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Technical Analysis: Holiday Cheer Comes Early To Wall Street

Note: The Technical Analysis column will return Jan. 2. Happy Holidays.

Monday begins a seasonally positive period on Wall Street, but this market has already had such a rally that we wonder if it isn't due for a pullback for a couple of days first, particularly as expiry hedges get unwound early next week. The Dow (first two charts below) continues to levitate despite being extremely overbought and at major resistance in the 10,300-10,400 range. A look at -DI and +DI (a proxy for selling and buying pressure) in the second chart shows that since the market peaked in early 2000, those indicators have been uncanny at marking major turns in the Dow when they get below 10. The indicator had a much more mixed record in the 1990s, however, so with a seasonally positive period approaching, we think the market can hold up for the next month or so. But short-term, the Dow can't go straight up forever. Support is 10,150, 10,100, 10,050, 10,000 and 9900, and resistance is 10,300, 10,350, 10,400, and then another big number is 10,670. The Nasdaq and S&P (third and fourth charts) look a little shakier here. The S&P is a doji, which indicates indecision, while the Nasdaq looks a bit like a bearish hanging man. The Nasdaq has resistance at 1967-1972, 1980, 1990 and 2000, and support is 1935-1942, 1915-1920, 1900 and 1878-1887. The S&P has resistance at 1093 and 1100-1106, and support is 1083, 1075, 1068-1071, 1064 and 1060.