A low-volume bounce with deteriorating internals (a steep drop in NYSE and Nasdaq new highs) following yesterday’s high-volume decline suggests more downside for this correction. However, excessive put buying once again suggests that the downside may be limited and new highs still possible. The Dow (first two charts below) remains the one big holdout, a potential negative the longer it fails to confirm the breakouts in other indexes, with major resistance still ahead at 8931, 9003, 9053 and 9077. Support is 8860. The S&P and Nasdaq (charts three through six) have already broken through major resistance and now must hold. For the S&P, 965 and 950-955 are important supports, and for the Nasdaq, 1548-1552 and 1540 are critical levels. 979 and 1620 are resistance. The S&P’s rally since March matched its October-November rally at yesterday’s high. Under Elliott wave terms, that could mean a complete ABC bear market correction, but we’d prefer to see fewer puts to favor that scenario.
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