Last week we advised i On the Market readers that the indexes were likely to fill out the right side of a "T" or triangle pattern. By Friday's close, the indexes completed their handwriting and geometry exams to a "T".
La' Resistance is the next lesson.
The S&P, NASDAQ and Dow are all at or within whispering distance of technical resistance that has repelled previous advances. These clear lines are awesome for investors as the markets' response answers - with great clarity - the "what to do next question?"
If buyers can convincingly push the Dow to a close above 10,700, the NASDAQ above Friday's close of 2315, and the S&P on top of 1130, then the lid is going to blow off. The Dow and S&P could push up 3% in a flash. The NASDAQ has some catching up to do and could rise nearly 6%.
Should current levels prove to be too stubborn and send bulls packing, the indexes' 50 day-moving-averages are likely to be the initial downside target area. That would put the Dow at 10,370ish, the S&P near 1090 and the NASDAQ close to 2225.
This week we are adding a new Indicator to the i On the Market. The indicator describes the current market type. The indicator will identify 1 of 6 possibilities, Bull, Bear, Sideways and volatile or quiet.
MARKET TYPE: SidewaysVolatile
This type of market churns, taking big swipes in either direction, but really ends up going nowhere.
It can be marked, like trading since May, with clear resistance and support lines. When the DOW, S&P and NASDAQ approach the top, it's usually a good time to take profits and go short on confirmation. When the indexes hit support, load up for the return trip to the top of the range.
As we mentioned in our technical analysis above, we are AT the highest levels of the current range, if stocks breakout, bulls should run. If stocks should falter, bears could lead the way back down.
MARKET LEADERSHIP: Buy
The NASDAQ ran the best race last week, turning this indicator green for the first time in a lucky 13 weeks. This indicator tends to stay in the same column for long runs. However, at buy/sell turnover times, it can head-fake investors before picking its column of choice.
MOMENTUM MODEL: Buy
With a total score of 15.01, MO' is well past the minimum buy score of 4.