Technical Levels : We've spent a fair amount of space focusing on the Dow recently. The reason? It's started generating massive intraday point swings, leaving traders with the sense it may just fall off a cliff. Yet a look at the two-month chart on the Nasdaq points to an interesting, and important, dynamic. Over the past two weeks, the index has held essentially flat despite notable weakness on the Dow. Specifically, over the past seven sessions the Dow has lost over 900 points on a closing basis -- if you include intraday moves, the Dow has been off by as much as 1,100 points. All the while, the Nasdaq finished yesterday a comfortable 29 points above its closing low on July 10th. We pointed to this dislocation Friday and it's notable for several reasons. Most importantly, we're talking about the Nasdaq here, an index that for the past six months, has been unable to sustain any upside traction to save its life. When that index is not only untouched by an 1,100-point slide on the Dow, but is actually heading modestly higher, it's time to take note. Whether or not you attribute the relative performance to sector rotation, the Nasdaq's recent strength suggests there may be something about the mid-1300's that has a fundamental basis. If this is the case, it could make a meaningful break of that area very challenging. In terms of the straight levels, look for the first significant overhead in the range of 1,420 to 1,423 -- this approximates the reaction lows going back to September 2001 and October 1998. Just as an aside, when reaction lows going back four years are serving as resistance that should serve as a solid testament to exactly how beat up the current market is. After the 1,420/1,423 area, the next significant area of resistance lies at 1,447/1,453 with another notable level in the range of 1,480 to 1,484.
-- Mike Ashbaugh, Briefing.com |
