The NYSE Composite surpassed both the October and September highs last week before Friday’s drop. The first strong support is in the 8,350 area (line a) and the 20-day EMA. There is more important support at 8,200, which was the early December low.
The daily NYSE Advance/Decline line was able to move to new rally highs, as the resistance (line c) was overcome. The A/D line dropped back below the breakout level Friday. It is still in a clear uptrend and above its rising WMA.
The Spyder Trust (SPY) made a high last week at $145.58, which was just below the monthly R1 pivot resistance at $145.68. SPY gapped lower Friday, but is holding above the quarterly pivot at $141.69.
The 20-day EMA at $142.70 was being tested on the close, with more important support at $140.37, which was the December 5 low. The minor 50% Fibonacci retracement support sits at $140.11.
The S&P 500 A/D line made convincing new rally highs last week, as both the September and July peaks were overcome. The A/D line also reached the May highs (line g), with next major resistance at the April highs.
The A/D line was stronger than prices last week but could retest its breakout level (line h) and its WMA on a further correction.
The Dow Industrial A/D line (not shown) did move above its April-May highs last week. This new high is bullish for large-cap stocks, as DIA is still well below its bull-market high of $136.48.
There is next support for DIA at $130.65, as it closed just a bit below the 20-day EMA. More important support waits at $129.16, which was the November low.
The PowerShares QQQ Trust (QQQ) is still the weakest of the major averages, as it moved briefly above the resistance at $66.39 before gapping lower Friday. The low on Friday was close to support at $64.44, which is the monthly pivot. The short-term 50% retracement support is now at $64.02.
The Nasdaq-100 A/D line was stronger than prices last week, as it made new rally highs and is well above the former downtrend (line c). It still shows a pattern of higher highs and higher lows with its WMA rising strongly.
There is first resistance now at $65.70 to $66.70, and then in the $68 area.
The iShares Russell 2000 Index (IWM) held up better than SPY and the other major averages Friday, suggesting that the January effect is already taking hold. Small-cap stocks, ETFs, and funds are therefore favored on a further pullback, as they should continue to outperform in January.
Once above last week’s highs at $84.77, the next major resistance is at $85.25 to $86.08.
The Russell 2000 A/D line finally overcame the bearish divergence resistance last week (line e) that goes back to the February highs. It dropped back below the breakout level Friday, and new highs are needed on the next rally to confirm the breakout.
There is first support for IWM at $82.16, with more at $81.40. The monthly pivot support is at $80.39, with the November low at $79.63.
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