NASDAQ APPROACHES NEXT TARGET AT 2100 -- LIGHT VOLUME IS A CONCERN -- UPTURN IN ENERGY PATCH MAY CAUSE SOME SHORT-TERM PROFIT-TAKING NEXT WEEK
LACK OF VOLUME IS A CONCERN ... The last time I showed the Nasdaq Composite market I wrote that it's next upside target was its spring high at 2100. Friday's close put it very close to that initial upside target. It's daily oscillators also show the Nasdaq to be in a short-term overbought condition. Since the Nasdaq has been leading the rest of the market higher over the last month, any pause in the tech-dominated market should lead to some backing and filling in the market in general. Although Friday's light volume was most likely due to the holiday weekend, the last week's volume has been noticeably light. That may also be a sign that the month long bounce is in need of a rest. One factor that may cause some nervous profit-taking over the next week is the upturn in the price of oil and energy shares. The Energy Select SPDR (XLE) and the Oil Service Holders (OIH) both closed back over their 50-day lines on Friday. That's a positive sign for the energy patch. But any sign of a significant upturn in energy is a potential negative for the rest of the market. My best guess right now is that the market has entered into a trading range between the highs of this year and the recent lows. I doubt that we'll see new 2005 highs. But there's certainly room for the major stock indexes to approach those highs. But probably not before some type of a pullback to work off the short-term overbought condition. As I wrote on Thursday, a key group to watch is the semiconductors especially as the group tests its highs for the year. Whether or not the SOX Index is able to exceed those highs may hold the key to market direction. The Semiconductor Holders (SMH) are close to those highs. A pullback from there would be a logical spot to expect some short-term profit-taking in the technology sector.
HAVE A GREAT WEEKEND ... This weekend marks the unofficial start of summer. Get out there and enjoy it. We'll return to our normal format (with charts) on Tuesday.