Stay Cautious at These S&P Levels
If the index proves itself, there will be plenty more upside.
Bonds gapped lower and drifted even lower throughout Wednesday's session. Rates on the benchmark 10-year are back above 3.8%. They've been consolidating around this level the last two weeks following a big move from 3.2% that began December 1.
Stocks put in another consolidation day Wednesday after Monday's big up day. The S&P traded in an extremely narrow five-point range all day.
Commodities and the related stocks provided strength as the market responded favorably to oil inventories and cold weather forecasts. PowerShares DB Commodity Index Tracking (DBC) had a stellar day, up more than 1.75%.
The US Dollar Index was lower for most of the day Wednesday, but a late rally kept the DXY above support once again.
Market Internals: NYSE
(Figures are rounded)
Critical Market Components (with ETF proxies):
S&P 500 (SPY): short-term support is last Thursday's low of 1114.81. More substantial support comes in at the 75-day moving average of 1086.47. Meaningful resistance is just above current levels at 1141 to 1146, which is a convergence of Fibonacci levels. The SPY has corresponding support levels of 111.39 to 108.21 and resistance comes in at around 118.50.
NASDAQ (QQQQ): support comes in at 2292 and then 2271 below that. The next minor resistance comes into play at 2331 (March 2007 lows) with more substantial horizontal line resistance coming up at 2400 and 2500. The QQQQs have support at $45.75 to $46.25 and resistance in the $48 area.
Dow Jones Industrials (DIA): support remains at the breakout point of 10,507 with 10,450 providing additional support below that; resistance comes into play at 11,000. For the DIA, resistance comes in at 106.36 to 106.63; initial support is at 105.
20-Year US Treasury Yield (TLT): resistance remains the 3.8% to 3.9% range and support is still down at the 3.6% level. These levels translate to support for TLT at 89 and resistance at just below 92.
Commodity ETF (DBC): the DBC continues to break resistance levels and now appears to be headed to its Fibonacci projection level for this correction of 26.73, which closely corresponds with 26.86 (the 50% retracement level of the wave 3 move lower that ended in March of 2009). Support for DBC is now the $25 breakout point with additional support at $24 below that.
US Dollar Index (UUP): The range for the DXY remains 77.47 to 78.44 on a closing basis. This trading range translates to 22.80 as support and 23.20 as resistance for UUP -- the ETF proxy for a rising dollar. If the DXY breaks down below 77.47 on a closing basis, there's plenty of additional support just below starting at 77.24.
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