The Bottom Line -
The bigger chart picture looks like the S&P 500 (SPX) and 100 (OEX) are "basing" still by going broadly sideways. I favor buying OEX calls/selling puts on dips into the 550-545 zone.
My initial suggested OEX call purchase got me in around 553-552; my suggested "tight" stop at 549 was asking to be tossed from this bucking bronco on Friday the 13th. What me superstitious!? Going forward, give OEX some leeway. I will use an exiting stop now at 542. My OEX trade objective remains as 565, which is just under what I see as fairly tough resistance currently.
Meanwhile, the earnings news for some key TECH stocks was enough to get buying interest/rotation of money into enough of the Nasdaq biggies to pull the Nas 100 (NDX) up through some key technical resistance and pierce its down trendline. I suggested buying NDX calls on dips under 1440, to its 21-day moving average (at 1438 at the start of the past week).
On a strategy note, my NDX 1433 exiting stop suggested last week, would have been touched at the weekly (Wed) low; nevertheless I want to hold calls, as the anticipated upside breakout did develop. However, I don't want to stay in the Nas 100 if it again falls below 1440. If it's a real breakout, the index should trend higher for awhile. My trade objective is 1495.
I continue to be cautious and more risk-adverse in the current conditions, given the back and forth action that's pretty common when the market is trying to establish a bottom.
MARKET NEWS and INFLUENCES
** INDEX TRADER - MIDWEEK UPDATES **
MAJOR STOCK INDEXES - COMMENTARIES/OUTLOOK
S&P 500 Index (SPX) - Daily chart:
The S&P 500 (SPX) did manage to hold in the area of the trendline that the index broke out above a couple of week's ago. What was resistance now appears to be acting as support. However, the break of the 21-day moving average suggests that another down swing can't be ruled out, such as the 1120 area.
I peg immediate support as 1148-1150. 1136 remains a key technical support, at the line of prior intraday lows. A downside penetration of 1136, especially on a closing basis, resumes the bearish chart pattern. What we have seen so far could just be basing action and is my current view.
1180 is first resistance, at the cluster of prior highs; not far above this is resistance implied by the previously broken up trendline at 1185. A close over 1185 turns the SPX chart bullish again on an intermediate trend basis.
The first rally off the April lows was disappointing to the bulls. It should be, but its not uncommon to see a period of back and forth action; assuming that is, that the retracement of the last major advance is going to hold at 2/3rds; and, not end up being a return all the way back to the October lows around 1100.
I'm thinking that the S&P is going to set up for another rally, at least again back up to the 1180-1185 area.
S&P 100 Index (OEX) - Daily chart:
An emerging trendline suggests near support in the S&P 100 (OEX) as being around 547. Prior lows suggest 545 as a key support. Resistance is at 555, then 565-568. I think that OEX is going to have a tough time getting back above those prior highs at 568. At recent lows, upside potential back up to 565-568 is enough for a decent trading opportunity, assuming an exiting stop at 543.
A break much under 545 however, would cause me to exit calls, as I think downside risk would be at least to 535 at that point.
The RSI is headed down again. Not indicating oversold yet, just showing this recent reversal in upside momentum.
My call-put ("sentiment") indicator is not getting too extreme. It shot up on the recent rally, but quickly subsided, suggesting a cautious view. Well it should, the way the last rally fell apart.
HOURLY OEX CHART -
Another way to look the chart is hourly. If OEX can rally from the 550 area, it still is maintaining a bullish chart. A break now to much below 545 is bearish.
Dow 30 Average (INDU) - Daily chart:
The Dow Industrials (INDU) has near support at 10,100, then 10,000. A close under 10,000 would suggest 9850 as next (down) swing objective.
Key overhead resistance remains at 10,375-10,400. A close over recent highs, and the 200-day moving average, is needed to gain some traction on the upside.
If the recent trendline is maintained by a continued pattern of higher lows on the attempted climb higher, there is a mildly bullish pattern still developing on the chart; if so, it suggests at least another move back up to re-test 10,375-10,400 resistance.
The turnaround in momentum in the Dow as seen in the 21-day stochastic is a reason to be cautious in buying this index. I favor OEX calls versus DJX as a way to play the potential upside in the blue chip type stocks, now that we're back down near the previous lows.
Nasdaq Composite (COMP) Index - Daily chart:
I suggested last week that the Nasdaq Composite (COMP) has upside potential at least back to the area of the 200-day moving average. The next significant technical resistance is at 2000, at the current intersection of its down trendline or the top of its downtrend price channel. A close over 2000 would suggest further upside potential to 2050. Stay tuned on that!
Key support is not seen until the index was all the way back to the 1900 area. I would rather be long than short, but having gotten bullish after COMP held a retracement of 2/3rds, by rebounding from the 1890 area, I would have to also say that I was only looking for a rebound back up the 2000 area.
Nasdaq 100 (NDX) Index - Daily:
A bullish chart as long as pullbacks hold near support at 1450. Lower support is implied by the recent low and dip to the 21-day moving average, at 1434. As noted at the beginning (The Bottom Line), I have an objective for a move back up the 1495-1500 area. However, to remain bullish I would like to see NDX stay above 1450, otherwise the recent strong rebound would look like a false breakout.
The market took a look at what was lagging but looking better, and decided that tech stocks were the only sectors still undervalued.
The Semiconductor Index (SOX) closing the week at 408 and always a tech bellwether, made an impressive double bottom low and led the rally on Friday. Judging by what I am seeing on the individual stocks (e.g. INTC), SOX can work higher and is helps a bullish case for NDX.
Nasdaq 100 tracking Stock (QQQ) Daily chart:
Finally, QQQQ managed a breakout above key technical resistance in the 36.00 area and on pretty decent volume over the last three trading days last week. What was resistance now becomes key support. Hey, turnaround is fair play! Assuming the stock holds this area on pullbacks, I measure upside potential to be 36.75 -37.00. A close over 37.00, at the last significant rally high is needed to give bullish hope for a re-test of early-year high at 38-38.25.
On Balance Volume (OBV) was rising before the rally, anticipating it, but has flattened out. I don't think its clear sailing in the Q's from here. I'm cautiously bullish and watching the 200-day moving average as a key area.
SUBSCRIBER MAIL -
Good Trading Success!