OVERSOLD BOUNCE CONTINUES --MICROSOFT HAS A GOOD DAY
BUT ON LOW VOLUME... The stock market continued the oversold bounce that started late last week. Unfortunately, volume remains light. Rising volume is one of key ingredients of a serious market advance. So far, it's missing. That leans us toward the view that this is an oversold bounce from the lower end of a seven-month trading range -- and not the start of a big market advance. The RSI line along the bottom of the chart has turned up from "oversold" territory near 30. And, the daily MACD lines appear ready to turn positive. The price chart, however, shows where more selling may re-appear. The NYSE could reach its (blue) 50-day average and/ or the upper Bollinger Band (which sits just over 5000 today, but is dropping fast). Resistance may also resurface along the bottom of the "trendline" drawn under the November/December lows. The yellow box to the right of the price chart shows where those points start to converge -- and where we suspect this rally will run into trouble.
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MICROSOFT LEADS TECH RALLY... Microsoft was one of the biggest percentage gainers in a strong technology sector. Unfortunately, its rally also took place on lower volume. Even so, a short-term bottom appears in place. The RSI line is rising -- and the MACD lines turned up. Moving average resistance resides around the 26 area, which will provide the first test of the new rally. The weekly and monthly charts provide much better perspective on the stock's trend. The weekly chart shows MSFT bouncing off a rising support line drawn under seven-month lows. It also shows weekly stochastics in an oversold area under 20. But, the weekly MACD lines are negative. In our opinion, to signal to us a major turn to the upside, MSFT needs to clear its November high just below 30. Its monthly chart shows why. The good news is that the stock is finding support along the flat two-year trendline near 20. The bad news is that the down trendline drawn over the highs of a similar time period is still intact. Microsoft has to break the upper line to move it out of that two-year hiatus. Until it does, the chart will have the look of a "descending triangle", which is usually a bearish pattern. MSFT is symptomatic of the market in general. It's bouncing from good support levels, which is enough to keep it in a trading range. It's going to have to break major resistance barriers, however, to turn its major trend back up again. It's a long ways from doing that. So is the market. [Please see our midday update for charts of some of the day's other technology leaders].
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MONEY MANAGEMENT UPDATE... We invite you to study the February 14 MurphyMorris Money Management Model Update. You can get there by clicking in the yellow box on the upper right of the MurphyMorris home page. You can see for yourself some of the technical tools we use to help us decide how and when to invest our clients' money. Since November, the NYSE has done better than the Nasdaq. That's not the ideal time to make money. You can also see deterioration in some of our breadth measures, which are currently rated "neutral to bad". The last chart shows that the "trend" of the market is still down. As the last paragraph in the update says: "We're not concerned with the reasons attributed to the direction of the market. We just want to know the trend so we can capture most of the good times and miss most of the bad times".
FLORIDA MONEY SHOW... After spending the past two days digging out from under the monster snowstorm in the northeast, I'm delighted to be heading off tomorrow for the 25th Florida Money Show. I'll be giving a couple of speeches on Thursday and Friday. Stockcharts.com will also have a booth at the show, where I'll be spending most of my time. [Chip Anderson will also be showing how to take best advantage of the Stockcharts.com website]. If you're in the area, come by and visit. The following week, we'll also be participating in the 4th Annual International Trading Expo in New York. You can get more info on both shows at www.intershow.com. One of the most enjoyable parts of these shows is meeting our members and getting feedback. That's the best way to find out how we're doing.
