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Technical Analysis: Market Still At Risk

The one positive is that the market has put in two follow-through days this week - but run into the same major resistance level each time. The problem with the market topping out at current levels would be that the Dow, S&P and the semiconductor index (first three charts below) would all look like head and shoulders tops, the Nasdaq and Nasdaq 100 (fourth and fifth charts) would reconfirm a key reversal level from early December, and the bank index (sixth chart) would once again get rejected at the 800 level. All in all, not a place where we'd like to see this rally end. On the plus side, the equity-only put-call ratio continues to be more supportive, closing at .66 today. But the downside is the VIX (seventh chart), the options volatility index, which hit a new low today without a new high in the Dow and S&P, a negative divergence. And with puts outnumbering calls by 156,000-38,000 at the 27 strike price on the Nasdaq 100 stocking track, the QQQ, upside over the next week could be very limited. The major resistance levels remain 1449 on the Nasdaq, 1088 on the Nasdaq 100, 8802 on the Dow, and 932 on the S&P. Supports to watch are 1400 on the Nasdaq, 908, 905 and 900 on the S&P, and 8580 on the Dow.

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