Technical Analysis: Failed Breakouts

Puts continue to pile up, yet the market has so far been unable to produce a sustained bounce, as the focus remains very much on inflation and the Fed meeting at the end of the month.

Tomorrow, the PPI and CPI are likely to come in mixed – the core tame, but the headline numbers showing inflation pressure. Fed Chairman Alan Greenspan will follow with testimony at 11 a.m. Given that it’s a quadruple expiry week, trading will likely continue to be volatile. Technically, the indexes (see charts below) broke their main downtrend lines last week but then failed to hold the breakouts – that disappointment has fueled selling here.

It’s possible that the big up day a week ago was a blow-off top, or buyers’ exhaustion, as an isolated 90% upside volume day can be. Also, we now have another lower high on all indexes – it now becomes important to take out last week’s highs.

Resistance on the Nasdaq (first chart below) is 1988, 2000, 2010 and 2023, and support is 1968, 1963, 1950 and 1935-1940. The S&P (second chart) has important support at 1120, and support below that is 1113-1115 and 1107. Resistance is 1131, 1136 and 1142. The Dow (third chart) has support at 10,300, 10,266 and 10,175-10,200, and resistance is 10,360 and 10,390-10,440.

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