Technical Talk: Volatility up, but S&P 500 remains above trend

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The comments below were provided by Kevin Lane of Fusion IQ.

The following are key aspects of the current market situation:

• Though volatility has increased of late the S&P 500 remains above trend.

• The NASDAQ is also seeing an increase in volatility.

• Transports are still tentatively holding above support.

• The Bank Index has lost momentum and is range bound.

• The Hang Sang Index is still range bound, but above key support.

• Crude oil breakout is a negative for consumers and the fragile recovery.

The S&P 500 still resides above its intermediate-term trend line (lower green line) and above support (orange line) near 1,295. As long as the Index stays above these levels the market should be OK – below these we fall into corrective mode.

The NASDAQ is also still above trend (red lines) with initial support below the Index at 2,705 with more critical support at 2,680. Prior to support an intermediate-term uptrend line comes into play near 2,750 (green line).

The transports have tested and held support in the 4,960 to 4,920 area (green lines). The trannies look weaker than the broader market here; however, we will give them the benefit of the doubt as long as they hold above the aforementioned support.

The Bank Index (BKX) remains in neutral after failing at resistance near the 57 level (red line) and is now heading for a test of support in the 52 to 50 region (green lines).

The Hang Sang Index is still above critical support near the 22,700 to 22,400 range (green lines). Resistance lies near 23,600. Like most indices we will give the Hang Sang the benefit of the doubt as long as it remains above support.

The recent breakout in crude above resistance near $94 (upper red line) is a drain on consumers. If $140 a barrel back in 2007’s booming economy was a consumer tax, we have to think that north of $100 in a nascent recovery is fairly equivalent.

Source: Kevin Lane, Fusion IQ, March 7, 2011.

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1 comment to Technical Talk: Volatility up, but S&P 500 remains above trend

  • Frank W

    I felt this article was helpful to me. Moreover, I think this whole postcard, esp. the contribution by Prieur, was really good.

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