Stock Market Punches Through Resistance
Stock-Markets / US Stock Markets Jan 29, 2009 - 05:04 AM GMT
So much for resistance. Both the S&P 500 and NASDAQ blew through resistance levels, including their respective 50 day moving averages. The DJIA was the laggard, unable to breach overhead resistance and the 50 dma.
The VIX also continued its decline. It closed below 40 again after spiking on January 20th and making a higher low. It is quickly coming down to touch its 200 dma at 36.28.
Based on this week's action, it was doubtful resistance would be breached. Volume had been decreasing prior to today's breakout. The one indicator flashing “go” was the McClellan Oscillator as it crossed the zero line on Tuesday.
Today's action, while encouraging, does not give the go-ahead to jump with both feet into the market. One nagging concern is that while volume was better than the last few days, it was not spectacular. Investors should not let “irrational exuberance” stand in the way of logical decision making and start chasing stocks. There will be plenty of time if a true rally kicks off.
The next area that needs to be surmounted is the 950 area on the S&P 500, the 1650 area on the NASDAQ, while the laggard DJIA needs to get above the 8400 area and its 50 dma. Investors also need to pay attention to which sectors may be leading and look for long candidates if a sustained rally occurs.
By Kingsley Anderson
http://tradethebreakout.blogspot.com
Kingsley Anderson (pseudonym) is a long-time individual trader. When not analyzing stocks, he is an attorney at a large law firm. Prior to entering private practice, he served as a judge advocate in the U.S. Army for five years and continues to serve in the U.S. Army Reserves. Kingsley primarily relies on technical analysis to decipher the markets.
Kingsley's website is Trade The Breakout (http://tradethebreakout.blogspot.com)
© 2009 Copyright Kingsley Anderson - All Rights Reserved
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