Technical Analysis: Indexes Score Breakouts

A surprising bounce today, even though it came on lower volume than Friday’s decline. Nonetheless, the indexes were able to recover a number of breakdowns and overcome resistance, so the year-end rally may have started. We would prefer a low to come this Friday, but there’s no arguing with today’s breakouts. Now they have to hold. The Nasdaq (first chart below) closed right at 1400 resistance. 1410 is next resistance, and then 1426. Support is 1388-1390 and 1378, and 1370 is critical. The Dow (second chart) took out two resistance points at 8505 this morning, an early sign of strength. Critical support is 8510, and resistance is 8650-8680 and 8750-8800. The S&P (third chart) closed at 910 resistance, and above that is 916 and 925. 900 is first support, and 890 is critical. One surprise today was the very high equity put-call ratio. We’ll check tomorrow to see how much of that was expiration-week short-covering rather than put-buying. Either way, QQQ 26 could remain resistance for the rest of the week, since puts outnumber calls at that level. If 26 is taken out, hedging could force it even higher.

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