Friday's action was important not only because we had a follow through day at last but also because by closing above the previous July highs, the market made higher highs - an important criterion if the chart has to start looking bullish. The momentum certainly lies with the bulls after the action last week but by no means it is game over for the bears yet. In fact, the overall chart still looks bearish and will continue to do so until we break the June highs. But before the market takes a shot at that, it still has a very important resistance level to overcome, the importance of which I had emphasized last week too.
The importance of 1115 here cannot be overstated. It represents not only the overhead resistance from November - March period, but also the MA(200) level. Making the bulls case a bit harder is the fact that the markets are already at overbought levels, but more on that in the next post.
NASDAQ also saw some significant action on Friday - bouncing off MA(50), closing above MA(200) and making higher highs. And all this on relatively high volume! But for this chart to turn bullish too, the June highs would have to be broken and that means taking on the important 2325 level.
The importance of the 2325 level can be seen more clearly from the 2 day chart shown below the daily chart. As marked on the chart, this level has continued to hold significance from 2007-2010 and should make for some interesting action next week!
So there you are dear readers. 1115 and 2325 should be the numbers to pay close attention to on S&P and Nasdaq in the coming week. I shall be back later looking at how overbought the markets are, a few stocks for the watchlist for next week and of course, the post on "The Art of Setting Stop Loss Points".
Have a great weekend!