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Monday rebound shows firm support

David Russell (david.russell@optionmonster.com)

Stock indexes rallied on Monday, bouncing strongly at key support. The CBOE Volatility Index also plunged as hopes for fiscal deal in Washington reduced anxiety.

The S&P 500 surged almost 24 points to 1426, its highest close since Dec. 24. Early in the session it touched a new low below support at 1400 but quickly rebounded. The index climbed throughout the afternoon, with heavy volume in the final hour. Resistance remains at the mid-December highs of 1448.

The Nasdaq 100 was the strongest of the three equity indexes we track, advancing 2.09 percent to 2661. It remains between support at 2600 and resistance at 2700.

The Russell 2000 followed closely behind with a gain of 2.07 percent to 849.35. Of the major indexes, it remains closest to its 52-week highs and is the best performer in the last three months. It has now established new support around 830, up from 821, while 852 is still resistance.

The VIX opened lower on Monday and kept dropping all session. It ended down 4.7 points to 18.02. Not only does the index remain at a rich premium relative to the S&P 500's actual volatility, but it is also back below the key 20 level that has been resistance several times since March.

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