Approaching Some Critical Levels

 | Oct 09, 2012 | 6:00 AM EDT
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Does anyone look at the 50-day moving-averages anymore? I realize the fuss is all about Apple (AAPL) these days, but I find it curious I have not seen much chatter about the various Nasdaq indices and their 50-day lines.

I have commented on Apple enough of late, so I won't spend more time on it now -- but the bottom line is that this stock is showing a head-and-shoulders top. The shares saw light volume on the bounce last week, and the eventual downside target is at or near $610. I fully expect the stock will rally at some point before it gets to that target. In fact, it might take months to get there. So I say we should stop fussing over Apple. In the meantime, Google (GOOG) has met its upside measured target, yet no one seems to be fretting there.

Away from that, let's move to the chart of the Nasdaq Composite. The index is now sitting just a mere 1% above its 50-day moving average. That moving average -- for this week -- happens to coincide with the area that saw a spike low two weeks ago. I would expect the index to try and find support here in its the first visit to that level.

Nasdaq Composite

Now let's look at the Nasdaq 100, for which Apple is such a huge factor. That index is essentially points away from the 50-day moving average line, and this is the first visit to that area since late July. What is fascinating to me is that 50 trading days ago was late July. That means the moving average is still rising. But, in two weeks' time, this moving average will start coming in at 2750 and upward from there.

So if the Nasdaq 100 cannot lift itself up and away from this area in the next two weeks, that line will flatten out and potentially roll over. Now please move your eyes to that period in July, when the index hovered around the 50-day moving average. At the time, it was in the process of curling under that level, and the line eventually became supportive. If the Nasdaq 100 now starts rolling over, that level will begin to act as resistance.

Nasdaq 100

Based on my indicators, I think the moving average will start to flatten out and eventually roll over. But if you want to wait and watch it, then you know the time frame -- the next few weeks should determine the direction.

I was asked to revisit the chart of natural gas, so here's a quick glance. You might recall that we looked at this chart just after the Federal Reserve meeting last month, and I was bullish on it. I have a lot of company on that now, but we should do a measurement and see where this chart might go.

If we take the high of the pattern, at $3.40 per MMBtu, and subtract the low at $2.80, we get $0.60. We then add that on to the breakout at $3.10 for a target in the $3.70 area.

Natural Gas

For the stock market as a whole, the now-standard "downside Monday" was in full effect -- but, as has also been the case so often, the selling dried up as soon as the market declined. This is quite similar to the way the buying dried up late last week. I still believe we should sell the rallies.


Overbought/Oversold Oscillator -- NYSE

Overbought/Oversold Oscillator -- Nasdaq

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