Technical Analysis: Indexes Retest Highs

The indexes are retesting their highs set earlier this week. The Dow (first chart below) is lagging, still some distance from Tuesday’s 8076 high. If it can clear that, it could hit critical 8150 resistance. To the downside, the index has support at 7850, and 7750 is critical. The S&P (second chart) would form a perfect down channel if it goes no higher than 850 on Monday. Above 853, 865-870 is critical resistance. Support is 831 and 825. The Nasdaq (third chart) has resistance at 1350 and 1360, and support is 1335, 1320 and 1300. The Nasdaq 100 (fourth chart) is testing its 50- and 200-day moving averages. The SOX (fifth chart), the semiconductor index, continues to stall at the neckline of a head and shoulders top. After three small-bodied candlesticks at that line, a turn down is becoming more likely. Finally, the VIX (sixth chart), the options volatility index, is pretty oversold; if that indicator turns up, it could be a negative for stocks. In short, buyers are hanging in there, but they need to take out some critical resistance levels on the Dow, S&P and the SOX to push the market significantly higher. It’s possible, particularly if there is a quick resolution to the Iraq conflict, but we think the odds favor more downside ahead.

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