Finding Support in Major Market Components
And knowing where resistance waits.
Bonds: The benchmark 10-year Treasury opened higher and gained strength throughout the day. Yields remains stuck between support at 3.6% and resistance at 3.8% to 3.9%.
Stocks: Stocks traded in very narrow range following Monday's big move up. The NASDAQ and Dow rallied after being lower by 0.5% to close relatively flat -- a victory for the bulls.
Commodities: Commodities opened higher, then sold off, then traded back up to finish higher on the day -- a potentially bearish "hanging man" candle.
US Dollar: The DXY once again broke its 77.47 support intraday, but managed to rally and close above it.
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 1139, 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 for the NASDAQ 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.
10-Year US Treasury Yield (TLT): resistance for rates on the 10-year Treasury 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 broke out above its recent resistance level of $25 and appears headed to minor horizontal line resistance at $25.60 to $25.68 (June 2007 highs). 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 closes below 77.47, there's plenty of additional support lower starting at 77.24.
Semiconductor Index (SMH): the SOX closed just below its upside resistance at 366.52 (Fibonacci projection); the next meaningful resistance above that is 384.28 (bottom of first wave lower from July 21, 2006); horizontal line support exists at 332.11. These levels translate to 28.43 as resistance and 27.50 and 26.50 as support for the SMH exchange-traded fund.
Bank Index (KBE): no changes here despite the good performance over the last two sessions. Critical support exists at 41.62; staunch resistance at 44.82. The KBE exchange-traded fund has support and resistance at 20.72 and 22.57, respectively.
Crude Oil (USO): crude oil closed just below the next resistance level at $82. A close above $82 would likely lead to acceleration to the upside in prices to around the $85 level. USO support comes in at around 40 now while its resistance is 41.92 (corresponds with the $82 level in crude) and 42.56 above that.
Gold (GLD): gold is attempting to break above resistance created by the underbelly of the broken previous uptrend line at the 1120 to 1122 range. Support for the yellow metal comes in at 1075 in the short-term with 1045 as our ultimate target (for new buys) below that. For GLD, the buy point would be around the 105 level while its resistance comes in at 110 to 110.50.
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