THE BOTTOM LINE:

Upside momentum stalled this past week as the S&P, Dow, Nasdaq Composite and the Russell 2000 formed minor double tops relative to their June highs. Probably a temporary stall but I always pay attention to renewed resistance implied by double tops. We are also in the summer 'doldrums' as the market gets choppy and somewhat trendless as seen on daily charts of late.

There's another aspect to slowing upside momentum here as the S&P 500 (SPX) and 100 (OEX) couldn't pierce resistance implied by their 200-day moving averages. The Nas Composite (COMP) also fell back under this average, although the big cap Nasdaq 100 (NDX), as well as the Russell 2000 (RUT) index, is holding above the 200-day average.

The charts and indicators are presenting a mixed picture, what an analyst I used to work with would call an 'indecision' pattern. Technical analysis of course reflects, in chart patterns, future earnings uncertainties among investors and traders. A double dip recession, should that occur, would of course be a negative for corporate earnings and this worry has resurfaced with the release of Q2 GDP.

While the major indexes broke out above what I see as bullish declining wedge patterns, there hasn't been the upside follow through that is a common next development. However, it's not rare either for pullbacks to develop that carry prices back to the area of previously pierced down trendlines. Once pierced to the upside, the various down trendlines featured on my index charts below, should now have 'become' an area of support/buying interest. Stay tuned on that!

I watched this past week's action from the far off time zone of Hawaii, where I much 'enjoyed' (:-) waking up in the middle of the night to catch the Opening. Falling back to sleep was then a blessing. Even more so was the close of the markets at 11am! Hey, surfs up around noon Maui time.

MAJOR STOCK INDEX TECHNICAL COMMENTARIES

S&P 500 (SPX); DAILY CHART:

The S&P 500 (SPX) has stalled in its rally after only limited follow through to the upside after SPX broke out above its bearish down trendline. With the formation of an approximate double top, I'd rate the chart as mixed. On the bullish side is that buying support has been seen on dips below 1100.

Prices could fall back to the previously penetrated down trendline, and provided that this line 'held' as support, SPX would still have a pattern of higher relative lows, maintaining a bullish trend. In terms of those long calls, I see profit-taking this past week as an appropriate move when the index stalled in 1120 area. Taking out the June intraday spike to 1131, the 1120 area was predominately where the June rally faltered and reversed. Hourly charts of a 2/2+ month duration is the go-to chart after the dailies to better pinpoint resistance and support areas. In this market it's better to take what the trend gives us given the lower volume choppy trade often associated with the summer doldrums.

Key resistance is in the 1120 area, which you may recall is where I pinpointed pivotal resistance last week; next resistance is well above 1120-1127 as implied by prior highs at 1170-1173.

Near support is suggested by the previously broken trendline, currently intersecting at 1068, with support also extending to the 1060-1057 area; next technical/chart support is well under 1060, coming in around 1020.

MARKET SENTIMENT:

The CPRATIO line above, representing daily readings for Trader sentiment, as well as the 5-day CPRATIO average, is neutral. Traders have got more cautious when the market stalled this past week. The appearance of double tops created a pick up in put activity.

A continued fall off in bullish sentiment would offer a contrarian bullish technical aspect, especially if occurring in conjunction with dips to technical support (e.g., back to the down trendline), assuming buying interest then surfaces.

S&P 100 (OEX) INDEX; DAILY CHART

The S&P 100 (OEX) price action mirrors the larger SPX index; i.e., the rally couldn't carry above its prior June high either and has formed an initial double top. The pullback to date is finding buying support on dips below the key 500 area, suggesting no real 'collapse' in this stock group.

I'm taking a mostly wait and see attitude relative to the next move in OEX. The index is no longer 'oversold' like it was at 460 and may continue sideways awhile longer; a sideways move will (as well as a further pullback) will also bring the Relative Strength Index (RSI) back to at least a 'neutral' reading. Bullish and bearish factors, buyers and sellers, seem mostly in balance currently.

Key resistance is in the 507-510 area, and then isn't anticipated until or unless OEX crosses above 530 again.

Important potential technical support is anticipated at the previously broken down trendline, currently intersecting at 485; next support is 480. Major support begins in the 460 area.

DOW 30 (INDU) AVERAGE; DAILY CHART:

The Dow 30 Average (INDU) is holding up relatively well, if by 'well' we mean INDU is maintaining a level above its 200-day average and above near technical support in the 10400 area. So far at least the Dow has maintained closes above the prior June closing high at 10450. INDU's weekly chart (not shown) looks relatively bullish. This past week's INDU high was close to exceeding the top of the Right Shoulder (RS) of the massive 'projected' Head & Shoulder's top that the bears have been licking their chops over. I still don't buy into a massive top theme. Of course, there's a long way still to go to exceed prior highs above 11000.

