Dow Chart The S&P, unlike the Dow, has broken over the 200-day average and that is a strong technical indicator for fund managers. Most have a hard rule to be long over the 200 and short under the 200. This could be a sea change for fund manager involvement in the current market. The S&P has broken out to a new high for 2009 and closed over the January resistance highs. A move over the psychological 950 level will be viewed as confirmation of the breakout and should trigger additional buying.
SPX Chart The Nasdaq may have struggled on Tuesday with the chips giving back some of Monday's gains but the breakout picture is clear. The Nasdaq was the first to break over the 200-day average and has now broken out to a new 8-month high. Once the chips shake off the Tuesday blues the Nasdaq should lead us higher. Short-term support is now 1825 and resistance is 1900. The Russell-2000, not shown, is also in clear breakout mode over the January highs and the 200-day average. This suggests fund manager involvement and rising commitment.
Nasdaq Chart For the rest of the week I would remain cautious if it appears the shorts are able to mount enough of a defense to test initial support levels. The Friday/Monday gains are simply out of character and despite being clear breakouts on the charts we need to see confirmation in the form of high volume on any continued move. We could easily see a decent dip just on profit taking but I believe it will be bought. I think we are on the verge of a continuation leg higher if just a few more ducks fall in sequence. Bernanke's testimony on Wednesday and the ADP report at 8:15 clearly have market moving potential. I would continue to buy the dips until proven wrong. Jim Brown  |
