Stocks are above support and below resistance – but still very weak

The stock market had a bullish two-day reversal on Thursday and Friday. But, all three indexes are still below the Wednesday highs. It is possible that the market is at the beginning of a new trading range that began with the January 20 low. If the price gains but peters out before reaching the early February highs, this becomes a much greater possibility. The market seems to be stuck between support (this week’s and the August and October lows) and resistance stemming from the just-past weakness.

An important factor in my stock sector table is its relative strength. The numbers reflect gains or losses compared to the overall market. But if the whole market is sinking, a sector that shows big gains is simply not sinking as fast as the rest of the market. Only the Banking Group gained this week; the Cyclicals, Consumer Staples and Technology Groups all fell. The core of the Technology Group: the computer software sector and the semiconductor sector both fell hard. Other big losers were the apparel, real estate and media sectors.

Here’s the relative-strength chart of the Computer Software Sector.


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