Technical Analysis: Dow And S&P Right At Resistance

The Dow (first chart below) and S&P (second chart) are sure making it interesting, pushing to the upper limits of potential right shoulders in head and shoulders tops. A move above 8550 on the Dow and 905.2 on the S&P would favor the bulls (the highs on the left shoulders back in October, 8558.63 and 907.44, could still be resistance, but above 905.2 on the S&P the important .618 retracement level would be exceeded). Also a positive is that volume has been increasing on this bounce after declining on the leg down. Note that stochastics are on a short-term buy signal, but that MACD remains on a sell signal and should be watched closely. New highs and new lows remain the one negative divergence in this rally, revealing a lack of leadership. Support is 8450 and 8500 on the Dow, and 8300 is critical. Support on the S&P is 894-900, and 872 is critical. The Nasdaq (third chart) must clear its August high at 1426.76. Support is 1400 and 1380, and 1360 is critical. There are a number of economic reports in the morning, including PPI, industrial production and Michigan sentiment.

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