Technical Analysis: Quite A Bounce

A powerful bounce today. So is it the start of something? Given that it’s the first day of the quarter – with new money coming in – we’re going to remain skeptical for now. The market had an even bigger bounce on Oct. 1 last year, only to find itself about 10% lower 10 days later. We’re not saying that history will repeat, just that first-of-the-month rallies can be isolated events. That said, there are a number of positives for the bulls to build on, such as yesterday’s .95 equity put-call reading and the complete lack of expansion of new lows. However, because the market stayed oversold for so long, it won’t take much for it to become overbought, perhaps just another day or two of upside. One interesting development is that blue chips appear to have taken the lead on this rally – they’ve recovered much more lost ground than techs and chip stocks. Perhaps we are seeing rotation into blue chips here. The banks (first chart below) would break out above 905 – a key index to watch here. The Nasdaq (second chart) has resistance at 1840 and 1860, and support at 1821, 1776-1783 and 1757-1760. The S&P (third chart) has resistance at 1019-1023 and 1030, and support at 1010-1015, 1006 and 1000-1003. The Dow (fourth chart) has resistance at 9500 and 9600, and support is 9350-9400.