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Technical Analysis: An Oversold Bounce

With stochastics oversold and sentiment showing some fear, today's bounce did not come as a surprise, particularly with an equity-only put-call ratio reading hovering around 1.0 for much of the morning (a close around that level would have been even better). The critical resistance levels remain the same: 1426 (1431) and 1446-1449 on the Nasdaq (first chart), 1083-1088 on the Nasdaq 100 (second chart), 925 on the S&P (third chart), and 8800 on the Dow (fourth chart). Support is 1400 and 1367-1387 on the Nasdaq; 1050, 1036, 1020 and 1000 on the Nasdaq 100; 900, 893 and 877-882 on the S&P and 8500, 8400 and 8338 on the Dow. The S&P joined the Dow in a negative +DI/-DI crossover today, showing an increase in selling pressure. One thing that could limit upside for the next couple of weeks is that Max-Pain on the QQQ (the point where most options expire worthless) is below 26. One odd thing about today's rally was that the TRIN (fifth chart), a good indicator of buy-sell pressure, never got into buy territory below .80, showing some hesitance on the part of traders today. In short, an oversold bounce, but buyers will have to show some resolve if they are to make this a new leg up.

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