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Technical Analysis: Market Holds Up

So far the market has done nothing more than consolidate at the highs, which suggests the potential for more upside. The S&P 500 (first two charts below) shows the greatest potential for a bullish set-up; another modest down day tomorrow could set up a bullish "rising three methods" pattern, essentially three small red candlesticks within a large white one. It would be nice to see greater skepticism in the equity put-call ratio, however, which closed at a relatively low .61 on a down day. So far that indicator has diverged from other pullbacks in this rally, where it was quick to spike. Support on the S&P is 935, 933, 931 and 923, and resistance is 947 and 950-957. The Nasdaq (third and fourth charts) has resistance at 1550-1555, and support at 1533-1534 and 1521. A hint of negativity in the Nasdaq daily chart is the failure of RSI to get back over 70, suggesting waning momentum. The Dow (fifth chart) has resistance at 8750 and 8800, and support at 8608, 8522-8530, and 8470. The small-cap Russell 2000 (sixth chart) continues to outperform, a bullish sign for the market, but a third doji tomorrow could be a bearish set-up for the small caps; an odd divergence with the S&P. 10-year treasury yields (seventh chart) hit our 3.5% target today, another new 40-year low, but we should note that they got as low as 2% in the 1940s and 1950s. There are rumors that the Fed may be buying long bonds to fight deflation; if nothing else, the threat of that is doing plenty on its own.

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