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Technical Analysis: A Big Test for the Bulls

The Dow and S&P (first two charts below) will face a familiar test tomorrow at upper channel lines that have limited blue chip gains for the last 3-4 months. If the indexes can clear 12,800 and 1460 tomorrow, stocks could be off to the races; if not, the indexes could find themselves back within the chopping trading channels that have dictated market action since November. With tomorrow's PPI number and a positive pre-holiday trading environment, bulls have plenty in their favor tomorrow. 12,700 is first support on the Dow, with 12,650 and 12,607 below that, and the S&P has support at 1453, 1450 and 1443-1446. The Nasdaq (third chart) is finally making some progress. Next up is 2500-2509, and support is 2490 and 2477. Bonds continue to benefit from the "Bernanke bounce" (see 10-year yields, fourth chart). Let's see what tomorrow's PPI number does for that rally; if estimates are accurate, it should come in pretty tame.