For the past few years the Market has NOT been up in September. But the 'curse' appears to be broken and the correction has run its course.
In answer to the age old question of what to do next, I tried to be clear last time you weren't wondering how I saw the market or what I was doing. So, I called my last week's (9/24) Index Trader article, "BUY CALLS". For an online reference to it click here.
Sometimes you get those clear perceptions of patterns. That's what 'pattern recognition' is; i.e., you've seen 'it' before. For the market repeats cycles and patterns over and over.
I said that I was a buyer of S&P 100 (OEX) and Nasdaq 100 (NDX) calls based on OEX holding 560 at its up trendline and the double bottom low made in NDX around 1550, as you'll see on the charts below. The Dow 30 (INDU) also made a double bottom low around 10350 and buying Dow Index (DJX) calls also looked favorable. The Nas 100 tracking stock, QQQQ, made a double bottom low at 38.25, and based on that the stock also looked like a buy; a lower risk way to play the upside, but also WITH a (sell) stop in place; at 38.00. My objective: Q's back up to the 41.5 area, maybe 42.
On cue the 'Rita-relief' rally came early in the week, followed by some backing and filling after that which gave YOU and I the opportunity to BUY INDEX CALLS.
So far, the S&P 500 (SPX) has held at its long-term weekly up trendline intersecting at 1205 currently. SPX did have a 1-day penetration of its up trendline on the daily chart, but it reversed to close above it on the following two days. I often say that it's not a single 1-day penetration of a trendline that is definitive if this action is not upheld the next day.
I mentioned last week also that I liked the technical action in the Russell 2000 (RUT). It made a double bottom. I'll show the chart next.
Nifty technical action, making the double bottom in the area of the prior March high; resistance, once broken, tends to 'become' support later on. It has a steeper near-term trendline going on. The main support and dominant trendline would allow a pullback to the 610 area even and still be within its overall uptrend.
I also like the technical action in the SOX (Philly Semiconductor Index), which formed a new trendline with multiple 'touches' to the projected line as seen in the chart below. It looks to me like SOX will take out its prior double-top highs. Stay tuned on that! We've been here before.
I still figure that Oil prices have discounted most of the bad news on production cutbacks and will fall back in price over the next few weeks. The Gold and Silver Index (XAU) looks like it may once again top out in the 111-113 death zone (wkly close: 112.9).
MARKET NEWS and INFLUENCES:
** MAJOR STOCK INDEX TECHNICAL COMMENTARIES **
S&P 500 (SPX); DAILY CHART:
Near support in the S&P 500 (SPX) I figure now at 1220, at the trendline per the chart. Possible trendline 2 (T2) is drawn in grey and rests a bit under this area. Major support in SPX is at 1200.
Near resistance at the 21-day moving average was pierced at 1226. and the Index looks like its headed back to the area of the prior highs around 1243-1245.
SPX never got as 'oversold' as it can tend to in terms of the Relative Strength Index or RSI. However, it got close. In an uptrend, the market tends to get MORE 'overbought' and LESS oversold.
S&P 100 (OEX) INDEX; DAILY CHART:
For two weeks I've been a bit of a 'broken record', as the S&P 100 (OEX) remained in an uptrend, as long as lows held the April Sept. up trendline; this line also being the low end of its uptrend channel. 560 held as support, keeping me bullish. 560 remains the key or pivotal near support.
There is now minor resistance at the 21-day moving average at 567. I'd like to see a close over this line, and not reversed the next day.
I favored purchase of OEX calls, especially close to the aforementioned trendline, allowing a close-by stop just under the trendline; if pierced, an exit on this break (and possible trend reversal) helps keep to a small loss. My exiting 'stop' order this week is at 559 for OEX calls.
I continue to estimate upside potential to at least 572, at resistance implied
by the down trendline (see red down arrow there) and probably
back up to re-test
the prior high around 575. Over time I anticipate a move back up toward 580,
My bullish 'sentiment' indicator (lowermost indicator above) was rising sharply over the past week, but is not at the kind of extreme that gets up looking for a top or shakeout.
DOW 30 AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) look bullish in its pattern and INDU rebounded first from its prior low. Very near support now looks like 10500, with key technical support not far under, at the up trendline as noted by the green up arrow, at 10450.
Near resistance is at 10700; there are multiple highs made at this key 'line' of resistance. 10700 is the key or pivotal level that must finally be overcome if INDU is going to head again up toward its upper channel line currently intersecting up around 10900.
As with the S&P indices, INDU never got as oversold as it has in the past few months. This, by itself, doesn't mean that much; not as much as the fact that there is again enough upside momentum to cause the stochastic model to turn up.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
Key near support in the Nasdaq Composite (COMP) Index has been at the 2100 level, which formed a double bottom low when it 'held' the prior downswing low. My re-drawn up trendline intersects currently around 2112, which now is near technical support.
COMP got above the 21-day moving average, which is a 'confirming' indication or suggestion that the momentum in the index is up and away. Just as the prior low was important, the pivotal overhead resistance is at the prior high, at 2185. Above this area, is the previous rally peak at 2220. I think COMP is headed to re-test this area. But, first of course, is the 2185 level.
As I said in the my initial 'bottom-line' commentary, the fact that the Semiconductors are advancing bodes very well for the Nasdaq overall.
NASDAQ 100 (NDX); DAILY CHART:
This past week's strong move over its 21-day moving average put the Nasdaq 100 (NDX) back into a near-term uptrend. Even the recent decline remained within the overall multimonth uptrend, although a break of 1550 would have said otherwise.
NDX looks like it is heading toward the 1619-1620 area at the prior recent peak from early-Sept; next resistance is at 1630. My next objective in the Index is to around 1650. Stay tuned on that.
Near technical support is around 1568-1570, at the up trendline, as noted by the green up arrow on the daily chart below.
I'll exit NDX Index calls on a break of 1560 in the coming week. A very 'tight' exit/stop point could be as high as 1585 on a CLOSING basis, but I want to have a 'loose' stop point, and give NDX room to roam. I would exit if the rally failed at 1630; or, reached 1650, which is my trade objective.
NASDAQ 100 TRACKING STOCK (QQQQ); DAILY CHART:
The Nasdaq 100 (QQQQ) tracking stock has nicely held the prior low and, on a closing basis, the low end of its uptrend channel, per the green up arrows I've noted on the daily chart below. Near support is at 38.75; then at the prior low at 38.25.
The 39.9 40.1 zone is the key resistance that must be overcome if the Q's are to make a run higher, such as to the upper area of its broad uptrend channel; e.g., to 41.5 42 at some point.
The jump in daily volume was a concomitant sign that buyers surged back in on the strong Thursday advance; and, probably suggested the shorts were running for cover too. Interestingly, On Balance Volume (OBV) had turned prior to the recent 'confirming' advance up through near resistance.
Please send any technical and Index-related questions to me at email@example.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!
Good Trading Success!