Option Investor
Index Wrap


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I'm skipping the more extensive 'bottom line' commentary of my weekend updates and just go to the index charts. I'll just say that I think it's better for my psychic health to stop 'predicting' any imminent demise to this runaway trend or any special resistance as a 'stopper', especially in the tech heavy Nasdaq. A correction will be seen at some point but it will be hard to predict when.

We can predict that the market is high-risk as far as getting into new index call positions. When a market is 'overbought' it doesn't mean it won't keep going up for some time more; but, when some real negative news hits, the reaction can be sharp and more severe than when the market hasn't exhausted a lot of buying power. Some real panic selling can ensure and make for poor trading decisions as a result of this kind of emotion.


S&P 500 (SPX), Daily chart:

The advancing trend is tracking up along the upper trend channel line. This only suggests that the rate of further increases has become more moderate, not how long it may do this. Prior to the last short-lived correction, the S&P 500 (SPX) 'hugged' the upper trendline for a period of about 25 (trading) days. Hey, SPX has only spent about 15 days this time in its run higher.

1250 still looks like a next potential objective this week. 1225-1220 still looks like the key downside support. I don't trust these markets that keep advancing while RSI goes sideways to lower. I've seen too many 'breaks' from or out of this kind of technical situation. But, meanwhile, prices keep advancing.

S&P 100 (OEX) Index Daily chart:

The S&P 100 (OEX) is lagging the broader market. These are not the calls to own, but the index may get to 580. I may take out some puts in that area, but risk very little. Then again, I may lay down until any feeling to short this market goes away. It's one thing to resolve only to buy after a correction sets in, another to buck the trend.

OEX is still in a basically sideways trend. Watch 571-572 as key support. RSI trends lower, while OEX goes sideways to a bit higher. However, bullish sentiment has moderated. Rallies where participation (buying) has broadened out to a lot of smaller-cap stocks AND where bullish sentiment is only moderate can keep going quite a while. Not a great trading market for the main index options, except in trading the stocks themselves.

DOW 30 (INDU) Average, Daily chart:

Dow 30 (INDU) resistance around 10700 area is still the area to watch. 10600 is near support and the place to closely observe buying interest or the lack thereof, on a pullback.

It's a very segmented market. There is no generalization to make about where big-cap lags small-cap, but these kind of rallies tend to be nearer the end of a move, than the beginning of another rally to come; such as if this recent 'consolidation' was ahead of another up 'leg' in the Dow.

NASDAQ Composite (COMP) Index, Daily chart:

If you own a bunch of tech stocks from the dead years in the recent past, you have reason to be encouraged.

I keep playing with the upper channel line, as the Nasdaq Composite index (COMP) still appears to be tracking higher in a channel. There still appears to be 'room' on the upside, for prices to go still higher and still be within this rate of ascent. It's a steep climb. There is a tendency to 'disbelieve' the staying power of this kind of advance, since this kind of power move has not been seen in so long. But, my conclusion is, with an improving economy, where else are you going to put any money. So, reach down into the second tier stocks.

2245 is a near-term and next objective. I would be looking for possible downside follow-through if COMP pierced 2200 at this stage; 2150 is a potential target if that happened.

Nasdaq 100 (NDX), Daily chart:

The Nasdaq 100 (NDX) chart pattern remains bullish and the index keeps chugging higher, with a possible next upside objective to 1640.

1592 is a key 'line' of support. On a very short-term basis, the hourly chart (not shown) up trendline intersects at around 1615 and a break of this level, could be a trigger for some selling. Those holding calls are going to get concerned at some point about taking the money (profits) off the table.

In this kind of market, currently ignoring negative news especially the climb in oil prices recently, there's always a 'trigger' point where some negative news gets market players thinking that maybe this thing is overdone. Stay tuned on that.

The Nasdaq 100 tracking stock, QQQQ: Daily chart:

The Nasdaq 100 (QQQQ) stock climbed over 40. 40.3 is an obvious target, the natural place to go in a test of the prior high.

39.5 is near support, then key technical support at 39.2.
I don't like the Q's when it's going up like this on less and less volume. I feel like I am going to end up holding when the stock breaks.

Meanwhile, those in the stock are hanging in judging from this volume trend. If long from the last 'safe' buy point, when it gapped up through 38.5, how much more profit do you think you'll get? Maybe 40.5 will be seen. If you want to preserve profits don't go on long vacations in the woods. Or, use an exiting stop at 39.5.

Good Trading Success!

Please send any technical and Index-related questions to me at Click here to email Leigh Stevens support@optioninvestor.com with 'Leigh Stevens' in the subject line; not only for answer, but also for possible use in my coming week's Trader's Corner article. Your emails are appreciated and where I learn what's on YOUR mind!

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