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Technical Analysis: Gap And Trap

The Plunge Protection Team must be running out of money, because rallies have now failed in five out of the last seven trading sessions. Oddly, closing at the lows of the day has made stochastics on all indexes (see charts below) oversold here. But if the market does bounce here, sentiment would likely become dangerous. The equity put-call ratio closed at .65 today, an especially low number considering today's action, and the VIX (first chart below), the options volatility index, is getting dangerously close to its magic reversal point, the lower weekly Bollinger Band (notice how last month's rally began when the VIX hit its upper weekly BB). The indexes were all rejected at their broken downtrend lines today. On the S&P (second chart), the index has support at 862-865, and below that 849 and 843 are support. Resistance is 881 and 887, and if the index can do it, a run to 910-915 would form a bearish rising wedge. The Nasdaq (third chart) has tough resistance at 1390-1393 and 1401. Support is 1347-1350 and 1336. The Dow (fourth chart) has support at 8200, 8150, 8100 and 8000, and resistance at 8340-8350.

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