Current Market Outlook - 7-27-2006

trendmagic

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Current Market Outlook 07/27/2006:

Dow Jones Proprietary Indicator: LONG

The broad markets were all over the place again today. As we have been saying for the last 6 weeks, volatility will reign this market for the next couple of months. The DOW was up 85 at one point, Nasdaq up almost 25. Both inidices ended down for the day. Nasdaq put in a 40pt swing to close down 15pts. However, we are not worried..the trend us up, for now. Our buy signal kicked in at the bottom and is still in a buy zone. Short term setbacks aside, we are going higher.

Now, lets look at the nasdaq. It has grossly underperformed the DOW JONES and the NYSE on this move up and looks very unhealthy. Volume came in heavy today and we were a couple points away from closing below yesterdays lows. That would have created what we can an "outside down" day. These tend to portend negative moves, however, it did not happen.

Nasdaq came up and tested the 2085 resistance, which we told you was going to be big resistance due to the gap that we are trying to take out and this level was the last swing high. We went up there and failed on lighter volume than the July 19th highs and closed below them. This index may want to go back down and test the July lows again.

On an intermediate term basis, the weakness in Nasdaq cannot be ignored. This market has led the entire market up since the 2002 bottom in October, however, it has broken and continues to stay weak. There has been a flight to quality and rotation into larger caps. We see this as another indication that the pullback we are waiting for in a couple weeks will more than likely happen into the October timeframe.

Its a good thing we are invested in the DOW...this is by far the strongest index of the majors.
 
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