Technical Analysis: Internals Need To Pick Up

Once more, a bounce has begun with poor internals, with the Nasdaq and NYSE barely recording 60% upside volume today. Will this rally fail as fast as the previous ones that began this poorly? We’re not so sure. For one, put buying was pretty pronounced for an up day, so that shows at least a little skepticism. And second, the indexes are all pretty oversold – they could use a little time to work some of that off. The big question will be the market’s reaction to the Fed tomorrow, when it is expected to change its bias toward inflation. Investors sold the rumor; will they buy the news? We’ll see soon enough. The bigger question will be whether internals can improve enough to sustain the rally. There is no shortage of news the next two weeks: the jobs report on Friday, and Cisco’s earnings and inflation reports next week. Fasten your seatbelts. The Nasdaq (first chart below) recovered its 200-day moving average, but finished well off its highs for the day. The bearish “three black crows” pattern formed last week seems to be very much in control so far. Resistance is 1940, 1954, and 1973, and support is 1935-1937, 1926, 1920 and 1897-1900. The S&P (second chart) has support at 1115, 1110, 1107 and 1098-1103, and resistance is 1119-1122, 1126 and 1129-1130. The Dow (third chart) has support at 10,217, 10,182 and 10,108, and resistance is 10,333 and 10,385-10,400.

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