The Dow's leader board is chocked full of cyclical stocks, so lets see what the Cyclical Index (CYC.X) is up to.
Morgan Stanley Cyclical Index
Over the past two days the Cyclical Index has taken out the 50% retracement level, 50-day moving average, and the four-month up trend. The decline was halted at 549, the 38.2% retracement and neckline of the head and shoulders bottom pattern. Today's 1.56 percent bounce has the index back above 50% and the 50-dma, and the stochastic turning up, but how much higher can it bounce. The 61.8% retracement and recent down trend are waiting in the wings to turn this index lower.
Microsoft Daily Chart
While cyclical stocks were helping the market, Microsoft almost killed it. At one point this morning Microsoft was down $2.11 to $62.90. That put the stock below support at $64.50, and dangerously close to falling below the 200-day moving average. The stock has abruptly changed course, and is back above $64.50. That puts Microsoft back in the congestion zone between $67.50 and $64.50 that it has been stuck in for the past two and half weeks. With the 50-day moving average dropping down to add extra resistance, MSFT might have an even hard time getting above this level. While cyclical stocks are helping the Dow move higher, the Nasdaq is going to need stocks like Microsoft to take out these resistance levels to move higher.
The Software Index has bounced off its lows, and the Nasdaq is just about to turn positive. The Internet Index is still a drag on the Nasdaq, down 2.53 percent.