Toil and Trouble

I recently completed my tax return (the first pass, at least) so I am not in a good mood. "Nothing new there!", you might say. But I think that it is obvious to most folks in this country that they are working harder and not making any headway. That is why they are raiding the equity in their homes, so they can not only maintain their standard of living, but maintain the rate of increase in their standard of living.

Likewise, the stock market is trying to maintain its upward momentum. And it appears that it is beginning to have a hard time doing so. After a stellar start to the year, it hit a major bump last Friday. Up until that point, the mild pullback was just that: a pullback after a strong breakout. But the worst thing that can happen to a breakout is for it to drop below its support at the point of its breakout. That is what happend Friday. "But last Friday was an options expiration day, which distorts the activity and usually produces a reaction in the opposite direction on Monday. But Monday's reaction was a bounce which only recovered 10% of the amount lost on Friday. Not good. Today's action was a little better with volume picking up, but the gains in the indices still left a little to be desired and leaves them below their breakout levels, which should now be considered resistance. Those levels are 1700 on the Nasdaq 100 and about 1275 on the S&P 500. Watch those levels closely, because if they can't be taken out to the upside and soon (before the end of the month), then watch out below. The next key levels to watch for below are 1644 on the NDX and 1255 on the SPX. If those level are pierced before the end of the month, we're doomed. Doomed, I say!