MARKET INSIGHT: Overhead Resistance Coming into Play
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Joel Addison, Optionetics.com
October 4, 2001
October 4, 2001
Tech stocks maintained a positive bias into the close today, but the Dow ($INDU) and S&P 500 ($SPX) fell into negative territory. Even the Naz’s gain of 1.1% was well off its intraday high when it gained nearly 4%. Dell Computer (DELL) helped the bull’s cause today when the PC maker reaffirmed it would meet its current financial targets. This was not expected, considering Compaq (CPQ) warned just days ago. Proving that Dell is an exception to the rule, after the bell today, Gateway (GTW) also warned about its current quarter results.
I noted yesterday that a retracement of 50% for the Big Three indices was a likely spot for resistance. Today, the Dow hit a high of 9,187, with the 50% retracement level at 9,239. The Nasdaq ($COMPQ) hit its apex at 1,641, with a target of 1,737. The SPX reached a high point at 1,084, with a target at 1,083. So, if these resistance points hold true, the Dow and SPX are rather close to their glass ceiling, and the Naz still needs to rise about 150 points from today’s close.
Besides the different earnings warnings that traders will need to cipher through tonight and tomorrow, the granddaddy of economic reports will also be released. The jobs report is highly watched by the Fed and traders use it as a gauge of where the economy has been and where it is heading. The details of the jobs report is likely to move the market one way or the other. There is little doubt the report will show negative facts, but it is how this compares to expectations that really matter.
After the bell today, several companies, including BMC Software (BMC) and Gateway, warned for the current quarter. This adds on to the high profile announcements last night that included Corning (GLW) and Research in Motion (RIMM). It is obvious that traders want to focus on the good news, but this is tough to do when so much negative news is announced every day. Regardless of how you view this market, make sure to understand the risks before jumping into a trade. If in doubt, just stay out.
Joel Addison
Staff Writer & Options Strategist
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