Technical Analysis: Back to Resistance
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Note: The Market Close and Technical Analysis columns will return on Jan. 2. Happy holidays, and best wishes for a prosperous 2008.
A strong move by the bulls today and right back into resistance on the S&P (see first chart below).
The S&P did well to move back above 1465-1468 resistance today after three days of consolidating below it, catching traders off guard who thought the market was winding up for another leg down. 1460-1468 should now be strong first support, and 1485-1500 is the start of major resistance. Above that, 1500 and 1520 are the next tough levels in a long trading range for the market.
The Dow (third chart) pushed through some significant moving average resistance today. Support is 13,430 (and falling), 13,325-13,340 and 13,200, and 13,650-13,680 is major resistance.
A quick look at the subprime market (fourth chart, courtesy of Markit.com) shows the best of the sector hanging on to its recent breakout but not doing much since then. A wobbly but still hopeful chart for the bulls there.
And finally, Charles Biderman of Trim Tabs reports that $70 billion has left domestic mutual funds since May, the most since the market saw $113 billion in outflows in June 2002-February 2003. A potential sign of pessimism that could bode well for U.S. stocks going forward.
In short, the bulls have a chance here and two seasonally favorable weeks in which to get it done.
Paul Shread is a Chartered Market Technician (CMT) and member of the Market Technicians Association.