Securities Research Services

Monday, April 02, 2007

Market at Support, but Resistance Looms

If you look at the weekly charts here, the market has some potential to pull back down to the March lows, creating a C leg in the A-B-C correction we discussed in detail last month. However, the daily charts disagree.

Generally it is good practice to give the greatest weight to the weekly charts, but since the weekly charts are really not very clear, we don’t have much of an option but to try and decipher from the daily charts what to expect next.

What we have is a double bottom, which was confirmed and then tested on both Thursday and Friday of last week. On both those days major indices closed with a doji at support indicating we should move up from here.

The question is, how far?

Until major indices take out the highs established on March 21, then we consider this to be a ranging market. If and when that high is overcome, then we will be back in an intermediate uptrend. Since the long term trend remains up, we should see some really great set ups emerge at that point.

Until then, prepare for more choppy market action and trade accordingly.

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