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Technical Analysis: Lower Highs, Higher Lows

With lower highs and higher lows, the market is truly trendless here. That could also mean symmetrical triangles, or narrowing price ranges, which the Dow and S&P (first two charts below) may be forming here. Resistance on the Dow is 7950, 8010, 8076 and 8150, and support is 7740-7750. Resistance on the S&P is 843-844 and 850, and support is 820-821. The Nasdaq (third chart) was saved from a bearish island reversal today - but the fact that that gap over support occurred at all is a warning that 1260 support may be retested. Resistance is 1332-1335, 1340 and 1351, and support is 1320, 1300, 1292 and 1275-1280. The SOX (fourth chart), the semiconductor index, looks like it could turn down from its retest of the neckline of a head and shoulders top. The Transports (fifth chart) made a nice save today before the Sept. 2001 low (1942) was taken out. A close below that level would be bearish for the market. Finally, a word about some of the forces at play here, not the least of which are the international events whipping the market around with every rumor. There are a lot of shorts in this market, with March puts outnumbering calls by 100,000 at both the 24 and 25 QQQ strike prices; those shorts are providing fuel for every rally. On the other hand, March futures positions are under water about 4% at current levels, so every rally is also an excuse to sell. In short, a volatile combination of forces that could make for a rocky market through the March 21 expiry.

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