The one good thing to say about this decline is that volume has been lower each day. As long as it doesn’t start to pick up to the downside, the rally has a good chance of continuing. One negative is that the equity put-call ratio declined to .66 today, showing a little too much eagerness on the part of equity option traders. However, one potential supportive factor for stocks this week is that Max-Pain – the point where most options will expire worthless – is between 24 and 25 for the QQQ, the Nasdaq 100 tracking stock, which closed at 24.31 today, so stocks could find a short-term floor near here. Microsoft , with a Max-Pain of 50, could be a little more problematic, but the stock may not need to get there, since 67,000 calls stand to get wiped out below 55. The Nasdaq (first two charts below) put in an imperfect bearish “three black crows” the last three days, giving the index downside potential to roughly 1280. The index has good support at 1302, and 1280 comes into play below 1300. 1347 is now resistance. The Dow (third chart) has good support in the 8200-8300 range, and 8000-8100 is critical support. Resistance is now 8500-8550. The S&P (fourth chart) has support at 865-870, and 855 is critical. Resistance is 885, 894 and 900.
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