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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
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Wednesday, October 12, 2011

Major Indices Hit Resistance...What Holds the Key?

Below are a series of 1-hour charts of the Dow 30, S&P 500, Nasdaq 100 & Russell 2000 Indices. As can be seen, they have run into prior resistance at/near the top of their large trading range...however, the Russell 2000 is lagging on the advance that began at the beginning of this month.

In addition, the YM, ES, NQ & TF have also hit resistance at either their downtrending regression channel or a Fibonacci retracement level (or both as in the case of the YM & ES), as shown on the Daily charts below.

A look at the Weekly charts of the YM, ES, NQ & TF, however, do not show much resistance at the current price levels for the YM & ES)...however, the NQ is attempting to hold above the rising 50 sma (red) and is immediately below resistance from the July highs...the TF is lagging on this timeframe, as well and is currently just below resistance of the -1 deviation level of the uptrending regression channel and the upper one-third of the range from its March 2009 lows to the May 2011 highs. Price has been bouncing around in between the 50 sma (red) and 200 sma (pink) on this timeframe...these are holding, for now, as support (200 sma) and resistance (50 sma) levels.

We'll see whether or not these resistance levels matter much over the next few days on these Major Indices and their corresponding e-mini futures indices. If price pulls back, they may re-test prior resistance levels, as shown on the 1-hour charts above, before potentially finding support and resuming their weekly trek upwards...I'm still mindful, however, of my comments in recent posts regarding the "thin-ice" which lies below the current price levels.

On the 60-day 60-minute chart below, I've shown a percentage comparison of price action of the S&P 500 ($SPX), Nasdaq 100 ($NDX), the Financials ETF (XLF), and the Commodities ETF (DBC). They all fell at roughly the same rate from July of this year until the beginning of August. From August, DBC led the bounce that ensued, followed by $NDX, $SPX & XLF. In mid-September, DBC dropped below, first, $NDX, then $SPX, where it currently sits in third place. XLF has remained the weakest, percentage-wise from where they began 60 days ago.

The 10-day 10-minute chart below shows a percentage comparison of the same four instruments. It's interesting to note that XLF took over the lead today (by 1.5% above $SPX at one point) in terms of a percentage increase since 10 days ago...whether this was just a one-day pop by this sector remains to be seen (although it did pop slightly above on October 6th)... DBC is in last place on this timeframe. Financials and Commodities (and the Euro) may hold the key as to whether or not a full-blown rally has begun in equities...it's something I'll be watching over the next few days/weeks, together with the price action of the EUR/USD Forex pair that I mentioned in my earlier post today.