Technical Analysis: Market Overbought And At Resistance

With the market firmly overbought, with stochastics above 90 on all the index charts, and all the indexes at resistance, we would not be surprised to see a pullback or consolidation soon. The Dow (first chart) is struggling at 8800 resistance; if it can close above that level, the index could be headed for its 200-day moving average at 8950. To the downside, 8700 is first support, followed by 8550-8600. The S&P (second chart) is hesitating at the 925 area; if it can clear that area with any force, it could head back to the critical resistance zone of 950-965. 920, 910 and 905 are support. The Nasdaq and Nasdaq 100 (third and fourth charts) are also hitting resistance, their 200-day moving averages and early December gaps at 1446-1449 and 1082-1088. Support on the Nasdaq is 1420-1426, 1415, 1400 and 1390. There is also one other factor that could put pressure on the market in the next 10 trading days: Max-pain, the level where most options expire worthless, on the Nasdaq 100 tracking stock (QQQ) is between 25 and 26; the QQQ closed at 26.65 today. Finally, sentiment is wobbly, with the CBOE equity-only put-call ratio hovering around .50, with yesterday’s close at .48. In short, not a lot to support a big advance from here, unless skepticism makes a comeback.

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