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Weekly Report for May 12th - May 16th, 2008 May 11, 2008- Market Summary In our previous reports, we mentioned that the bulls have managed to push the major indexes toward the long-term resistance of their respective 200-day moving averages. We noted that many traders were curious to see if the nearby moving averages would act as a level of resistance that would prevent the rally from continuing. As you can see from the charts below, the Dow and S&P did indeed bounce off their respective 200 DMA, which is raising a concern that the broad markets are getting exhausted. We expect that the record high oil prices will continue to add to the downside pressure and we'll watch for the indexes to struggle while trying to make a move higher. We've also added
the Relative
Strength Index to several of the charts because it is nearing
the 70 level. We expect this indicator will trigger overbought conditions
soon (above 70), which could hinder the rally from continuing. We
expect an RSI reading near 70 will make the major indexes prone
to a sharp pullback.
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