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Dow 8,500

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Stocks continue to hold near their best levels of the session and we may be seeing some psychology come into play near the close as the Dow Industrials (INDU) 8,515 +2.32% threaten to close above the psychological 8,500 level. A close above this level could put further pressure on a bear's mental state as he/she begins to assess further upside risk to 8,700.

The S&P 500 Index (SPX.X) 898.49 +1.59% is also trading a "psychological" level just below 900. Some bear camps have stated in the past couple of weeks that this was a level of firm resistance under the blanket of poor earnings and weaker economic conditions.

Look for closes above 8,500 in the Dow Industrials and 900 in the SPX to put further pressure on bears. Bull's know only too well what breaks to the downside of psychological levels have meant in the past, and it may now be time for bear's to visit the couch should these levels fail to hold as resistance.

Treasuries closed near their session lows with the benchmark 10- year December futures (ty02z) 112'045 -0.48% threatening Friday's low, which frees up some cash that may be available for stocks. With the bond market closed, look for equity bears to check positions that begin getting out of hand to the upside to further implement hedge strategies, while anticipating tomorrow morning's bond market reaction. Should Treasuries gap lower in the morning, then further upside remains with an equity bear's psyche feeling some pressure.

Despite early weakness in the Semiconductor Index (SOX.X) 282.29 +5.2%, this group has broken above recent four-session technical resistance of 270 and looks ready to test "psychological" resistance of 300. Earlier in the session, shares of Texas Instruments (NYSE:TXN) $17.18 +0.46% traded a session low of $16.06, but have since reversed course, most likely on short covering by bears that have seen a break higher in the sector.

Jeff Bailey

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