Eoin Treacy's view The S&P 100 Index has a similar pattern to the FTSE-100 which I reviewed yesterday, although it has not fallen to the same extent. Nevertheless, the set of conditions which will have to be met to indicate that the bullish camp have returned to dominance are the same. Here is a summary:

1. The Index found at least short-term support near the psychological 500 level on August 9th and bounced from above that area on August 23rd; posting a higher low. This is the minimum, though by no means only, condition to indicate that supply and demand are at least temporarily coming back into balance.

2. It now has to sustain a move above 545 to post a higher rally high and confirm more than very short-term support above 500.

3. Assuming the second condition is met it will need to continue to hold above the August 22nd low, at 507, on the next pullback, to confirm a short-term uptrend.

4. From a medium-term perspective, the Index will need to sustain a push back above 560 to confirm the best case scenario that the early August plunge was nothing more than an aberration in the course of what has been quite a volatile two and a half year uptrend. Since neither condition 2 not 3 has been yet been met this is still quite a lot to expect.

I clicked through the constituents of the S&P100 this morning in an attempt to gauge the extent of the technical damage experienced this month. There are some very clear divergences between various sectors. For example oil majors (Exxon Mobil), oil service companies (e.g. Halliburton) , pipelines (Williams Co.) railroads (Union Pacific), couriers (UPS), chemicals (DuPont), construction equipment (Caterpillar) and a number of technology companies share a similar pattern of massive reactions against their prevailing uptrends. On the other hand, leaders among the cloud computing, tobacco, credit card and multinational consumer oriented companies have held up considerably better.

The Dow Jones Transportation Average offers a useful template for companies which had previously been leaders but have experienced serious technical deterioration. It trended consistently higher from March 2009 to retest the 2008 peak and lost momentum early this year. The progression of higher reaction lows remained intact until August 2nd when it broke below 5050. The Index subsequently experienced by far the largest reaction since 2008. It broke below the August 9th low last Friday and has yet to clearly signal meaningful support has been found. A sustained move above 4700 would be required to break the seven week downtrend and question the supply dominant environment.

The Dow Jones Industrials Average has also posted the largest reaction in the course of its more than two-year uptrend. It found at least short-term support, on August 9th, in the region of 11,000, which also marked the upper side of the 2010 medium-term congestion area. While the Index has definitely lost some of its uptrend consistency it has held up better than either the S&P100 or the Dow Jones Transportation Average. A sustained move below 11,000 would be required to reaffirm the downtrend.

Leaders in the cloud computing sector such as Amazon, IBM and Apple share a similar pattern of outperformance. Their respective reactions to date have been limited to pullbacks similar to those posted in the course of their impressive uptrends. They all remain above their 200-day MAs. Equity markets still represent a highly charged environment, so the risk premium attached to all equities is higher than it was. However these shares have retained their position of outperformance for a reason and are likely to remain leaders once a more broad based recovery takes hold. Other companies in the cloud computing space such as Oracle and EMC Corp have similar patterns of underperformance to the Dow Jones Transportation Average above. (Also see Comment of the Day on August 11th).

Leaders in the banking sector such as JP Morgan, Wells Fargo and US Bancorp have returned to test the lower side of their respective two-year ranges. Clear upward dynamics held for more than a day or two will be required to signal anything other than temporary support in the current area.

Credit card companies are notable for their relative strength. Mastercard (0.19%) remains in a consistent medium-term uptrend and continues to range above $300. A sustained move below $270 would be required to trigger an MDL stop and question demand dominance. American Express (1.5%) has been ranging with a mild upward bias since late 2009. It bounced impressively from the early August low and a sustained move below $42.20 would be required to signal a return to medium-term supply dominance. Visa (0.71%) found at least short-term support at the upper side of the 1-year range and a sustained move below $80 would be required to question scope for continued higher to lateral ranging.

Tobacco companies such as Philip Morris (3.72%) and Altria (5.84%) are typical defensive shares with strong cashflows and competitive yields. Philip Morris has the more consistent medium-term uptrend and rallied well from the lower side of its range earlier this month. A sustained move below the 200-day MA, currently near $64.25 would be required to question the consistency of the advance. Altria fell more, but has subsequently rallied impressively. It is now testing the three-month progression of lower rally highs and a sustained move above $26.50 would bolster the case for recovery.

The Dow Jones Utilities Average yields 4.52% and remains in a gradual uptrend. It bounced back impressively from the early August low and a sustained move below 410 would now be required to indicate medium-term supply dominance. Southern Corp (4.62%) is one of only two companies in the S&P 100 to have hit a new high since August 9th. The other is McDonalds. The former has rallied impressively this month and a sustained move below $39 would be required to question medium-term scope for further upside. AT&T (5.91%) has a relatively similar pattern to the Dow Jones Utilities Average.

Global consumer oriented companies such as McDonalds (2.75%), Coca Cola (2.76%), Colgate Palmolive (2.67%), Heinz (3.78%), Kraft (3.45%), Johnson & Johnson (3.53%) and Nike (1.48%) have held onto their positions of relative outperformance. A number of these companies are dividend aristocrats exemplifying their strong record of increasing their dividends. (More than 25 consecutive years of dividend increases). Provided they continue to hold above their respective 200-day MAs, the benefit of the doubt can continue to be given to the medium-term upside.

One can't help but spot the commonality in the decline of companies dependent on a thriving industrial sector in order to prosper. The underperformance of commodity and chemical related companies is a less than encouraging omen for economic growth. Companies dependent on the US economy generally appear to require strong cashflows and high yields to attract investor bullish interest. Companies with globally diversified businesses aimed at the growth of the middle classes continue to retain positions of relative and absolute outperformance.