THE BOTTOM LINE:

My commentary will be more condensed than usual as I can't sit up for extended periods to write the darn thing. This due to minor surgery I had a few days ago. I wanted to, at a minimum, present my up to date charts with highlights I consider key technically. Beyond that, I'll comment as usual but perhaps more focused on just the pivotal chart/indicator aspects.

The Dow 30 and Russell 2000 indexes highlighted last week as good bets for a bounce outperformed my immediate expectations. Where to from here is the next big question as the major indexes approach prior highs.

The market of course had a good run last week. The buying opportunity was on the initial breakout move, when risk to reward on calls was good. Further upside from Friday's levels may be slow going. One, the market is overbought on short-term oscillators. Second, we're at the top end of SPX and COMP's downtrend channels, which can offer tough resistance especially initially. Third, is the approach to prior highs within striking distance in the S&P and Dow, and within a couple of more strong upswings in the Nas 100. In a market cycle like our current one there's a tendency for buyers to hold up on further accumulation as prices get increasingly closer to prior highs.

All important for a reversal in the intermediate-term trend from down to up is that the indexes manage to pierce and stay above, their August tops. In the S&P 500 (SPX), a further advance to the 1128-1130 area would mark the third time that the index has been to this price zone. Triple tops are less common than the times in a third price swing that leads to a break out above 2 prior tops.

In the current trading range market, it's been useful to see 'extremes' by use of the 21-day moving averages with upper and lower envelope lines set to a percentage above/below the center moving average. That percentage tends in my use of it to start out at 3 percent, expanding to 4-5 percent on the sell side of the market currently; i.e., where the sharp price swings have occurred. Old trader's saying: "They Slide faster than they Glide".

MAJOR STOCK INDEX TECHNICAL COMMENTARIES

S&P 500 (SPX); DAILY CHART:

The S&P 500 (SPX) chart is bullish on a short term momentum basis and the intermediate trend would turn up if the prior highs in the 1129-1131 area were exceeded on a sustained basis. More immediately, SPX is at resistance implied by the upper end of SPX's downtrend channel. A move above this line would be a bullish plus with the key test still taking out the prior highs.

There are a number of trading opportunities on both sides of the market in a period such as we're in. Another thing is that the current trading range seems to be narrowing 'in' some. The moving average envelope indicator is a good one for conditions and price swings in such a market.

Support is at 1080, with fairly major support beginning at 1040, extending to the low-1000 area. Technical resistance is at the upper channel line (1105, Monday), then most key, at 1128-1131, the prior 3-month highs. A breakout could hit 1200 at some point, a breakdown below 1040-1000 in a new down leg could hit 950.

MARKET SENTIMENT:

As seen in my 'CPRATIO' indicator above, bullish sentiment has been hitting recent levels that are 'too' high for me to trust that things are going to go the way the bulls are anticipating. Bullish sentiment this high before the market has proven its ability to advance in a new sustained up leg, is speculative at best. Because of my current market sentiment readings I am a guarded bull in terms of seeing a lot more upside in September. This, contrary to my tendency to see last week's run up as impressive, especially the way NDX ripped.

S&P 100 (OEX) INDEX; DAILY CHART

The chart is the same for the S&P 100 (OEX) Index in terms of the index being close to testing a key down trendline, currently intersecting at 501-502. The intermediate trend turns up if OEX pierces prior highs in the 512 area. Any new closing high should see some follow through buying in subsequent days or look out for a false breakout.

There may be tougher going on further rallies now that the bears would no longer be caught by surprise; unlike this past week. Immediate resistance is 501-502; then around 510-512; major resistance begins at 540.

Immediate support is at the 21-day moving average (490 currently); next support, 472 area, with major support beginning around 460.

DOW 30 (INDU) AVERAGE; DAILY CHART:

I was looking for decent further upside in the Dow 30 Average (INDU) and it got to and through 10400 quicker than I imagined. There was a good 'base' of support however, suggested by those several back and forth price swings between 9930 and 10150.

Resistance at the 21-day moving average was minor on the recent rally; the key technical test is an ability for INDU to climb to higher than 10600 for this current move. Above 10600, the key trend changing resistance is at the prior highs in the 10700-10720 area.

Initial support, as implied by the 21-day average, is at 10290, with major support at 10000.

NASDAQ COMPOSITE (COMP) INDEX, DAILY CHART:

The Nasdaq Composite (COMP) Index chart has made a pretty good recovery rally off its recent basing action in the 2100 area, when COMP also finally got to a 'fully' oversold extreme. The market is now overbought on a short-term basis.

Further upside potential is suggested if the index can continue through and above technical resistance at the high end of the COMP downtrend channel; on Tuesday, this line intersects at 2235. Key resistance in terms of the determining the (intermediate-term) trend, is at prior highs in the 2300-2309 area.

The 21-day average at 2188 may provide initial support if prices begin to slide. Major support begins at 2100.

MARKET SENTIMENT:

[Repeating from my comments above:

As seen in my 'CPRATIO' indicator above, bullish sentiment has been hitting recent levels that are 'too' high for me to trust that things are going to go the way the bulls are anticipating. Bullish sentiment this high before the market has proven its ability to advance in a new sustained up leg, is speculative at best. Because of my current market sentiment readings I am a guarded bull in terms of seeing a lot more upside in September. This, contrary to my tendency to see last week's run up as impressive, especially the way NDX ripped.

NASDAQ 100 (NDX) DAILY CHART:

A strong rally this past week. The intermediate trend prospects start to shift if the Nasdaq 100 (NDX) can break out above the upper boundary of its downtrend channel, currently with a top line intersection at 1883. Then, the BIG change would be a move that climbs above prior highs around 1919.

The 21-day average, at 1828 currently, may act as near support, with next support at 1800, then at 1750.

Looks like some more upside, but limited. We may be in a 1900-1750 trading range.

NASDAQ 100 TRACKING STOCK (QQQQ); DAILY CHART:

The Nasdaq 100 (QQQQ) tracking stock is at its key juncture of 46.0 and the top end of the downtrend channel dating from the April top. The key upside resistance target is at prior highs make at 47.2 to 47.7. We don't often see triple tops, so a continuation of the current advance could be the one to carry through the prior double top.

Low volume rallies, even sizable ones, are more or less the 'norm' for the Q's and that's what we saw last week. As long as the OBV line keeps pointing higher, that's the only volume confirmation we're likely to see for a continued advance.

Near support: 44.9

Next support: 44.0

Near resistance: 46.0

Next resistance: 47.2

RUSSELL 2000 (RUT) DAILY CHART:

The Russell 2000 (RUT) chart looked moderately bullish to me last week but a stronger 4-day rally (from 600) than I was expecting, followed. Beyond my expectations was that the Friday close would end up ABOVE a key technical resistance at the top of RUT's downtrend channel. Tuesday/Wednesday in the coming holiday shortened week, may see some selling pressures given a short-term overbought condition.

Beyond any short-term stuff, further upside potential isn't ruled out in the chart but I don't see a lot of upside ahead or much potential for expanding the current trading range to above 670-677.

645, at the 200-day moving average is a potential resistance. The key resistance area in terms of trend direction is at prior highs at 665-672. Initial support is at 630-632; next technical support is noted at 600. A double bottom would be 'confirmed' if RUT got above its previous 672 high.



GOOD TRADING SUCCESS!