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Technical Analysis: Back To Support

The indexes are all back at critical support. The one positive here is that volume has remained lower on the down moves than the up moves, but other signs are not so positive. The indexes are all forming bearish broadening consolidations here (see Dow chart, first chart below). That Dow chart is particularly worrisome - higher highs and lower lows in the same pattern is a sign of an unstable market, which usually resolves to the downside. Below 7902.60 on the Dow and 839.50 on the S&P, both those patterns and the 61.8% retracement off the October lows would be broken. The Dow daily (second chart) has potential support at 7850 and 7750, and clear support at 7450-7500. Resistance is 8050 and 8200-8250. The S&P (third chart) has some support at 825-835, stronger support at 800, and resistance at 855 and 865. The Nasdaq (fourth chart) has critical support at 1320; 1263-1273 would be the next target below that. Resistance is 1330-1335 and 1347-1357. Finally, it's time once again to discuss the January indicators: as goes January, so goes the year, is the saying, and unless the Dow gains 397 points tomorrow, January will go into the books as a down month. When the January indicator lines up with the December indicator - the December lows getting taken out in the first quarter of the new year is considered a negative for the market - the combined indicator has been pretty reliable. It looks like this will be the second year in a row that those indicators have lined up together.

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