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Technical Analysis: Vanishing Bears

The stock market has made little progress since our last update six weeks ago, with only the Dow trading significantly higher among the major indexes.

One interesting development recently has been the vanishing act by the bears in the weekly Investors Intelligence market sentiment survey. This week, the ratio clocked in at 50 percent bulls to 16.7 percent bears, the lowest number of bears since a 60-16 reading in June 2003. But as the market didn't begin to correct until early 2004, that reading by itself didn't turn out to mean much.

But with the market still stalled at some critical levels here, it's nonetheless worth noting the apparent complacency.

The biggest hurdles for the bulls remain 1133, 1150 and 1200 on the S&P and 10,683-10,827 on the Dow (see first two charts below). As we've noted for some time, 10,683 could prove to be an important market fulcrum for some time, as it was the first mid-term election year low to be broken prematurely since 1930.

The S&P has support at 1080-1083, and retest of 1020-1030 is possible below that. The Dow has support at 10,231, 10,000 and 9679.

Looking ahead, the Nasdaq (third and fourth charts below) will face a very difficult hurdle at 2400, a trendline connecting the 2000 and 2007 peaks. 2205 and 2300 are first resistance levels, and 2114 and 2024 are support.

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.