Option Investor
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Monitor strength for resistance!

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How strong or "real" is today's rally? One way I look to answer this question is to monitor past "strength" for resistance and see if bulls are really committed to pushing their favorite groups through key resistance levels.

Unfortunately, not many of these are technology related. What I'm actually looking at is the Morgan Stanley Cyclical Index (CYC.X) 575.75 +1.76%.

Morgan Stanley Cyclical Index Chart - Daily Interval

Even the Cyclicals have responded to Cisco's (NASDAQ:CSCO) $15.67 +19.87% "good news" from earnings. If the CYC.X can get back above the 580 level, then I begin to get a little more bullish toward technology stocks. My long-held belief is that the Cyclicals and the Transports would be two groups to lead in economic recovery and technology would lag. So far, that's been the case and I don't want to throw that out the window just because technology has rebounded today. Still very cautious on technology despite profiling Applied Materials (NASDAQ:AMAT) $24.84 +11.29% and the NASDAQ-100 Trust (AMEX:QQQ) $30.89 +7.5% in recent days.

I will discuss the Dow Transports (TRAN) 2,719 +1.34% later today. Right now, the 50-day is rolling very similar to that found in the CYC.X. The 50-day MA on the TRAN is up at 2,838.

Jeff Bailey
Senior Market Technician
Option Investor

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