Technical Analysis: Not Much Of A Rally So Far

Note: The Technical Analysis will return on January 2. Happy Holidays.

Not much of a rally so far heading into what is historically a positive period. The Dow and S&P (first two charts below) may be forming bearish broadening patterns over the last couple of weeks, suggesting the potential for more downside, perhaps after one more run to the upper ranges of those patterns at 8650-8680 on the Dow and 910-915 on the S&P. A rally that fails in the 8750-8800 range on the Dow and 925 on the S&P would look like head and shoulders tops. If those levels are cleared, note that the 200-day moving averages are approaching the August and early December tops (9077 on the Dow and 955-965 on the S&P). 8327 is critical support on the Dow and 880 on the S&P, although support could be found around 8250-8300 and 870-875. The Nasdaq (third chart) has critical support at 1347; 1319 would be the minimum target below that level. 1385-1390, 1400-1405, 1426 and 1446-1449 are important resistance levels. Sentiment indicators are, in a word, worrisome. The equity-only put-call ratio closed at 0.47 today, just above the 0.45 danger zone, and the VIX (fourth chart), the options volatility index, has fallen hard the last two sessions despite only modest gains in the indexes. The holiday rally may prove elusive if everyone expects it.

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