MAJOR STOCK INDEXES CONTINUE TO TEST OVERHEAD RESISTANCE NEAR THEIR NOVEMBER HIGHS -- AND CONTINUE TO LOOK OVER-EXTENDED -- THE S&P 600 SMALL CAP INDEX AND THE DOW TRANSPORTS ARE MEETING SOME SELLING AT THEIR 200-DAY LINES
NOVEMBER HIGH IS BEING TESTED ... After having one of the strongest starts to a new year in history, major stock indexes find themselves testing yet another potential overhead resistance barrier. And they're doing so while in an over-extended technical condition. But they've been looking over-extended for most of the past month. Chart 1 shows the Dow Industrials testing their early November intra-day high at 26,300 (first red circle). A decisive close above that previous peak would clear the way for a retest of last October's record high. But it has to clear its November high first. The Dow remains above its 200-day moving average (red arrow). Its blue 50-day average, however, remains below its 200-day line. On a more positive note, its 20-day average (green arrow) remains above the other two longer averages. If the Dow does pull back, that would the first moving average to be tested. Maybe even the 200-day. One cautionary note is the fact that its daily MACD lines (lower box) have been converging over the last month and are close to turning negative. That would be their first time in negative territory since the end of December. That might be enough to signal some short-term profit-taking. Or possibly a period of consolidation to work off its overbought condition.
Chart 2 shows the S&P 500 in a similar technical condition. The SPX is testing its November intra-day high at 2815. If it does pull back, it could retest its 20 and 200-day averages (green and red lines). Chart 3 shows the Nasdaq Composite Index also testing its November intra-day high at 7572. The lower box in Chart 3 shows its MACD histogram bars in danger of falling below their zero line (red circle). That would signal that the MACD lines themselves are turning negative.

Chart 1

Chart 2

Chart 3
SMALL CAPS AND TRANSPORTS ARE TESTING 200-DAY LINES ... Two other economically-sensitive stock indexes are testing overhead resistance. Chart 4 show the S&P 600 Small Cap Index testing its 200-day average (red line) and its early November peak at 994. Small caps have a history of leading larger stocks up and down. So their current test of the red resistance line could be important for both. Chart 5 shows the Dow Transports also meeting some resistance at its 200-day average (red line). The direction of the transports often has a bearing on the Dow Industrials. So the current test of its 200-day average could effect both.

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Chart 4

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Chart 5
MSCI EAFE ISHARES ARE TESTING RESISTANCE LINES... Foreign stocks are also off to a good start for the year. With emerging markets in the lead. Monday's message showed the MSCI Emerging Markets iShares (EEM) clearing their 200-day average with a lot of help from a rising Chinese stock market. Foreign developed markets are also rallying. But they're up against a couple of resistance barriers. Chart 6 shows the MSCI EAFE iShares (EFA) testing its red 200-day moving average. But it's also up against a falling trendline drawn over last January and September highs. Needless to say, a decisive close above both resistance lines would be a bullish development. The EAFE includes developed stock markets outside of the U.S. and Canada. Its biggest foreign holdings are in Japan (23%) and the UK (16%) with another 19% in France and Germany combined.

Chart 6