Yesterday, following a higher opening, which took the Dow up about 45 points, stocks fell, then picked up steam, and by 11:15 a.m., the blue-chip index was up over 50 points. But that was it for the bulls, and the remainder of the session was spent meandering lower until a last-minute rally put the Dow up a point while the other indices fell slightly.

The technical picture of the market is deteriorating. As I reviewed scores of charts yesterday for our monthly ETF picks, I was struck by the number of industry groups that are so overvalued that downside reversals must be just days away. Many stocks are currently priced 25% or more above their 200-day moving averages — an important indicator and the primary reason why the S&P 500 is lethargic. It is simply out of energy.

Let’s put this in perspective. We are in a bull market. That means that long-term investors should not sell their cornerstone holdings. It is time, however, to harvest short-term gains and to review the market’s support zones with an eye as to where money should be put back to work.

The chart of the S&P 500 shows a clear break into support Zone 1 as a result of yesterday’s low falling below Friday’s low. Within Zone 1 the 20-day moving average (green) could provide support at 1,314, and so could the 50-day moving average (blue) at 1,310. Together they form the first genuine support line to a pullback  If stocks fail to hold within Zone 1’s spread from 1,290 to 1,330, the next support is in Zone 2 at 1,275 to 1,290.

Tomorrow, we’ll consider another very different method of targeting support zones that is literally centuries old and has “stood the test of time.”

For one stock traders should sell now, see the Trade of the Day.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.