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Technical Analysis: Back To Resistance

Not much of a bounce considering the size of yesterday's sell-off, but on the other hand, the internals were solid for such a small advance; another 80% upside day tomorrow would be bullish. That said, even if this market is headed higher, we'd prefer a complete correction first, with another leg down to 8000 on the Dow, 846 on the S&P, and 1343 on the Nasdaq, assuming today's highs hold. The Dow and S&P (first two charts below) closed right at the critical resistance levels of 8250-8300 and 870-875; above that, they could take another run at the 200-day moving averages. Support is 8185, 8100, 8000 and 7931 on the Dow, and 862, 852, 846 and 841 on the S&P. The Nasdaq (third chart) is probing into its evening star reversal gap at 1390-1420. It would have to take out 1425 to negate that bearish breakdown. Support is 1380, 1366, 1353 and 1343. The equity put-call ratio came in at a very high (bullish) .83 today, but with a big down day for the VIX (fourth chart), the options volatility index, the reading is not as meaningful. It could just be short covering, which we had a surprising amount of yesterday (130,000 puts closed at QQQ 25 alone).

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