A week that saw new highs and heavy volume finished with the Nasdaq barely in the green and the SPX barely in the red and the Dow leading to the downside. The heavy volume and overall heavy feel to the market suggested distribution taking place at the top, but it could also be base-building consolidation ahead of the next wave up.
For the day, the Dow lost 55 points, closing at 10586.29, the SPX lost 2.39 points to close at 1141.55, and the Nasdaq gained 4.86 points, finishing at 2123.87. For the week, the Dow lost .3%, the SPX gained .2% and the COMPX dropped .8%, bringing the 52 week gains to 27% for the Dow, 30% for the SPX and 56.2% for the Naz.
Volatility remained low all week, with the OEX volatility index, the "old" VIX now called the VXO, finishing at 14.87, with a bottom having printed at 14.40 on Wednesday. The Nasdaq volatility index, the VXN, printed a record low at 20.1 a week ago but cam close on Thursday's open at 20.4. The NDX volatility index, the QQV, actually broke beneath 19 for a few minutes on Tuesday afternoon, still reflecting the ongoing bear market in fear and option premium that has easily exceeded levels that marked the top in Spring 2000. Bears who aim to survive this rally have learned to take these readings in stride and follow the only indicator that prints on monthly statements, the price.
Weekly COMPX candles
Prophetcharts is expressing the COMPX's .8% drop to 2123 with a green weekly candle, but the closing print is nevertheless correct. Note that the index has closed for the second consecutive week above the upper rising Bollinger band, which indicates a seriously overbought, upwardly trending market. The .8% correction is minor given the close above the upper band and the trending weekly oscillators. Rising wedge resistance on the weekly chart is now 2170, and support is now 2100, followed by 2025. The weekly cycle oscillators are pointed north on buy signals from deep in overbought, the 10-week stochastic nevertheless at a lower oscillator high. Any decline from here will set up a bearish divergence, but we've been watching that setup since July 2003, as it continues to tell us only that the decline, when it comes, risks been serious as the market trends ever higher.
Weeky INDU candles
The Dow dropped .3%, closing at 10586, the first weekly decline in 2 months. The weekly cycle oscillators are still well within their bullish uptrend, as is the price within its rising channel. 10500 was spike support, and 10300 is next support, followed more substantial support between 9900 and 10000. The weekly charts remain uniformly bullish, with this week's notable weakness constituting at best a weak correction.
Daily OEX candles
Turning to our primary trading vehicles, we see some cracks in the bullish armor, and given how overbought the indices had become, one might expect more selling to follow. That may or may not turn out to be the case, but for the moment the price trend on the daily OEX is firm. A daily cycle downphase began last week despite new 52 week highs printing this week. 565 held today, with more significant support below at 560, then 556 and 550. Until 525 breaks, any decline from here should be treated with caution by bears, as that level, once such firm resistance, is now strong support. To the upside, 570-2 is resistance, but a move back to that level could reverse the current daily cycle downphase and likely set off the next short squeeze.
20 day 30 minute chart of the OEX
The 30 minute cycle downphase provided a whipsaw on Thursday that was maximally dispiriting to bulls, but it reached deep oversold territory on Friday before the closing bounce. Unless Monday sells off quick and hard, I'd expect the next meaningful move on this cycle to be to the upside. As can be seen over the past 3 weeks, this cycle does not trend in oversold at all, and barely in overbought. A selloff on Monday would indicate trouble in paradise for the first time in many weeks, and will imply that the daily cycle downphase is going to get some price traction after all.
Daily QQQ candles
I've generated a daily chart for the past 52 weeks, to display the strong uptrend at the expense of some candle clarity. The QQQ is in a daily cycle downphase here, and if 37.40 breaks, next real support comes at 36. The shape of the daily cycle rollover looks good for a move to that level, but this rally has been built on whipsaws and early downphase aborts. Below 36, next stop is 33.50, with minor support at 34.20.
20 day 30 minute chart of the QQQ
The 30 minute cycle for QQQ was trending in oversold before the end of session bounce that closed QQQ at a minor loss of 12 cents at 38.03. 37.60 is strong support, and I'd treat a break of that level as a head and shoulders neckline break, projecting 1.2 points lower to 36.40. Given how oversold the 30 minute cycle oscillators have become and the bullish kisses on which they left off, I'll be viewing any upside Monday morning as indicating a new 30 minute cycle upphase. If that upphase fails right away or from a lower high (below 38.80), then the daily cycle downphase will be confirmed, portending a test of 37.60 support.