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Technical Analysis: Capitulation

It's just plain ugly out there, but there are a couple of hopeful data points. First, we now have had four 90% downside volume days on the NYSE in the last two months, the most in a comparable period since there were five in July-October 1990. And second, big commercial futures traders are buying this decline. We don't know when the turn will come or how much uglier it will get, but when the turn comes, the upside potential could be surprising. Now all we need is a 90% upside day to confirm a bottom, per the work of Paul Desmond of Lowry's Reports.

For the S&P (first chart below), 1410 is the next major support level, and resistance is 1450 and 1461. 2490-2500 is obvious first support on the Nasdaq (second chart), while resistance is 2531, 2550 and 2576. The Dow (third chart) has support at 13,132 and 13,000-13,041, and first resistance is 13,300. The 10-year yield (fourth chart) continues to push deep into support, with the first close below its 200-day average since May. Building fuel for a bounce, whenever it arrives.

Paul Shread is a Chartered Market Technician (CMT) and member of the Market Technicians Association