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Market Overview



There has been a great deal of talk recently about trendline breaks and price resistance. I think the easiest way to address them is to do so graphically.

Looking at the charts, I found that all three major market indices are bumping up against near-term price resistance, but only the Nasdaq Composite has broken any trend line resistance levels. I believe that in a market built on head fakes, you need break both trendline and price resistance levels to confirm further upside.

As a result, unless these indices break through overhead supply or go back toward the lower end of the range, I would not be inclined to be a "market" buyer.

The near-term S&P 500 is clearly bumping up against some significant near-term price resistance and intermediate-term trendline resistance near current levels. In my view, absent any new significant news, it would not be the time to buy until a break through the range is seen or stocks pull back toward the lower end of the range and become oversold.

Lots of price resistance ...

And bumping on the downtrend line

The Dow Jones Industrials look a little different. While the index is also bumping into near-term price resistance, it is more in the middle of the range that began last year on the intermediate-term view and has not come close to breaking trendline resistance. Recent weeks have been exciting, but it is important to put the action into context. Remember the 3M (MMM:NYSE) head fake?

Dow's big resistance

Neutral at best

The NASDAQ Composite Index looks the best technically, but everything is relative. In a market where so many head fakes have occurred, I believe it is important to get through both price and trendline resistance before becoming overly optimistic on stocks. The NAZ has clearly broken trendline resistance, but is now bumping up against price resistance. If it breaks through both, there should be enough upside that waiting instead of guessing should pay off.

Nazz broke the wedge

Adding some perspective...

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No positions in stocks mentioned.
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