« The Bigger Picture (Weekly Market Update): Jan 15, '12 »

The indices suffered small losses on Friday but still ended the week with gains of just under 1%. The bulls still have their noses in front, but is this move losing momentum?

S&P-500 index daily chart:

The bears just can't catch a break. SPX was trading back in the old resistance zone, during the day, on Friday, when the index was showing a loss of as much as 18pts. There was a recovery by the close, however, and the index was able to close above the important 1285-level, finishing with a loss of just 6pts (0.5%). The upper Bollinger band is rising and RSI has stayed above the 60-line, so the bulls still have their noses just in front. That should remain the case, until/unless the index falls below its 20dMA.

Dow Jones Industrials Average daily chart:

INDU closed with a loss of 49pts (0.4%), after showing a loss of nearly 160pts, on Friday. RSI has dipped below the old resistance level near the 60-line but thats probably not something that will bother the bulls too much. As long as the index remains above resistance at 12250 and above its 20dMA, the bullish trend will be firmly intact.

Nasdaq-100 Index daily chart:

NDX lost 10pts (0.4%), on Friday. The upper Bollinger band continues to rise at a decent clip. It sits a good 36pts (1.5%) above current levels and could attract prices to those levels - and above intermediate resistance at 2400 - over the next few sessions.

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Let's now take a look at the weekly charts.

S&P-500 index weekly chart:

SPX gained 11pts (0.9%), this week. The index has closed at a new weekly high, as far as the past 5 months are concerned. The upper Bollinger band has been rising once again, since the past month or so. RSI is starting to pull away from the centerline and is making an attempt at resistance. Additionally, MACD is attempting a positive 0-line crossover.

Dow Industrials Average weekly chart:

INDU gained 62pts (0.5%), this week. A positive 0-line crossover on MACD is now complete. The upper Bollinger band is rising as well. All we need is for RSI to break resistance and the index could be off to the races.

Nasdaq-100 Index weekly chart:

NDX gained 16pts (0.7%), this week. The index is now fronting up to major resistance in the 2400-2425 zone. Several times, over the past year, the index has run up to this level and been turned around. This time around, the index has had lots of time to 'reset' itself, given that RSI and MACD have coiled around their centerlines for several months and as such the index should be wound up and ready to spring a big move.

Whether the big move is to the upside, following a break of resistance, or to the downside, courtesy another failed attempt at a breakout, remains to be seen...

Conclusion

The markets are going to embark on a wild ride soon. You wouldn't want to be on the wrong side of this move. So don't get too aggressive - on the upside or the downside - until clear cut signals develop. At the moment, the bulls are in front, but to call the move clear cut, decisive or smooth would be to overstate the case.

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Asher Pinto