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Technical Analysis: Back to Resistance

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.

Check out those gaps on the Nasdaq (second chart), another sign of traders expecting worse news than they got. Still, the techs face some tough resistance between here and 2700, with 2735 and 2772-2774 above that. To the downside, 2671-2676, 2640-2650 and 2590-2610 are support.

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.