The NASDAQ index has been one of the leading indicators for the stock market over the past six months but it has slipped into a sideways range since mid-November. Strength in early January saw the market break through the top of that pattern but that break did not attract follow through selling and the index has subsequently slipped back into the prior range. These false breakout patterns can provide powerful signals and the impression from this one is that the market is headed back to the range lows (2390).
Mar S&P has been following this same path although that contract was not able to make a new high in January and instead stalled right at the spot of the December high at 1445. Given the fairly balanced sentiment readings, this does not appear to be the start of a very significant decline but the reaction to key support (50-day moving average at 1420) will have to be monitored closely over the next few sessions.
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