A nice growing number of new highs on both exchanges, but there still seems to be a leadership void here. Yahoo dropped off the new highs list today, but at least it was replaced by eBay. A remarkable number of leading stocks were missing from today’s rally, among them Yahoo, Microsoft, IBM, Cisco, 3M and Dell. That suggests that investors may be finding the blue chips too pricey and are bidding up secondary names, which is usually a late-stage rally phenomenon. The S&P (first chart below) hit the big resistance level we were looking at last week; if it can hold on and continue higher, 935-940 could be in the cards. However, with the possible exception of the Dow, all indices are very overbought here, with the banks (second chart) perhaps the most overbought of all. The VIX (options volatility index, third chart), meanwhile, put in an “inside day” and is giving a slight hint of reversing from a deeply oversold condition, which would be a negative for stocks if it does. The Dow (fourth chart) would give a Dow Theory buy signal if it can close above 8522.2; the Transports (fifth chart) have already put in a higher high. Critical support levels are 8300-8350 on the Dow and 890 on the S&P. The Nasdaq (sixth chart) is right at its January high; a move higher could target 1481-1500. Support is 1440-1445, 1412 and 1390-1401.
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