Another day of heavy volume capped off a strong week for the indices, with the Dow closing higher by 46.66 points at 10,600.51, the S&P 500 by 7.78 points at 1139.83, and the Nasdaq by 31 points at 2,140.46 on volume of 2.65B shares. NYSE volume was 1.72B for the day, very heavy volume ahead of a 3 day weekend lining up with op-ex Friday.
For the week, the Dow gained 1.4%, bringing its 52-week gain to 21.5%. The SPX was up 1.6% for the week, 6.7% for the month, and 24.1% for the past 52 weeks, while the Naz was up 2.6% for the week, 11.6% for the month and 48.8% for the past 52 weeks.
Volatility remained in extremely low territory throughout the week, with the OEX volatility index (VXO, the old VIX) breaking below 15 again on Friday afternoon as the put to call ratio fell back below .60 and closed at its session low at .52, an extremely unbalanced reading on the call side. These numbers are best taken with a grain of salt at the tail end of option expiration week, but on the other hand, the Friday-afternoon breaks coincided with upside resistance breaks on the indices.
Huge gains were seen in the speculative darlings of bubbles past, with NT and GLW up nearly 8% on Friday, JDSU up nearly 16% (not a Novell up 7.07%, Tellabs up 12%+... you get the idea. CSCO and GE also posted breakout moves, and so there's ample evidence on which to argue for either a manic, speculative blowoff or the beginning of the next wave up in the Rally of 2003.
Weekly COMPX candles
The 2.6% move higher in the Naz leaves the 2000 level in the dust with a close at 2140. The lower wedge trendline break was a throwunder in retrospect, as were the sell signals on the overbought weekly cycle oscillators. The new closing high above the March lows is slightly above the upper wedge trendline, either in breakout territory or not, as trendline drawing is anything but an exact science. I personally am watching Tuesday before making up my mind. A positive close on Tuesday should seal this week's breakout, and lend credence to the buy signals printed on the weekly oscillators. That said, a negative close for Tuesday and next week could be bad news, as the weekly cycle oscillators are still at lower highs against the higher price highs, setting up a potential bearish oscillator divergence. Combined with the echoes of the Y2K blowoff, with stuff like JDSU leading the way, there's plenty of evidence in both directions. But, until we see a decisive break to this iron-clad price trend, the burden of proof is not on the bulls.
Weeky INDU candles
The INDU whipsawed this week, printing a spike low that resolved itself into a doji hammer for the weekly print. The weekly cycles continued to trend higher, and the Dow closed right at the critical 10600 level. The transports held 3000 support and close at 3036.28 on Friday. Again, as with the Nasdaq, there are compelling arguments on both sides of the trade, but those with a bullish bias have been winning with particular panache for the past two months. I count 8 up weeks in a row just completed, with the Dow rising when the dollar collapsed, then rising when it bounced. Bull or bear, you have to respect the price action, and until it corrects for longer than an hour or a day, this remains a market that can only be shorted on an aggressive scalp basis, preferably with very strong coffee and a few tabs of Immodium close at hand.
Daily OEX candles
Turning to our trading vehicles, the snarling mug of The Teflon Market can be inspected more closely. The OEX closed at 564.72, up 4.3 or .77%. The daily cycle downphase aborted after all of 3 days after 2 months of upside, with the lower rising channel trendline never seriously challenged. Upside resistance, if such a word is even still applicable, should be at the top of the channel, currently just north of 570.
20 day 30 minute chart of the OEX
Whether the break above 563 was just an op-ex related short- covering throwover or the start of another bear purge will be seen in short order when the markets open on Tuesday. I can't add much, as the 30 minute cycle has been almost useless all week, aborting each downphase in the very early going as the price squeezed higher. Please note the failure of yet another head and shoulders formation off Tuesday's low, and I suspect that traders ten or even 2 years hence will shake their heads in disbelief at the thought that we ever made money following "chart patterns". Bulkowski's "Encyclopedia of Chart Patterns" for which I paid north of $70 will be used for party laughs or possibly coloring practice by the kids. I digress. Support is currently at 563, followed by 560, 556 and 553.
Daily QQQ candles
QQQ closed 7 cents below its new 52 week high at 38.63, atop what may or may not be a bull flag. So long as 38.40 holds as support, I vote for the bullish interpretation. Forget the daily cycle downphase, which aborted hours after it issued its first sell signal, and ressitance above is next at 39, with upper channel resistance another 50 cents north of that. Support is at 38.40, 37.70, 37.20 and 36.
20 day 30 minute chart of the QQQ
Nothing to add on the 30 minute chart of QQQ, with the flag breakout clearly depicted with a move above 38.40. The upper break was not as explosive as one might have expected, but with op-ex complicating the picture, Tuesday's trading will provide us with either positive or negative confirmation quickly enough.