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Index Wrap

A funny thing happened on ...

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THE BOTTOM LINE -

Yes, on the way higher today, the funny thing that happened was that the rally stopped and reversed in the area of the down trendlines I noted on the charts yesterday (Sunday). Well, actually not before popping up through them a bit - enough to "run" (activate) stops in the index futures. Then, selling pressure reasserted itself and back down we came.

Now, I know that was due to some fundamental (funny-mentals) event/news - of course - the market or, should I say the media talking heads, have to find a short-term reason for why the rally ran out of steam. If we keep in mind that this market has had one heck of a rally already off its lows, it's not surprising that we get some weeks (months?) of backing and filling.

This backing and filling gets boring, but only cause we love those strong price runs or trending markets. It used to be said that the market only "trends" (strongly) 30% of the time. Keep it in mind.

TODAY'S TRADING ACTIVITY -

The Commerce Department reported that sales of new homes rose about nearly 9 percent in March to a record seasonally adjusted annualized rate of 1.23 million. Estimated sales in February were revised lower to an annual rate of 1.13 million from 1.16 million.

Halfway through earnings season, investors are wondering if the rest of the pack will be good - and, of course, the wondering on the Street is whether the good numbers were all pretty much "priced" into the indices.

Data will be released on personal income and consumer sentiment later this week, while some more Dow stocks will be releasing their quarterly numbers.

The S&P 500 (SPX) Index lost 5 points (0.4%) to close at 1,135.48, after being higher in the morning. The Dow (INDU)fell 28 points to 10,444.73. Nasdaq Composite (COMP) was down 13 to finish at 2,036.7.

Semiconductors, networking stocks, airlines, tech hardware and software were among the losing sectors. Biotech, gold, drugs, oil services, brokers and utilities were on up on the day.

OTHER MARKETS -

The 10-year T Note closed up 10/32 at 96 and 18/32, with its yield falling to 4.42% from 4.46 percent on Friday. The dollar at $1.1869 to the Euro was down 0.2% and was also down 0.2% versus the yen to close in New York trading at 108.65 yen

MY INDEX OUTLOOKS -

S&P 500 Index (SPX) - Daily chart:

Resistance and selling pressure came in around the area of the down trendline, at 1143-1145. It will take a close above 1145 to suggest that 1160 resistance could be re-tested. Support is figured at 1133, at the 50-day average, then in the 1120 area. I think we could see a drop even back to the up trendline in the 1005 area.

Call activity today increased and puts the call to put ratio up a bit, which makes it slightly more likely that prices will fall back first.

S&P 100 Index (OEX) - Daily chart:
Another way to look at resistance is to examine the level lines drawn through the cluster of prior lows (support - once broken - becomes resistance later on) and highs: suggesting a resistance band at 558-562. I do NOT expect a close over 562 - stay tuned on that!

Support is around 550, then in the low-540 area. OEX closed under its 50-day average today, which is bearish. This Index remains in a downtrend - a series of lower rally highs, with each rally topping out lower than the one that preceded it.

S&P 100 Index (OEX) - Hourly chart: Those of you who have followed my musings (rantings!?) on trendlines, know that former support trendlines also "become" or define areas of resistance later on. The hourly OEX chart below shows this idea. It's not super precise, but highs like we saw early today (Monday) that touch a former trendline like this (more or less) is often the "kiss of death" for a rally.

When the aforementioned pattern appears of up against the trendline, in CONJUNCTION with an overbought Stochastic or other technical indicator showing the market at a near-term extreme, its a good trading signal for a put buy - going against the trend and looking for a reversal.

Dow Industrials (INDU) Daily:

I haven't much more to say on resistance in the Dow coming in around 10,500. It's apparent on the chart. Support is in the 10,300 area. I anticipate downside follow through tomorrow.

Unlike the OEX, the Dow 30 held at its 50-day moving average, and this area is also key one to watch tomorrow: 10,425.

Nasdaq 100 (NDX) Index - Daily:

1500 is SO resistance - very apparent today. The 1450 area is key support, then down around 1400. Look for some action tomorrow as the bears start baling out some more.

Nasdaq 100 (NDX) Index - Hourly:
The hourly charts area always a good watch - yes, the trendline gave way a bit - but NOT on the close - no way, no how. Notice how NDX opened right ON the trendline, rallied a bit and then turned down - pretty typical, as trendlines show a declining line of resistance/selling pressure and a declining area where traders and investors are willing to buy the stocks making up the Index.

Nasdaq 100 tracking Stock (AMEX:QQQ)- Daily:

Sell this stock between 37 and 37.50, with a stop just above 37.50 on short stock positions. Look for some buying interest in the 35.75 - 36 area. I would turn buyer at 34.25-34.00, if reached this week. (Exit at 33.70)

Good Trading Success!

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