THE BOTTOM LINE:
Speaking of the overhead resistance/potential resistance implied by prior (downside) chart gaps in Nasdaq, the Nas 100 (NDX) surged strongly into the beginnings of that resistance on Friday. My bullish outlook is unchanged. While the charts look bullish, it also should be noted that the prior highs may offer tough resistance. Those holding calls and I am in that situation need watch the market carefully for any sign of a (downside) reversal. So what else is new!!
There's nothing technically that suggests warning, be careful, etc., except those prior highs; and, well in the case of Nasdaq if there's a rally failure at the top end of the aforementioned price gap areas, at 2492 in the Composite (COMP) and in the 1820 area in NDX.
In the case of the Dow 30 (INDU) there is a neckline suggested in a Head & Shoulder's bottom pattern in the hourly chart that suggests pivotal resistance at 12,697-12,700 ahead; this was also shown and discussed in my Wed article having the link above. The intersection of the line (implying resistance) has just moved up a bit.
In the Russell 2000 (RUT), there's resistance implied by a return to the previously broken Aug-Jan up trendline coming in around 822 currently; over time that steep trendline will be intersecting at the prior 830 high and offer 'double' resistance so to speak.
On balance there is not a lot of change of/from my bullish commentary of last week but all major index charts are updated below as to targets and/or support and resistance levels. The 21-day averages, at current levels, are still key support areas in my estimation.
MARKET NEWS and INFLUENCES:
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S&P 500 (SPX); DAILY CHART:
Price action in the S&P 500 (SPX) this past week has led to a more bullish chart now that there's been a decisive upside penetration of the prior 1438-1439 highs. Minor resistance may be seen around 1450 at the upper moving average envelope still set at 2 percent over the 21-day average. This envelope line could easily expand up/out to 3 percent however. Pivotal resistance remains the prior line of highs in the 1460 area. It's quite likely that this level will be tested and some likelihood that it is exceeded. Stay tuned on that.
Near support is at 1417, then at 1409 with a close under this prior (down) swing low, unless reversed the next day, bearish in its technical implication.
The daily chart RSI (set to 13) is moving slowly up toward what would be the start of an 'overbought' level, but this is not something that should be construed as a sell 'signal'. However, an overbought reading coupled with churning action at the prior 1460 high or a clear cut reversal pattern, is a stronger warning of a top than just price action alone.
S&P 100 (OEX), DAILY CHART:
The S&P 100 (OEX) also has broken out (above 657) in what looks to be a new bullish up 'leg' that should carry at least to a challenge of the prior important high in the 670 area. Right now, even with a move above 670, I don't anticipate OEX getting much further than about 675, at least not without a pullback/pause first.
Near support is at 647-651, with pivotal support at the prior swing low at 644. A close below 644 would be bearish, unless reversed fairly quickly by a move back above this level.
MARKET 'SENTIMENT' AND NOTES ON TRADING STRATEGY:
DOW 30 (INDU) AVERAGE; DAILY CHART:
Near resistance in the Dow 30 (INDU) is now above and beyond the prior 12,511 high and is now pegged at the prior 12-month high at 12,796. A 'measured move' objective per the chart below, can be projected to the 13,000 area.
Near support is at 12,338; then at the prior recent low at 12,242. A close under the prior low would be bearish. Otherwise, it looks like INDU is being pulled up toward a re-test of the prior all-time Dow high in the 12,800 area.
In the Nasdaq Composite (COMP) we have a convenient 'reference' in the overhead 'gap' area from 2471 up to 2492. If COMP clears the high end of the gap, there is a good likelihood that the Index can get up to the prior high in the 2530 area. Either implied resistance, at 2492 or the prior top could be a stopper to this rally. Some of the key Nasdaq stocks are resurging however and there may be a move to at least that prior high. Beyond that I don't have a lot of confidence in a move still higher, at least without a period of backing and filling and at least some minor pullbacks in the Index.
Near support is noted at 2428, at the LOW end of the minor gap (there's that word/concept again!), with next support implied at the prior swing low just under 2400, at 2397. A close under this prior low would suggest that the underlying stocks were being sold down again and imply that potential buyers were waiting for lower prices again.
NASDAQ 100 (NDX) DAILY CHART:
The Nasdaq 100 Index (NDX) big cap tech index surged, after lagging some in the recent rebound. NDX pierced resistance at 1807 and looks ready now to tackle 1820. A move above 1820 that is sustained suggests that the Index could then make it back to the 1850 area and re-test the prior high. A rally failure anywhere in the 1807-1820 zone would provide a near-term bearish outlook.
Near support is suggested at 1779; next support is not far under, at 1772; finally, pivotal 'must-hold' (for the bulls) support is at 1753 on a closing basis.
In terms of the Nasdaq 100 tracking stock (QQQQ) recent price action, the chart is maintaining a bullish pattern. Key resistance now comes in at 44.75, at the top end of the chart gap; a close above 44.76 suggests potential for the Q's to trade back up to challenge the old high in the 45.5 area.
Near support is around 43.5-43.6, with key technical support further down coming in at the 43.1 prior swing low.
Volume has been relatively low on recent rally days, suggesting that a significant amount of short-covering has been going on, which is not the MOST bullish sign for a push to a decisive NEW high or even necessarily for a move back to the OLD high. I'd like to see volume surge after the long weekend to keep me firmly bullish on the stock.
RUSSELL 2000 (RUT) DAILY CHART:
Near support in the Russell 2000 Index (RUT) now is up to 805. The chart is bullish but important resistance looms ahead, around 822 in my estimation; then at the prior high of course at 830. The pivotal/key near support is at 790-791. Just as with the Nasdaq, I'm not convinced yet that RUT will see a decisive upside penetration of the resistance trendline and/or the old high. IF the Index can get back above it's previous and long-standing up trendline, then this action elevates the chart picture back into strongly bullish.
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NOTES ON MY TRADING GUIDELINES AND SUGGESTIONS
Trading suggestions are based on Index levels, not a specific option (month and strike price) and entry price for that option. My outlook often focuses on the intermediate-term trend (next few weeks) rather than the next several days of the short-term trend.
Having at least 3-4 weeks to expiration tends to be my guideline for trade entry choice. I attempt to pick only what I consider to be 'high-potential' trades; e.g., a defined risk point would equal in points only 1/3 or less of the index price target.
I most often favor At (ATM), In (ITM) or only slightly Out of the Money (OTM) strike prices in order not to 'overtrade' my account. Exit or 'stop' points, as well as projected profitable index price targets, are based on my technical analysis of the indexes.