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Weekly Tech Charts & Report - July 5 - by TradesAfterWork

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Posting this to share with our readers: (We really like these Weekly Technical Briefs by TaW).
I thought we'd start our charts off with one of the three primary trends that I look at. As you no doubt remember there is a short term trend, intermediate term trend and a long term trend. The chart below of the Nasdaq Composite Index demonstrates what the long term trend of the market has been. I am using a 12 month moving average of the Composite prices to determine that trend. Notice that prices are above the 12 month moving average which is showing a strong upward bias and positive trend on a longer term basis. The monthly Percentage Price Oscillator (PPO) is positive and above the zero line which is showing longer term positive momentum. Stochastics are above 50 and the Relative Strength Index (RSI) is above 50. It is hard to argue with the chart of this index, that is why it has been the leader in the market.
The daily chart of the Composite also looks very healthy. The price of the Composite is above all the major moving averages. Also, notice how the moving averages are working in harmony with the short-term moving averages holding above the long-term moving averages. Stochastics looks fine and the RSI is over 50. The only thing that I could find that may come into play involves the PPO. The Composite finished with a higher high in prices, but the PPO did not confirm. Normally, as prices go up in an index or stock, the PPO, which monitors momentum, should go up in concert. That did not happen in this instance. (See chart to the side which is a magnified view.) This is called a negative divergence. Is this bad? Well it may signal that we might have lost some momentum for the short term in the Composite. However, just because a stock or index shows a negative divergence does not mean that the negative divergence will play out. I have seen many that never do. It's just something to be aware of when it comes to the matter of calculating your risk management.
The S&P 500 Index ($SPY) is basing or trading sideways. This can also be called consolidating. This kind of price action can be very healthy. When a index or stock comes out of a consolidation, it will generally break in the direction of the previous trend. In this case the previous trend was up, so we would give the odds in favor of the bulls. Currently the index is trading in about a 5% range. The range is from a little below the pivotal 3000 round number up to 3165. If we can close above the the 3165 with some volume or conviction, we may get out of the mud here and begin trading up again, working towards those February highs. Although the S&P 500 Index is not near as strong as the Composite Index, the thing they have in common is their bullish trends.

If you have any questions or I can be of any assistance please don't hesitate to contact me.
Take Care!

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Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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