Resistance Levels Hold, BAC, JPM Slide

The S&P Index failed to break 1200 for the third consecutive day of testing and other sectors seem to be finding their own resistance levels as well as the market closed for this first day of this short trading week.

The dollar index finished marginally higher though the euro was surprisingly strong considering the bailout that is coming to Ireland. In the precious metals sector we are slowly approaching overbought territory on the stochastics and RSI while it appears that we are finding resistance there in addition to the S&P.

Stock in Bank of America had another rough day as shares finished down 3% and are on the wrong side of a 9 and 20 day MA cross although they have not yet tested the $11 support. However, the price channel is trending downward and suggests that $11 may not be the bottom of this chart. In addition, it would need to rally a whole point in order to pierce the high side of the channel.

Recent selling volume has been substantial and the reason for the bounce off of the support was most likely a short setup after QE II. In the extreme short term, the stock may be oversold, but the RSI confirms that there is at least price stability which means that there could be another small bounce before testing $11 again. Price action in Bank of America is paramount to the overall market and I believe that this is serving as a leading indicator for what lies ahead.

Shares of JP Morgan also had a hard day as the stock broke through a recent price channel that appeared to be a clear cut bullish flag. A bullish flag is a generally a money indicator but today the stock pierced the bottom line in the channel to the downside which negates the formation.

The 13 and 50 MA’s are turning to the downside and it appears that the next major support is at $38. I expect that to be tested if the overall market continues to struggle with overhead resistance.

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About Aaron Basile
Market Technician, Equity/Commodity Trader, Austrian Economist, Contrarian Investor

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