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Technical Analysis: Too Many Puts

Today's rally may have been more the result of the high equity put-call ratio at the open than any news. About 185,000 June QQQ puts in two or three trades accounted for that high reading, so take that out and the rest of the market came in at about .50, a much less bullish level than would otherwise appear. We're more interested in seeing what happened to May open interest today; calls outnumber puts at 26 and above on the QQQ, so we'll check tomorrow to see if that picture changed at all. And the VIX (options volatility index, first chart below), of course, remains at deeply oversold levels, but has yet to show any sign of a reversal. Sentiment remains dangerous, but price, volume and internals all look fairly good here, so higher prices are not out of the question. A Dow (second chart) close above 8522 could give this market room to run, and the S&P (third chart) is hitting major resistance at 915-917. The bank stocks (fourth chart) blew right through some major resistance today. That said, the banks and the Nasdaq and S&P indexes are getting pretty overbought, so some sort of rest or pullback could begin in the next day or two. Resistance is 1104 and 1467 on the Nasdaq 100 and Nasdaq (fifth and sixth charts). Support levels to watch are 900-905 and 883 on the S&P and 1425-1435 on the Nasdaq. One last comment on internals: new highs have been expanding nicely here, but there's still a surprising lack of leadership - no new highs in Dow stocks, and Amgen and Yahoo are the only Nasdaq leaders of note. That will have to improve greatly for this rally to have staying power. eBay's test of 92 tomorrow will be interesting.

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