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----- Original Message -----
From: <A
title=panda2222@xxxxxxxxxxxxx href="">Victor
Wadel
To: <A title=aalloro@xxxxxxxxxxxx
href="">aalloro
Sent: Tuesday, July 20, 2004 12:25 AM
Subject: Good News -Bad News
Where is the Nasdaq Support?
In case you haven't noticed, the Nasdaq Composite Index shed more than 8%
of its value in the first 11 trading days of the new quarter. Today's small gain
does nothing to improve that score.
Another thing that may have escaped your attention is the fact that the
Nasdaq Composite Index is now at the same level it was 10 months ago. That's
right. The year-end 2003 and early 2004 move that propelled the Nasdaq to a
closing high of 2153 on January 26 has been completely undone. The recent
decline has also caused the Nasdaq to slice through its 200-day moving average
and to break its uptrend line, which began at the October 2002 low. Given all of
this short-term negative action, where might the Nasdaq find some technical
support?
The answer is not to be found with widely followed moving averages, as the
Nasdaq Composite now sits nearly 100 points below both its 50-day and 200-day
moving averages. Not that it has any technical merit, but it is also below its
300-day moving average, so even thinking "long-term" is not helpful at this
juncture.
As we mentioned earlier, the uptrend line from the bear-market lows failed
to provide support and was taken out in early July. But other support lines may
soon come into play. On May 17, the Nasdaq Composite established an intraday low
of 1865 and a closing low of 1876. Today, the Nasdaq had an intraday low of 1870
with a close of 1883. All four of these numbers are within 1% of each other.
This implies that the next level of support for the Nasdaq has now
arrived.
However, since the Nasdaq has removed numerous levels of support without
even flinching the past two weeks, one must be looking to where the next level
of support rests in case the current level fails like the others. The answer is
not obvious, but perhaps a clue can be gleaned from the downtrend channel that
has formed this year. The bottom of that channel can be found near the 1800
level, which is about 4.4% below today's price. Perhaps that is where the Nasdaq
can find some support.
Victor Wadel
panda2222@xxxxxxxxxxxxx
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