Technical Analysis: Sentiment, Options Flash Caution

A couple of option indicators are flashing caution here: the equity put-call ratio closed at a very complacent .40 today, and Max-Pain – the point where most options expire worthless – is at about 35.50 on the QQQ, the Nasdaq 100 tracking stock, almost 5% below today’s close. While hedging could continue to send the market higher, the market has some significant downside potential between now and Jan. 16 expiry. The Nasdaq (first two charts below) has support at 2050, 2040, 2025-2030, 2020, 2010 and 2000, and resistance is 2066, 2078 and 2099, the January 2002 peak. The S&P (third and fourth charts) has the clearest trendline of the major indexes, and thus the most important support. That trendline is at 1115 for tomorrow. Resistance is 1125, 1146 and 1170-1177. The Dow (charts five and six) has had an amazing run off the November low, almost 1,000 points with nary a breather. Major resistance is at 10,670, with 10,800 above that, and support is 10,500, 10,450 and 10,350.

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