What Technicians Are Worried About?
The market is getting a nice bounce today on the heels of coming off extreme oversold territory, and what looks like some relief from the elections last night that maybe the healthcare reform will be more mild, and this has the HMO stocks rallying strong.
Getting to the charts below, you can see from these three examples that many of the key indexes put in double-tops in October; they then proceeded to break below their longstanding 50-day average support; and finally, they broke below their early October lows, leaving a lower low on the charts for the first time since the rally off the March lows began.
These snapshots below are as of Friday, so these indexes have bounced a bit as of this morning, but they are still right near the resistance represented by the lower horizontal line drawn on the graphs below. The first step toward recovery will be recapturing those levels, and converting this near-term overhead resistance into support.
From there, we will need to see the major indexes recapture their 50-day averages. This morning, the S&P 500 is trading above its 50-day, so that is a start. Many of the other indexes still have room to rally before they reach their overhead 50-day averages.