THE BOTTOM LINE:
The S&P (both the 100 and 500), the Dow Average, the Nas Composite and Nas 100 (on a Closing basis), plus the Russell 2000 (RUT) cleared prior recent highs after holding technical support more or less implied by the last 'line' of tops from late March, especially on a Closing basis; this is as it should be according to the idea that prior resistance, once pierced, tends to 'become' support on pullbacks later on. Sure enough it did.
The only thing that I was still waiting for to suggest that it was going to be clear sailing at least back up to re-test the prior highs from late-February, was to see the Nasdaq Composite (COMP) and the Nas 100 (NDX) move back above resistance implied by the overhead and prior (downside) chart 'gaps' from the late-February market break. Well, COMP closed right up at the top of the gap and NDX was close to the same.
Unless there is a sharp downside reversal on Monday/Tuesday I think that the S&P 500 (SPX) is still leading the way higher here. If the Nasdaq rally failed in the aforementioned gap area, even though this segment of the market is lagging the leading S&P index, it could have signaled that the current rally might falter shy of the old highs.
Now, it looks good for a test of the old highs and some of my work suggests that the major indices can advance to still higher objectives such as to 1480 in SPX and to around 12,900 in the Dow, at a minimum. But first of course, these same indexes have to clear their old highs. I have to just note that the market is getting a bit 'overextended' in terms of how far current levels are above the near 21-day averages and is moving into the upper end of the 'overbought/oversold' scale in terms of the Relative Strength Index readings.
Double tops are always something to be watching out for IF this rally reverses in the area of prior highs. Stay tuned on the outcome of all this but meanwhile the charts continue to look bullish.
My midweek TRADER'S CORNER article was about the predominately bullish chart picture and that Wednesday was NOT a One-Day Reversal (ODR) Down, but I voiced some concern about the overhead gap area IF the top end of the Nasdaq gaps could not be overcome. This article can be seen in your Wed, April 11th Option Investor Daily Newsletter or can be viewed online by clicking here.
I'm firing on about 3 of 6 cylinders today as I'm down, not quite out, with a nasty cold/bronchitis type virus brought to me as a special offering from New York City it seems. One of my friends, after giving a concert here in the Rockies and coming to our Sunday brunch and who thought he was no longer contagious, did in fact seem to spread his suffering to me. No blame, but it made me more aware of lying low when you have something like this, so I am! But I will struggle through making hopefully some sensible comments on the various indices. Thank goodness I can only infect my computer. Hey, virus turnabout is fair play!!
MARKET NEWS and INFLUENCES:
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** MAJOR STOCK INDEX TECHNICAL COMMENTARIES **
S&P 500 (SPX); DAILY CHART:
I could almost repeat last week's comments that price action in the S&P 500 (SPX) this past week has led to a still more bullish chart with the break out move to another new high. The prior cluster of highs around 1460 is the only real remaining potential resistance. As I noted in my initial comments, 1480 would be a next upside target if SPX closes above 1460 without any reversal(s)in the following day or two.
1435-1438 is pivotal near support, with next support around 1429 or the 21-day moving average, especially on a closing basis. I would continue to view a close below the 21-day average not reversed (back to the upside) the next day as a warning of the start of a further substantial correction. Major support is in the 1410 area as the last downswing low. A close below 1409 suggests an intermediate-term trend reversal.
The daily chart RSI (set to 13) slowed its march up into the 'overbought' zone, but the reading at the upper end of this scale does suggest caution if there's signs of a reversal in the area of the old highs around 1460. Especially of concern would be a spike up to the low-1460 area, followed by a close near the day's lows; i.e., a One-Day Reversal down.
S&P 100 (OEX), DAILY CHART:
The S&P 100 (OEX) also broke out again to a new high for the current move and looks headed to test of the very significant prior 'line' of highs/resistance around 670. A close above 670 suggest potential for a 680 target and ultimately to around 690.
Key near support is at 656-657, then at 653 at the 21-day moving average. I'd make the same comments on the relative importance of OEX holding above the 21-day average especially on a closing basis. Pivotal support is at the prior 644 (down) swing low.
DOW 30 (INDU) AVERAGE; DAILY CHART:
Near resistance in the Dow 30 (INDU) now looks like 12,700, with key resistance at the old 12,796 high; call it 12,800 being so close. Based on an hourly Head and Shoulder's (H&S) bottom formation (not shown), you could measure some technical resistance at around 12,850 also. As I discussed last week, a 'measured move' upside objective can be projected to the 13,000 area. First is getting through the prior high however! Never be complacent about the market sailing through a significant prior top!!
Near support is at 12,460, then at 12,420 at the 21-day moving average. Below these levels, significant must-hold support for the bulls is the prior 12,242 intraday low.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
As noted already, the Nasdaq Composite (COMP) has closed right at the top end of the overhead gap area, suggesting that COMP will move on above this implied resistance as outlined on the chart below. It hasn't done it yet, but the close right at its high on Friday is bullish. 2531 is the prior intraday high that is a next target for a re-test of on strong is the current upside momentum and strength we're seeing in the tech heavy Composite index. It may be following the leader (the S&P) but it IS following!
Near support is noted at 2450, then at 2440 on a closing basis, at the 21-day moving average. 2397 is key support implied by the last downswing low.
NASDAQ 100 (NDX) DAILY CHART:
The Nasdaq 100 Index (NDX) big cap tech index surged to a new closing high and closed near Friday's peak level, which makes for a new weekly closing high. A decisive upside penetration of 1820 would be bullish and suggest that NDX could be heading again up toward the prior top in the 1850 area; I don't currently have price swing objectives above the prior 1851 intraday high. A move to the 1850 area seems like a fair distance on the chart (from 1820 to 1850), but would mean the index only tacked on a further gain of 1.6 percent.
Near support is at 1794-1797; next support is at 1788 as suggested by the 21-day average and then at 1779; speaking of gap areas as I've been doing about the overhead gap, 1779 is the low end of the upside gap seen under current price levels and a likely technical support. Major support is at 1753 at the prior swing low.
NASDAQ 100 TRACKING STOCK (QQQQ); DAILY CHART:
Above 44.76, the next key overhead resistance in the Nasdaq 100 tracking stock (QQQQ) is at the prior intraday high at 45.55. On Balance Volume (OBV) being in a strong upward trend is supporting the bullish chart action of this past week; for example, the strong Thursday rebound from the level of the 21-day average at 44.0.
Near support is at 44.0, next at 43.60 and lastly at 43.29 to 43.10.
RUSSELL 2000 (RUT) DAILY CHART:
The chart of the Russell 2000 Index (RUT) is also bullish in its pattern along with all the other major indices. Key or pivotal resistance is at 830, a sort of 'double' resistance implied by the prior high and a return to the previously broken up trendline as highlighted on the daily chart below.
Near support is at 803, then around 790-791. I don't put as much store on breaks of the 21-day moving average on RUT, but have this average on the chart below as a trading 'benchmark'. A close under 791 as the prior swing bottom would be bearish unless it was a simple 1-day affair.
RUT looks higher and could tack on another 10 points, to 840, if 830 is pierced.
Good Trading Success!
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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.