Technical Analysis: Support Holds

Support on all indexes held today: 8100 on the Dow (first chart), 858 on the S&P (second chart), and 1368 on the Nasdaq (third chart). Those supports have now been tested enough so that a substantial decline could occur if they are broken. Support levels are 8100, 8000, 7969, 7931 and 7838 on the Dow; 858, 855, 852, 846, 841-842 and 830 on the S&P; and 1368, 1353-1360, 1330-1343 and 1320 on the Nasdaq. 8250-8300 on the Dow, 875-880 on the S&P and 1400 on the Nasdaq are tough resistance levels. The Nasdaq has a couple of resistance lines at 1375 that could lead to a test of 1400 if broken. Note that the Dow and S&P have formed clear downtrends on volume; a break of those lines could be a good hint of eventual market direction. The indexes could reach oversold levels on stochastics with one more down day, but the VIX (fourth chart), the options volatility index, is even more oversold, an odd divergence because a rising VIX could spell trouble for stocks. Finally, don’t be fool by today’s very high put-call ratio. About 225,000 equity puts were a rollover from April QQQ 22s to May, making the actual equity PC ratio a decidedly less bullish .60.

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