The term “overbought” has about as much meaning for this rally as “oversold” did for the sell-off of a couple of weeks ago. On the plus side, by starting the day lower and ending higher, the indexes formed bullish engulfing patterns, perhaps most noticeable on the SPY, the S&P tracking stock. We continue to track potential bearish broadening patterns on the indexes (see charts below). Those upper trendlines are roughly at Nasdaq 1940-1950, S&P 1050-1055, and Dow 9750. We’ve seen similar patterns break to the upside only once, in October 2001. 1914 is first resistance on the Nasdaq, and 1860 is support. The S&P closed right at 1040 resistance, and 1030-1032, 1022-1025 and 1015 are support. On the Dow, 9500 and 9350 are support, and 9686 and 9750 are resistance.
