THE BOTTOM LINE:
For those like me who hope to stay in a move for 2-3 weeks (or more), I suggest waiting for a clearer sense of where prices are going in January. For those traders who like the challenge of quick in and out trades, this market looks like it will provide some select opportunities, but be nimble and quick Jack and Jill. In terms of the S&P 500 (SPX) the key apparent range currently is 1435-1520 and the Nasdaq Composite (COMP), 2550-2735. The Nasdaq 100 (NDX) looks the most capable of breaking out of overhead resistance around 2150, with further upside potential then to the 2200 area.
Bullish 'sentiment' shows more optimism (for higher prices) than I think is warranted by the chart picture, so there's some disconnect there. As the chart pattern provides me the best picture of future upside potential, I'm cautious on betting on the upside here.
The Nasdaq indexes have held so far at least, support implied by their 21-day moving averages. The Russell 2000 (RUT) has been bouncing back and forth between the 740 area and 800, with it's last rally reversing in the 796-800 area where I figured it would hit significant resistance.
MARKET NEWS and INFLUENCES:
** MAJOR STOCK INDEX TECHNICAL COMMENTARIES **
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) Index has been finding resistance in the 1500 area and upside momentum faltered after that test as seen in SPX slipping below its 21-day average. The SPX chart is mixed near-term but the intermediate to long-term trend looks lower, as suggested by the pattern of declining rally peaks. What would be common in this kind of chart pattern is for the next decline to carry lower than the prior 1435 low.
If there's a rally back up the 1520 area with ability to pierce the prior 1523 high, especially on a closing basis, should tell us if there's potential back to 1540-1550 in SPX.
1480, or the level of the 21-day average, is a pivotal area. A continued slid below 1480 will suggest that prices will slip back (at least) toward the prior lows in the 1435-1440 area; ability to hold 1480 could set the stage for a rebound above near resistance at 1500 and then on to the early-December highs at 1520-1523.
S&P 100 (OEX) INDEX; DAILY CHART:
Not unexpectedly, especially in the quieter holiday-shortened week, the S&P 100 (OEX) Index faltered this past week at key near resistance in the 700 area. As I noted with the S&P 500 above, a pivotal area is the 21-day moving average currently at 691. If OEX starts closing under the average for more than a single day, it will suggest a further decline that carries the index back toward 672-670.
Conversely, if OEX can hold the low-690 area or the level of the 21-day average, this would suggest potential to again challenge resistance around 700 and above, especially back to a re-test of the earlier month highs in the 708-711 area. Above 711, the next key resistance is from 720 to 726.
If the prior 672 intraday low gives way, downside potential is to 660 again.
While the spike in my 'CPRATIO' to around 2.4 as seen above (under the OEX price chart), would normally suggest a VERY high degree of bullish sentiment, this reading back on 12/20 looks like it may be a fluke due to unwinding of some very large call positions, bullish sentiment at the end of this past week seems 'too' high relative to what I can see technically for upside prospects for the market. I usually figure that high bullish sentiment in a mixed-picture market foretells more downside to come. Stay tuned on that!
Just a note on my sentiment indicator in answer to a question on it from an OI Subscriber, I display this indicator with the OEX chart as I have to set up this 'custom' indicator with some particular index. Whether seen with the OEX chart or not, this measure of trader sentiment pertains to the market as a WHOLE; it's not an indicator that pertains just to the OEX, but that chart is where you'll see my call/put indicator.
DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) hit the same 13563 high on the day before and after the Tuesday holiday and then fell sharply after that this past week. Hey, double tops are potent symbols of selling pressure/resistance. The Thursday and Friday Closes were below INDU's 21-day moving average, which I rely on a lot to suggest whether near term to intermediate upside or downside momentum is predominating. The Dow is showing more weakness in this way than the other broader indexes.
Near resistance begins around 13560, with the next higher key resistance coming at the December 13780 peak on up to 13800. Major resistance begins around 13960 and extends to the 14000 area.
Near support is suggested by prior December hourly lows beginning around 13140 on down to the lowest daily chart low at 13092 for that period, as seen below. Technical support is also anticipated at 13000, with major support at 12800.
NASDAQ COMPOSITE (COMP) INDEX, DAILY CHART:
The Nasdaq Composite (COMP) Index got closer to its December high than occurred with the S&P indexes, but COMP nevertheless also failed to re-test its prior 2735 top and this remains a key near resistance. Above 2535, I estimate increasing resistance will be seen on any rally that approaches the 2800 area.
Near support is at 2662, at the 21-day average currently, with next support just slightly below at 2640, the low end of the prior upside chart gap. Next support is around 2075, extending down to the prior intraday low 20 points lower around 2555.
NASDAQ 100 (NDX) DAILY CHART:
The Nasdaq 100 (NDX) Index continues to exhibit resistance/selling pressure when the index gets near its 2147 high that was seen earlier in the month. NDX made it 2141 on this latest rally.
The index did have a bounce from support implied by the 21-day average at 2090, so could be in position to mount another rally. Above the prior 2147 high, I calculate next resistance at 2168-2170, with major resistance coming in at 2200.
Below near (2090) support, the next technical support is at 2070, at the top end of the upside chart gap from 12/20-12/21; major support in the Nas 100 index is in the 2000 area.
I wrote last week that: "It looks to me like NDX may establish a trading range between 2150-2160 on the upside and the 2040-2000 area on the downside." This comment may still reflect a valid estimate for NDX's possible trading range, but this week I would extend the upper end of the Index's possible trading range to 2170-2200.
RUSSELL 2000 (RUT) DAILY CHART:
Just like the Russell 2000 Index (RUT) was a likely low-risk call buy on its last decline to the 740-735 area, taking out puts in the 796-800 area also was 'low risk', assuming that an exit on the trade was just over 800; e.g., 805. The rational for such a trade technically was the index being both back to an area of prior highs with the assumed resistance there coupled with the fact that the 13-day RSI reached an overbought extreme.
Near support is suggested at the low of the chart gap around 767 at the first green up arrow on the RUT daily chart below, with next support at 750, with major support anticipated at the 'line' of prior lows around 735.
It looks to me like RUT may be headed back down to the 750 area. All bearish bets are off however on a rebound back to and above the 800 level. Major resistance begins at 815 and extends up 830.
Good Trading Success!
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.