The Next Move

The market has cobbled together an impressive rally off the November lows. The major indices have bounced off oversold readings and a retest of support in the daily charts and rallied back for a test of overhead resistance. The round trip by the indices in November has been interesting, but it doesn't tell us much technically except that the market was short-term oversold at the lows. What we need to see now is either a breakout over resistance or a high order consolidation of the recent gains, which would suggest a resumption of the uptrend is in the works. The bulls have regained some traction, but the next move by the market will tell us if this traction is meaningful and whether or not the indices will be able to sustain a recovery.

All of the major indices cooled to varying degrees on Monday and showed minor weakness. We're not terribly surprised to see weakness develop at this level following the quick reactionary move to the upside from the recent oversold reading. If we look across the charts for the major indices, we can see that prices are testing overhead resistance at the upper end of the recent consolidation formations across the board. The "cooling" and stall in prices Monday follows short-term overbought signals in the short-term stochastic oscillators for these indices....217 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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