Technical Analysis: A Nice Start

The internals in today’s rally were strong, and fear levels remain impressive, suggesting more upside potential for today’s rally. Today’s heavy put-buying may have been due to fear of terrorist attacks this weekend, so if there are none, traders will likely be covering shorts on Monday. Beyond that, we’ll have to watch. The market has put in a number of signs of a good bottom, including heavy put-buying and high selling pressure, but it remains to be seen whether the selling is done. The one thing we could have used today was more volume, but otherwise, a solid day. Now the market has to start taking out some solid resistance levels – which are still some distance from here. On the Nasdaq (first chart below), resistance is 1991, 2000, 2007 and 2022, and it would take a move above 2043 to break the downtrend. Support is 1978, 1964, 1943 and 1913-1920. The S&P (second chart) faces resistance at 1126, 1133 and 1138-1140, and support is 1112-1115 and 1105-1107. The Dow (third chart) would need to gain 300 points to make a run at serious resistance. Support is 10,128, and resistance is 10,300, 10,350 and 10,400.

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