THE BOTTOM LINE:
The recent whippy price action, but with closing levels holding not far under recent highs, suggests potential for more upside. I lean to this bullish view but also suspect that 'getting there' might be a little torturous.
The major indexes have stayed close below levels (a bullish consolidation) that could suggest a coming/next move above a sort of last hurdle resistance that seems to show up fairly often: this being the area representing a 62 to 66 percent retracement of a prior decline. There's a tendency for rally failures in this (retracement) zone, but when this area is pierced, an equal tendency for a re-test of the prior top at a 'minimum'.
There is more too it than this, there always is, regarding breakout points in either direction in the two key broad popular indices.
In the S&P 500 (SPX), a move above 1110-1115 is a bullish breakout; a drop below 1078-1080 would suggest a possible retest of prior lows perhaps or something in between.
In the Nasdaq Composite (COMP), a decisive and sustained upside penetration of 2250, would suggest COMP potential back to the area of the prior 2326 high. Conversely, a fall to below 2185 for more than a day would suggest prices were headed back down again.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart is in a pattern that suggests that the index is consolidating before a future move above its recent 1112 high. Such a move above 1112-1115 would fulfill the bullish potential suggested by the fact they kept knocking them down last week but they also kept coming back; 'back' as in back closer to recent highs than recent lows.
I previously emphasized the pivotal bullish 1100 level in the S&P and with one exception (Tuesday), from several onslaughts of selling, SPX managed to maintain closes above 1100.
Beyond and above a breakout above 1112-1115, next resistance looks like 1133 and the most pivotal chart/technical level that could be retested is the prior 1150 high.
If SPX sails above 1115 and the bulls are find and dandy, any sustained move below 1078-1080 should cheer the bears. Support/buying interest below 1080 next comes in around 1060, extending to the prior 1044 low.
There's nothing that's earthshaking showing up with two major indicators I track and seen above. RSI and sentiment readings are mostly 'neutral'. 1-day dips toward bullish territory have recently showed up in my CPRATIO model. This is encouraging or would 'support' a breakout scenario suggested by the chart pattern.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) Index might I suppose continue in a trading range between 500 on the downside and 510 on the upside, both levels being offering key nearby resistance and support levels. The ability for OEX to consolidate near the HIGH end of the run up from 482 up to 510, suggests some potential for another up leg, such as back up to the 530 area again.
Sometimes a moving average 'defines' a significant area of support or resistance and a move above the 50-day average at 510 here would suggest continued upside momentum and that the bulls were still in the forefront of moving this market.
Pivotal resistance is at 510, extending to 512-514, with next resistance starting around 525 and then most importantly, at the prior 531 high.
Key near support is at 500 extending to 496, a price which is the low end of an upside chart gap that showed an acceleration of the rally in mid-February. Next support is at 490, extending to the prior 482 early-February).
DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow (INDU) Average has significant resistance at its recent high at 10438, representing a key 66% retracement of the prior early-Jan to early Feb 'waterfall' type decline. Support showed up in the 10200 area and prices rebounded.
If INDU can pierce 10400 then stay mostly above this level, good potential is suggested for extending the prior rally up to the 10600 area. 'Ultimate' (for the current move) resistance is at the prior intraday high at 10730.
Key near support is at 10200; piercing this, the Dow could be headed for a retest of support at 10000; next support, the 9830-9900 area.
Of the 30 Dow stocks, only 8 are still trading above their longer-term up trendlines dating from the March (2009) bottom: BA, HD, KFT, MCD, MRK, PG, TRV and WMT.
Of the remaining 22 Dow stocks, I mostly see potential to challenge and possibly exceed recent highs by another 5 stocks in the Dow: CAT, CSCO, DIS, HPQ and INTC. 13 Dow stocks, if in strong uptrends, can move the Average higher, but back to the 10700 area? An open question.
NASDAQ COMPOSITE (COMP) INDEX, DAILY CHART:
I feel like a broken record when I repeat from last week that: "The Nasdaq Composite (COMP) only has to pierce 2250, at the 66% retracement, to suggest fairly clear sailing toward a retest of the prior top." I don't why I said 'only'!
Considering how buffeted tech stocks were last week on at least a couple of sharp selloffs. The most telling of which was on Thursday when COMP shot up to close at 2234 after trading down to 2198. After making a new low for the week, a rebound like Thursday's suggests that the investors still have a buying or accumulation appetite; an outlook that says buy on dips.
