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Support Becoming Resistance\?

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Yesterday some of the major indices broke through support. Those support levels are now acting as resistance.

S&P 500 and Nasdaq Composite Daily Chart

1,177 supported the S&P 500 on July 11th, but that level failed to hold yesterday. Today's 10.96 point gain isn't much, but it might be enough to get the index back above this level. If we do in fact close above this level, it may offer some bullish hope for tomorrow.

1,975 has been the Nasdaq Composite's danger line. On July 11th the Nasdaq failed to climb back above 1,975 but look what happened the next day. Perhaps it's my overactive imagination, but it looks like a similar pattern is setting up today. The only problem with my little theory is that Microsoft gloating about better than expected revenues was the bullish catalyst on July 12th, what do we have as a catalyst today? Nothing of the same magnitude I imagine. Regardless, we could be experiencing a pause or possibly a reversal in the short-term trend. If nothing else, stochastics are getting oversold. If we do manage to claw higher, could the S&P 500 and Nasdaq Composite be trying to form a double bottom?

Jeffrey Canavan
Assistant Analyst

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