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Tickers in this Article: SPY, DIA, IWM, QQQ, AMZN, NFLX
Despite some high profile stocks taking it on the chin this week, the overall stock market managed to follow through higher in an impressive show of strength. After a mid week dip that served to trap a few bears, the markets gapped higher on Thursday and powered through the end of the week. The market indexes are now quite extended and have pushed higher than many market participants expected in a very short time. Some of the market indexes are approaching resistance levels, and it would not be surprising to see the markets take a little breather soon. We mentioned last week that it appeared as if the markets had put in their lows for 2011 and this week did nothing to disprove that notion. The S&P 500 as represented by the S&P 500 SPDRS (NYSE:SPY) ETF backed off the 200-day moving average mid week, but was able to push through this level by the end of the week. Incredibly, SPY has rallied over 20 points in less than a month and now stands back in its prior base. While many have suspected this move to simply be a short covering bounce, the recent strength has to be respected. That being said, SPY is very overbought and could see some sideways movement or possibly some profit taking near these levels. If SPY were to reverse near this level, the key support area to monitor would be near $122.50. This level was holding SPY back before the recent strength and should now be a support level.

The Diamonds Trust, Series 1 (NYSE:DIA) ETF also powered through its 200-day moving average after feigning a failure earlier this week. This week's strength caught many bears off guard, as the mid week reversal appeared to have legs behind it. The $118 level may now be a key support level to watch as a former resistance area. Any weakness in the coming days may find buyers waiting at this level.

The Nasdaq 100 suffered through some volatility this week as high profile stocks like Netflix, Inc. (Nasdaq:NFLX) and Amazon, Inc. (Nasdaq:AMZN) suffered through post earnings declines. However, by the end of the week, the Powershares QQQ ETF (Nasdaq:QQQ) ETF was back at new weekly highs and is amazingly poised just under multi-year highs. The fact that this index has been able to shrug off some high profile stock's profit taking reveals wide participation in this rally. This bodes well for future strength. The $59 level remains a key resistance level to watch and could cause QQQ to pause soon.

The small caps had a strong week as well as the iShares Russell 2000 Index (NYSE:IWM) ETF finally joined its peers in clearing its September highs. IWM rallied sharply, but did manage to pause under its 200-day moving average. This is still showing some relative weakness to its market peers, and the $77.50 level may act as resistance in the near future. This was a prior support level and is coinciding with the 200-day moving average. A close above this level would go a long way towards improving the technical structure for IWM.

The Bottom Line
The markets continued to surprise market bears with its strength towards the end of the week. The inability for the mid week reversal to gain momentum was revealing of the underlying strength supporting this move. Regardless of what is fundamentally pushing this move, the strength has been readily apparent. We also mentioned last week about the recent change in character from selling rallies to buying dips. This was once again very apparent and may be the pattern to watch moving forward. With the markets extremely extended, it doesn't make sense to chase this market at these levels. However, the market structure has certainly improved to a point where dips should be expected to find support.

Charts courtesy of stockcharts.com

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

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