It's clear that the key COMP resistance is 2250. It's useful to have a well defined key resistance, when then also makes it a key breakout point. A decisive upside penetration of this level, followed by support developing in this area on dips could then 'support' so to speak a move to back up to 2300-2330 or above. The Index seems to want to go beyond the recent 2250 high. Let em go.
In a bearish scenario, COMP cracks 2185 and heads to next support in the 2130-2100 area. I lean bullishly but will give that view a rest if we start getting COMP closes below 2200.
NASDAQ 100 (NDX) DAILY CHART:
There is likely no need to tell you that volatility increased this past week. What may mark a short-term low in the Nas 100 (NDX) may have been made Thursday, as also discussed in regards to the Nasdaq Composite index. A strong rebound from the 1780 area in NDX, led to a springboard move back toward (but still under) prior highs.
A next up leg and bullish phase, would be suggested by an NDX rally that pierced the recent 1826-1830 minor double top. If no such bullish move occurs, this same area could instead form the top end of a trading range that goes on for a week or two more.
The NDX chart seems to reflect continued buying interest in key tech stocks in that recent dips have led to rebounds. Stay tuned for whether independent strength (not bargain buying) can pull NDX above its resistance at 1828-1830. I think the chart (pattern) suggests this outcome.
Near support is 1780, then 1740 and extending to 1712, the intraday low from which the recent upside reversal sprang. A sinking spell taking NDX below 1780 and especially a move next back to the 1740 area, would turn the chart mixed to bearish short-term. On that note, I rate the intermediate-term trend as 'mixed' due to the broad sideways trend of recent months. Only the long-term trend remains bullish in my view.)
NASDAQ 100 TRACKING STOCK (QQQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQQ) continues to hold above 44 support, suggesting still decent upside potential. Current resistance that has to be overcome begins at 44.8 and extends to 45.1.
If the stock climbed above 45 and the chart pattern suggests that possibility, next resistance begins at 45.5 and where QQQQ would rise into a potential supply overhang. Stock for sale versus plentiful willing buyers would reach a key test at 46.5-46.6, where QQQQ would be retesting levels seen at the January top.
Key support is at 43.8; if this level was pierced next support/buying interest probably begins in earnest on dips to below 43, extending to the 42.6 area and lower; e.g., back to 42.
RUSSELL 2000 (RUT) DAILY CHART:
The Russell 2000 (RUT) Index pattern of recent days looks most like the sideways move of a bull flag or pennant pattern reflecting a bullish consolidation prior to another push higher; i.e., through and above 632-633 resistance.
Above the prior 649 high, major resistance can also be implied by the intersection of the previously broken up trendline in the 660 area. Reversals at such trendline junctures have been common.
The current pattern will not be of the bullish flag 'type' (in terms of common outcome) if the RUT does NOT have such a upside 'breakout' type move within 1-3 more trading days. If the index can't pierce resistance, the possibility or likelihood becomes RUT has plateaued at recent highs. The potential for a decline by just not going forward increases significantly.
Near, and key, support is at 620-621. A break of 620 sets up a test of potential support around 611, extending to 597. 585-587 begins a next prior support zone that goes down to the 580 intraday low.
GOOD TRADING SUCCESS!
NOTES ON MY TRADING GUIDELINES AND SUGGESTIONS
1. Technical support or areas of likely buying interest and highlighted with green up arrows.
2. Resistance or areas of likely selling interest and notated by the use of red down arrows.
I WRITE ABOUT:
3. Index price areas where I have a bullish bias or interest in buying index calls, selling puts or other bullish strategies.
4. Price levels where I suggest buying index puts or adopting other bearish option strategies.
5. Bullish or Bearish trader sentiment and display the graph of a CBOE daily call to put volume ratio for equities only (CPRATIO) with the S&P 100 (OEX) chart. However, this indicator pertains to the market as a whole, not just OEX. I divide calls BY puts rather than the reverse (i.e., the put/call ratio). In my indicator a LOW reading is bullish and a HIGH reading bearish, consistent with other overbought/oversold indicators.
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 tend to favor At The Money (ATM), In The Money (ITM) or only slightly Out of The Money (OTM) strike prices so that premium levels are not as cheap as would otherwise be the case, which helps in not overtrading an account. Exit or stop points, as well as projected profitable index price targets, are based on my technical analysis of the underlying indexes.