So far, INDU has held above its prior recent top in the 10400 area, which makes for a bullish consolidation as resistance, once exceeded, 'becomes' subsequent support.

A number of key Dow stocks look like they're consolidating for a push higher. This coming week should give us more to go on in terms of how AXP, BA, CAT, CVX, DD, GE, JPM, KO, and UTX fare. All these stocks look to be consolidating for a next push higher. Stay tuned on this outcome!

I highlighted (red down arrow) near resistance around 10560, extending to the 10600 area; next resistance is well above this in terms of prior rally highs around 10900.

Near support/buying interest as already noted has showed up around 10400, with next technical support suggested by the current intersection of the prior resistance trendline at 10200; major support begins in the low-10000 area.

NASDAQ COMPOSITE (COMP) INDEX, DAILY CHART:

The Nasdaq Composite (COMP) Index has so far failed to follow through on its bullish breakout above it down trendline. I was anticipating a challenge to the prior 2341 intraday high or the prior Closing high at 2310. Instead profit-taking selling and shorting overwhelmed reluctant buyers, ahead of the GDP report. COMP sank below its 200-day average but held above the 50-day. We're looking at a potential bearish double top if prices continue to retreat from recent highs.

Near support is anticipated at the down trendline (resistance 'becoming' support), currently intersecting around 2200, with this area being a pivotal level technically; holding above the trendline keeps the index within still-bullish price action and expectations so to speak. Next lower support is assumed to lie at the recent 2160 (down) swing low, with major support beginning in the 2100-2077 area.

Key resistance is still close to where I noted it last week, at 2300, extending to around 2320 with further resistance at the prior intraday high in the 2340 area. A close above these prior highs would establish upside momentum.

MARKET SENTIMENT:

The CPRATIO line above, representing daily readings for Trader sentiment, as well as the 5-day CPRATIO average, is neutral. Traders have got more cautious when the market stalled this past week. The appearance of double tops created a pick up in put activity.

A decline in bullish sentiment would offer a contrarian bullish aspect, especially if occurring in conjunction with dips to technical support (especially back to the down trendline) assuming buying interest then surfaces.

NASDAQ 100 (NDX) DAILY CHART:

The Nasdaq 100 (NDX) chart is bullish to mixed; 'mixed' in the sense that NDX has made another rally high that is BELOW the prior upswing high. On the other hand, the chart shows bullish technical potential as long as NDX holds above the down trendline it pierced with related upside promise the week before last.

Reaching the 1900 level was a trigger for selling and is NDX's key resistance currently. A move above 1900, especially on a Closing basis, would be bullish and suggest that the prior 1939 intraday high and potential next resistance, would get re-tested.

Near support is highlighted (green up arrow) at the previous bearish down trendline, currently intersecting at 1820; next support then is assumed at the prior downswing low at 1785. A break of this prior low would be bearish and 'set up' possible downside targets to the low-1700 area again.

NASDAQ 100 TRACKING STOCK (QQQQ); DAILY CHART:

The Nasdaq 100 (QQQQ) tracking stock presents a mixed chart picture. The progressively higher 'stair-step' reaction lows made on the way up from the 41.7 low of July 1st is bullish. However, at some point the prior (47.7) rally high ALSO needs to be pierced to 'confirm' a bullish intermediate-term uptrend.

I've noted support in the 45 area, then at the prior low that formed around 44-43.8.

Key near resistance is at the recent 46.7 high for the month long advance, with next resistance at the previous 47.7 rally peak.

As is usually the case with QQQQ, volume expanded on the recent decline as speculative holders of the stock exited ahead of the Friday report. It was 'sell the rumor, buy the fact' as the actual lower than expected GDP figures brought in some buying when the market didn't totally fall apart on Friday. After all, business buying of new computers and software, a bright spot in the GDP report, was a factor in GDP being as high as it was.

RUSSELL 2000 (RUT) DAILY CHART:

The Russell 2000 (RUT) appears to be consolidating for a move higher. RUT's chart remains bullish if the Index continues to stay at or above near support in the 640 area, which was a prior resistance; rebounding from the area of a prior top is a bullish pattern. Next support is at the trendline, currently intersecting at 620; next lower support is then in the low-600 area.

Near resistance is at the prior highs made in the 670-672 area, extending to the previous (June) intraday high at 677.



GOOD TRADING SUCCESS!



NOTES ON MY TRADING GUIDELINES AND SUGGESTIONS

CHART MARKINGS:

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.