The Dow Jones Industrial Average, as well as the S&P 500 are showing a similar technical picture – that of strength in the face of ‘danger.’

Both major US Indexes inflected nicely off a solid level of support, drawn on both charts, which has both served as support and resistance over the last few months.  The longer a trendline exists, and the more frequently it is touched, the more relevant the trendline becomes.

Despite the bounce off support in these two indexes, the NASDAQ actually leads in relative strength, as it is completely erased the losses incurred by Friday’s ‘dramatic’ avalanche in prices across the most popular US Indexes.

The Dow:

The S&P 500:

I have drawn the major support level on both of these charts, and hinted over the weekend that price showed better odds of inflecting off recent support than breaking through it, even if the price action was a slight inflection.

Although the selling pressure and the most recent ‘down-swing’ in price was forceful, it was not sufficient to create a new momentum low in the lower panel oscillator, which is a bullish development.  The fact that the indexes managed to rally as much following a large volatility down move such as Friday is further evidence of underlying potential bullishness.

I mentioned this in the past, but it bears repeating.

WHY is the NASDAQ (heavily weighted with Technology Stocks) outperforming the S&P, Dow, and Russell 2000?

I need only show three charts and mention that ‘a rising tide lifts all boats’.   But does this ‘euhporic’ move contain breadth, or the support of a broad number of stocks, or just a handful?  That is the important question:

Apple (AAPL) traders reacted to strong earnings today:

Google (GOOG) rose in sympathy with Apple, combined with impressive earnings itself:

Strong stock Research in Motion (RIMM) could not be left behind with such a strong move in other technology stocks:

These three charts are even more impressive on the weekly charts.  You’ll need to use a logarithmic scale chart to view them properly.

Keep in mind that these stocks represent a narrow slice of the overall picture of what is happening in the broader stock market.  Other sectors and industries are in massive downtrends that are mirror images of these ‘impressive’ stocks (such as the housing and certain financial stocks).

Nevertheless, it is difficult to combat a rising market, especially one with such resilience as the current market is showing.

Be safe and trade well.