Sunday, January 02, 2011

Weekly Market Commentary: New Year Rolls In

The New Year brings new challenges as the Santa Rally comes into a new quarter and a new year.

Starting with the Nasdaq we have overbought stochastics on a bearish divergence in the MACD histogram. The index is caught between 2,535 support and 2,818 resistance and the early assumption is a continuation of the rally up to 2,818.



The Nasdaq 100 is in the thin air of multi-year highs (although on the daily timeframe it has already drifted out of its rising channel). While 2,217 is a support level I would look to a test of 2,130 as the first meaningful challenge for bulls.



The Nasdaq Summation Index is back against resistance with stochastics popping into overbought territory.



Small Caps have been dull; 760 support key but this is an index which has failed to challenge 2007 highs, unlike Tech.



The S&P also has its work cut out having only just cleared 2010 highs (a long way from 2008 or 2007 highs). Stochastics overbought with bearish divergence in MACD histogram.



So for the first few weeks the rally could run a little higher, but when the selling starts it's likely to be short and sharp down - November lows will be the first major test.

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