Checking the charts– S&P and NASDAQ poised for good 2009
While 2009 is set to be an already great year when cash makes it way back to market, I like to identify technical reasons and rationale for why the stock market will follow what the fundamentals are telling us. This time around the technical analysis is completely in favor of a great start to 2009 as two strong trends are forming on both the NASDAQ composite and the S&P 500.
Investors have known the “January Effect” for bringing stocks back from bear markets and this year will be no different. Both major indices are showing strong trends emerging from the base that was made during the credit crunch panic.
I like both of these trendlines for different reasons but mostly the fact that the range has been perfect thus far and because the trendlines are not following a crash course straight to the top. Trendlines with lots of slope have proven to be profitable but fall out quickly, I think these two trends are poised to run for quite some time as the market bounces in between the lines.
The NASDAQ chart is very promising due to the fact that the market has pushed out of the top far more times than at the bottom and the resistance portion of the trading range appears weak. Going in to the next year it would be great to see the market top the channel and run along the upper edge rather than bother with channeling between the two lines.
The S&P chart is showing some of the same characteristics that show through on the NASDAQ chart with a few variations. In this chart the S&Ps upper limit looks stronger but I think that may be due to the short term resistance at 920 rather than the upper limit of the trend. Long wicks at the bottom of the channel give me some comfort that the support line will hold.
