A Tale of Three Indices

Last week's price behavior was the exact opposite of what I was hoping to see after the Geithner announcement given the buildup that Obama offered the night before. Rather than rehashing what we know, let's focus on an interesting development in the comparison of the three indices. For the first time in a long time, I am seeing the three indices offering decidedly different technical patterns.

The Nasdaq 100 (NDX) has fared much better off of the November lows relative to the S&P 500 and the Dow. This index appears to be trying for an uptrend channel, albeit at the lows of that uptrend channel. This index is also the only above its 50-day exponential moving average. A move back above 1285 on a closing basis could help send this index back up to the 1400 level in the first half of the year. The NDX will have to contend with continued negativity in expectations for the first half of 2009, but so will the other two indices.

The S&P 500, on the other hand, remains in a congestive phase between essentially 800 to 875. The financial sector clearly continues to weigh on this index, and unless they can catch a bid, the S&P 500 will have trouble closing above 875 with sustainability. While an opportunity still exists for uptrending behavior, it probably won't happen until closer to the end of the first quarter or the beginning of the second quarter. I am not as optimistic that the NDX can pull the S&P 500 with it.

The Dow behaves the worst out of all of them. Not only does this index remain troublesome, but we've had discussion after discussion about revamping the index. There are clearly losers in this index that may not ever make it back to life. There are also single-digit stocks in the index, which the Dow is not a big fan of having. I expect an overhaul in this index before the end of the third quarter, pushing out the old and bringing in the new.

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Chris Schumacher is a financial trader, speaker, writer and co-author of Techniques of Tape Reading. While Schumacher cannot offer specific investment or trading advice, he appreciates your feedback; click here to send him an email.