Technical Analysis: A Mixed Picture
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There were a number of positives today. The indexes (see charts below) reversed off some major support levels. The equity put-call ratio showed some decent fear. And this decline has seen no expansion of new lows, which is potentially bullish. The one big problem we have is that the market has yet to stay in oversold territory all the way to the closing bell, which makes it harder to exhaust a trend and suggests a little too much eagerness to buy the dip. By contrast, at the Sept. 30 low, which produced a very good rally, stocks had spent four days in oversold territory, three of them on a closing basis. That said, the market has flirted with oversold levels all week, so there's enough of a set-up in other indicators for it to head higher. But don't be surprised if the market decides to retest today's lows. Another negative is the imperfect bearish island reversal that formed on the Nasdaq (see arrows in first chart below). That suggests a possible retest of the Sept. 30 low of 1783 if today's low of 1842 fails to hold. Resistance is 1874-1890 and 1912-1920. A gap up Monday would look good if it can hold and head higher. The S&P (second chart) held the major 1015-1018 support zone. Below that, 1005 looks like the next good support, and 1035-1040 is significant resistance. The Dow (third chart) held 9500 support today, but not by much. Resistance is 9622 and 9700.