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Technical Analysis: S&P Stalls at a Big Level

The S&P 500 (first chart below) has been stalled at its 200 EMA for two weeks. Quite some resistance level here, which also coincides with the January high on the index.

On the plus side, the index has been consolidating at its highs for the rally, but it's going to have to decide soon which way it will move out of this narrow trading range.

If the index can move forcefully above 956, the 1000-1044 zone will be tough resistance. To the downside, a move below 926 could signal a larger correction, with the 200-day simple average at 911 (and falling) a possible support below that.

The 200-day exponential and simple averages provide a clear example of the difference between the two types of moving averages: the more sensitive EMA has flattened along with the index, while the simple average continues to fall.

One negative we'd note here is that bullish sentiment has been climbing as the rally has flattened out, suggesting that sentiment may need to be refreshed at some point. The Investors Intelligence survey came in at 47.7-23.3 bulls-bears this week, the most bullish sentiment in more than a year. And all that while the economy remains solidly in recession.

The Nasdaq (second chart) is coming up on a very big resistance level — a big gap from last October at 1905-1947. Support on the index is 1820, 1800 and 1773.

The Dow (third chart) has a lot of support at around 8600, while 8856-8877 (the 200 EMA) and 9000-9088 are the next upside hurdles.

Paul Shread is a Chartered Market Technician (CMT) and member of the Market Technicians Association. He is a co-author of the book "Dow Theory Unplugged" from W&A Publishing.