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Technical Analysis: Bulls Try Again

There are a whole lot of reasons why the market could put in a major bottom here — crazy levels of put buying; the highest number of new lows on the NYSE (1107) since August 1998, when there were 1209; a spike in the VIX (first chart below) to levels not seen since 2002 — but we still want to see a 90% upside volume day to suggest that sellers have been washed out and give us an "all clear" signal. Still, today was a good start, and also preserved the March lows and series of higher highs and higher lows in the big picture.

The Dow (second chart) held 12,500 support today. To the upside, the index really needs to get back above 13,200-13,300 to be on the mend. The S&P (third chart) just barely held on today. 1427-1430 and 1440 are just the beginning of resistance for the big caps. The Nasdaq (fourth chart) is another one that just barely held on today. 2500 is just the start of resistance for the techs. In short, a very sold-out market, but can the bulls rush in to fill the gaps? The 10-year yield (fifth chart) got a big flight to quality bid today — but not nearly as much as three-month T-bills (sixth chart), which continue to benefit from a bet on Fed rate cuts. You don't need T-bills very often as a hedge, but when you do...

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