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Wednesday, January 6, 2010

Wallstreet Bulls Shrug Off Overbought Conditions Extending Rally


The S&P 500 closed higher on Wednesday as it extends this week's rally. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought but are bullish signaling that sideways to higher prices are possible near term. If March extends this week's rally, the 62% retracement level of the 2007-2008 decline crossing at 1155.15 is the next upside target. Closes below the 20 day moving average crossing at 1110.98 are needed to confirm that a short term top has been posted. First resistance is today's high crossing at 1135.00. Second resistance is the 62% retracement level of the 2007-2008 decline crossing at 1155.15. First support is the 10 day moving average crossing at 1122.49. Second support is the 20 day moving average crossing at 1110.98.

The NASDAQ 100 closed lower due to profit taking on Wednesday as it consolidated some of Monday's rally. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are overbought but are neutral to bullish signaling that sideways to higher prices are possible near term. If March extends last month's rally, the 75% retracement level of the 2007-2008 decline on the weekly continuation chart crossing at 1947.00 is the next upside target. Closes below the 20 day moving average crossing at 1833.30 are needed to confirm that a short term top has been posted. First resistance is today's high crossing at 1891.75. Second resistance is the 75% retracement level of the 2007-2008 decline crossing at 1947.00. First support is the 10 day moving average crossing at 1869.80. Second support is the 20 day moving average crossing at 1833.30.

The Dow closed higher on Wednesday and the high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought but have turned bullish again signaling that sideways to higher prices are possible near term. If the Dow extends Monday's rally, the 62% retracement level of the 2007-2008 decline crossing at 11249 is the next upside target. Closes below the 20 day moving average crossing at 10460 are needed to confirm that a short term top has been posted. First resistance is Monday's high crossing at 10604. Second resistance is the 62% retracement level of the 2007-2008 decline crossing at 11249. First support is the 10 day moving average crossing at 10,525. Second support is last Thursday's low crossing at 10,423.

The U.S. Dollar closed lower on Wednesday and below the 20 day moving average crossing at 77.68. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. Closes below Tuesday's low crossing at 77.39 are needed confirm that a short term top has been posted. If March renews the rally off November's low, the 38% retracement level of the 2008-2009 decline crossing at 79.72 is the next upside target. First resistance is the reaction high crossing at 78.77. Second resistance is the 38% retracement level of the 2008-2009 decline crossing at 79.72. First support is today's low crossing at 77.59. Second support is Tuesday's low crossing at 77.39.

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