
markets over the next few days.  Likewise, I expect the 1900 level to provide a
bottom on the NAS.  It’s likely to take a major event to break either side of
this range, such as a terrorist event (to the downside) and good unemployment
numbers (to the upside).  In any event, I anticipate that late this week or
early next week we will break out of this range.   

For its part, the Dow is
sitting on support at 10200, and that could be broken to ultimately test the
50-day MA near 10117 before bouncing. 



Portfolio Strategy: 
We’re going to potentially look to get closer to delta neutral today. 

Mark Melin