The upward move off the late December low prices is nice, but the heaviness of the resistance levels just above may prove difficult to overcome. This is true of all the major indexes and most of the sub indexes. By resistance level, I mean those clusters of price areas where major selling took place on the way down.
From the stand point of price chart analysis, those are typically likely spots for sellers to re-awaken and dump stocks again, just as it begins to appear as if they’ve regained some kind of footing. If enough buyers show up, these levels can be taken out — but most of these charts have yet another significant resistance level just above.
Here’s how the S&P 500 looks:
I’ve placed a green dotted line down there where buyers jumped back in — Christmas Eve at the 2350 level. From there, it’s been a steady bit of bullishness right up into the approach of mid-January.
If the index can somehow make it through that cluster of selling in the 2650 area from October right through December, then maybe some kind of rally could continue. If so, then it has that 2850 resistance where sellers came in big time twice during November and December.
The NASDAQ Composite looks like this:
You can see where the major selling came in during November and December up at that 7500 to 7600 level. But before the index reaches that spot, there’s the downtrend line that connects the late September high with the much further down late November high.
It’s likely some trend-following programs will be using that line — now at about 7150 — as a place to unwind certain positions. Also, a few human being traders who keep track of such things without the aid of artificial intelligence may be unloading.
Here is the index of small cap stocks, the Russell 2000:
This more volatile index full of smaller stocks dropped more deeply and at a faster clip than the other major indices. That downtrend line connecting the late September high with the late November high is the first most likely place for buyers to give up — who wants to fight a powerful downtrend?
Above that, the next likely spot for sellers to appear is where they showed up last time in the 1540 to 1600 area.
And here’s one more chart showing a rally from September instead of a drop:
It’s the VanEck Vectors Gold Miners ETF — widely followed as an indicator of the action in only gold mining stocks. I mentioned the August/October inverse head-and-shoulders formation weeks ago in this post. Since then, the action has been upward, very unlike the other major stock averages.
The obvious big resistance here comes in at the 22.75 level. I would guess that it would take some kind of major event to take out that area.
I do not hold positions in these investments. No recommendations are made one way or the other. If you’re an investor, you’d want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment advisor.