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Technology Leading, Financials Lagging


And small-caps continue to fall behind.

Summary of Last Thursday's Notable Technical Developments

Stocks finished higher once again in Thursday's shortened session. Light holiday trading volume makes it difficult to draw major conclusions; however, it should be noted that both the NASDAQ and Dow closed out the week above their monthly closing resistance levels. It will be worth watching to see if they can hold these levels through this Thursday's close.

Bonds sold off last Thursday sending the yield on the benchmark 10-year US Treasury above 3.8% for the first time since August. Will the higher yields attract investors for this week's heavy supply of new government debt? Or will investors shun the new offerings in favor of risk assets as bonds continue to falter?

Commodities finished higher on thin trading Thursday as market participants favored risk assets in response to last week's economic data releases.

The US Dollar Index closed slightly lower along with the Japanese Yen Index last Thursday as money rotated out of safety and into risk (e.g. Canadian dollar and Australian dollar). The DXY has been range-bound between 77.50 and 78.50 for the last six sessions.

Market internals:

(Figures are rounded)

Critical Market Components

S&P 500: The S&P appears headed to the previously mentioned target of 1139 (convergence of Fibonacci levels) with possible upside to around 1145 in the near-term (see today's charts for the 1145 rationale). Short-term support is the breakout point of 1119 with more substantial support coming in at the 75-day moving average of 1080.63.

2271.48 on a monthly close is the number to watch for the NASDAQ and the market as far as I'm concerned. Any close Thursday above that forces me to change my cautious stance on the NASDAQ and the market in general. The 61.8% retracement (using the daily extremes) of the October 2007 to the March 2009 range comes in just above Friday's close at 2292.68. Support below that level is the recent breakout point at 2212.49.
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No positions in stocks mentioned.

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