S&P 500, NDX - January 4, 2010

Well, Holidays are over.

I think I left my readers in a very good shape with a very valid and solid setup.

If you remember, I kept posting two 60-min range charts with targets to each side. All one had to do was to initiate a trade on the break of the range.

This is the updated chart for Nas100



NDX broke to the upside and did not look back until 1880. A 70-point power run that must have taken care of a lot stops and short positions, hitting and exceeding my first target in the process

The second range target may become harder to achieve as many who are left behind try to catch a ride on a pullback and may become distribution targets. In addition, there may not be as many shorts in the system to fuel the run. So, a more cautious stance may be warranted

This is the updated chart for S&P



S&P broke to the upside of the range. It has not been packing as serious punch a NDX, not yet anyways. It still is well short of my targets. It did a very nice retest of the top of the range, offering a very low risk entry.

Both indexes have put in an almost complete 5-wave set. They will soon show us whether this wave set is all they had left after the breakout of their ranges or if this is the beginning of an extended wave structure.

The low risk entries are now rather behind us.

NDX has a number of open gaps. In a previous post, I pointed out to the gap around the 1870 area and wondered if it was an exhaustion gap. It indeed was an exhaustion gap as NDX soon rolled over into its small wave 4 correction.

Today, NDX opened with another gap, and I wonder if that is the gap before completion of the ongoing wave 5.

All in all, market has had very positive price action. It was led higher by the tech sector, which is also positive.

On the other hand, most of the best of the rallies came on lackluster volume and during overnight session (that’s why you see so many gaps on NDX chart).

As things stand, NDX needs a move below 1850 to turn the short term down. S&P needs a move below 1111 to turn the short term trend down.

As long as that has not happened, mid-term trend is up, and short term trend is up. In addition, our OEW long term trend has also turned up.

Support on S&P is 1107 and 1090. Resistance is 1133 pivot, which has so far kept S&P in check, and 1168.

Have a Very Happy New Year!