Technical Analysis: Not Pretty

The market has been oversold since Tuesday’s close, yet has made little headway, and sentiment hasn’t been as supportive as we would prefer. However, Thanksgiving is historically one of the most positive periods for the market – the next four trading days have been up 70-80% of the time in the last 30 years, so perhaps bulls can yet make something of the oversold conditions. The charts are mixed – they could be forming a bottom, or consolidating before another move down. The Nasdaq (first chart) has resistance at 1904 and 1915-1930, and support at 1878-1880, 1865 and 1842. The S&P (second chart) has resistance at 1043 and 1047-1050, and support at 1031, 1025 and 1018-1020. The Dow (third chart) has resistance at 9656, 9726-9765 and 9800, and support is 9585-9600, 9500 and 9400. And finally, a look at a potential reason for the market’s hesitance – after years of fast growth, money supply is undergoing one of its sharpest declines in decades (see M2 chart courtesy of Economagic.com, fourth chart below). After worrying about deflation for the last several years, the Fed may suddenly be worried about inflation – and is engaging in some de facto tightening.