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What Do the Next Few Sessions Mean For the Markets?

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Thanks Mr. Tuttle!

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I put these charts together on Friday in an effort to clarify my comment that the market may need a breather based on technical considerations. I circled up with the uber talented Mr. Tuttle to compare notes and we share the belief that we're actually at some fairly important technical levels from a shorter term perspective that could set up the action for the remainder of the year.

Last Wednesday's action was really a clue to that weakness as the action showed signs of distribution with waning momentum, volume edging higher and continued lethargy of market bellwethers (C, WMT, RTH). The storm concerns have oil on the move and the markets began the morning on edge.

We had been sitting right at some important levels going into the close on Friday. Most of the major indices were right at support stemming from the trendlines off the April lows. Kevin Depew walked thru a number of charts this morning - let's take a look for those who have yet to master the PnF approach for some further clues:

With respect to the SPX, a lift off support suggested a potential retest of that neckline near the August highs. We haven't gotten that bounce yet and the technical perspective suggests if we can't in the next few sessions we may need to find better support at lower levels (1180 on the S&P?).

Some of the technology names had been holding in during recent sessions, most notably the semis (SOX). We came back down to test support at the neckline.

On a weekly chart though the story looks a bit more concerning - failing at resistance in the course of a double top formation?

Small caps continue to remain the place of choice for speculative money. Keep an eye on 640 - that would be the first sign of trouble.

The Dow still looks like garbage supporting Bernie's recent thoughts.

Take a look at this chart on the BKX and consider the implications if this longer-term HnS plays out. Look at Citi (C) on a five year chart - it's simply hard to get the mojo going without the financials on board. Watch for further traction / slippage.

Conclusion: We're at or approaching some key levels on the major indices and the next few sessions could dictate the path of the market going into year end. If we are going to make a move higher we need to hold these levels. If not we'll likely have to find better support at lower levels. Stay tuned...

* All charts from Friday courtesy of www.stockcharts.com

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No positions in stocks mentioned.

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