Technical Analysis: Indexes Oversold

The market is oversold enough for a bounce, with stochastics on all indexes in the single digits (see charts below). However, there was one very bearish development today - the equity-only put-call ratio closed at a very low .42, below the .45 danger zone. That degree of bullish sentiment on a sharp down day is a negative and will likely make the coming bounce a weak one; today's highs of 8623 on the Dow, 906 on the S&P and 1387 on the Nasdaq could cap it (see first three charts below). First resistance on the Dow is 8525, and 8249 is critical support. Critical support on the S&P is 975. The Nasdaq has first support at 1347-1357, and 1330 is critical. If the index can clear 1387, 1391-1397 looks even tougher. The SOX, the semiconductor index (fourth chart below), is holding above critical 285 support. A break of that level could lead to new lows for the chips.

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