THE BOTTOM LINE:
As anticipated, SPX and COMP struggled to pierce down trendline resistances. The more critical technical resistance is now ahead, at the June-August highs.
While the area of prior highs (e.g., 1129-1131 in SPX) could mark the top end of a broad trading range, it also should be noted that triple tops tend to be less common than rallies that break through a resistance zone on a third try. Working against the idea of a good-sized run above prior highs just ahead is that the 13-day RSI is approaching the area where an overbought market begins to be suggested. On the other hand (and relating also to technical indicators), as the major indexes get closer to prior highs, there has been a fall off in my bullish sentiment numbers which is positive, in a contrarian way, for at least a challenge of prior tops.
Not related to my market outlook, I was pleased to see that the SEC on Friday announced an expansion of the number of stocks covered by new 'circuit breakers' that can pause the kind of crazy volatile trading seen in the sharp May 6th market plunge. Not only are more stocks in the S&P 500 on the circuit breaker list, but all stocks in the Russell 1000 are also covered.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart continues on a bullish track with SPX's recent breakout above its down trendline and the top end of its bearish downtrend channel. The pivotal test for the bulls will be an ability to take the Index above its prior 1129-1131 highs. Given that the 3% upper envelope line has 'contained' recent months' rallies and SPX is nearing an overbought situation in terms of the RSI, I'm not overly bullish on the prospects for a decisive upside breakout above prior highs. I can't also say that I'm ready to play the short side of this market until I see further price action, especially what happens if the index gets to or near the 1130 area.
Triple tops aren't all that common, as would be the case if SPX challenged its prior highs but then started falling again. On the other hand, in trading range markets numerous tops (e.g., 4-5) in the same area arenâ€™t uncommon. A recent fall in bullish sentiment is a mildly bullish note from a contrarian perspective.
Support is at 1080, with fairly major technical support beginning around 1045. Technical resistance comes in around 1120, extending to 1129-1131.
S&P 100 (OEX) INDEX; DAILY CHART
The chart is the same for the S&P 100 (OEX) Index in terms of the index having penetrated its down trendline resistance; in OEX, in the 500 area. The intermediate trend would turn UP if OEX has a sustained move above prior highs in the 512 area. Any new closing high should see some follow through buying in subsequent days or look out for only a temporary, or 'false', breakout. I think there's a better than even chance that the 512 area will again be tested, but I don't have a view that OEX can climb much beyond this area.
Resistance is anticipated in the 506 to 512 zone. Major resistance is then likely in the 530-532 area, extending to around 540.
Immediate support is at 493, the bottom end of the recent upside gap and extending to 488, at the 21-day moving average; I've noted next support at an emerging up trendline, currently intersecting at 475.
DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 had some further upside momentum in the past week; not a lot, but it was a slightly higher weekly close. A next key technical test for the bulls occurs at the down trendline, currently intersecting around 10560 as noted on the chart below. The most critical test of resistance occurs at prior highs in the 10700-10720 area. If INDU gets, and stays, above 10700, it would suggest a reversal in the intermediate-term trend from down to up. (The long-term trend remains bullish.)
I don't rate it as highly probable that INDU will achieve a decisive upside breakout above 10700. If bullish sentiment continues to moderate the prospects get a bit more favorable.
Near support is at 10300-10315, then at 10250, at the current 21-day moving average. No change in the suggestion that major support should be found in the 10000 area.
NASDAQ COMPOSITE (COMP) INDEX, DAILY CHART:
The Nasdaq Composite (COMP) Index continued its recovery rally dating from the basing type action seen in the 2100 area, when COMP also finally got to a 'fully' oversold extreme.Moreover, this past week's rally pierced the down trendline dating from the April highs.
Technically, the most important resistance is in the 2300 area, at the cluster of prior highs made in late-July/early-August; resistance also extends to the 2321-2341 area, the highs made this past June. As with the other major indexes, a decisive upside penetration of prior highs above 2300 would shift the intermediate-term trend to up in terms of the chart. As indicated with my S&P 500 commentary, bullish fell off this past week going into the weekend.
If bullish sentiment continues to moderate as the Index works higher, this divergence works in favor of increased bullish price potential. Working somewhat against the view of a major breakout ahead is the fact that if prices continue higher, the 13-day RSI will indicated an initial overbought condition.
Immediate resistance begins around 2260-2361, extending to 2300-2310; with next key resistance at 2321-2341 as already noted.
The 21-day average, currently at 2180, is noted as initial support, although 2200 should offer immediate near-term support. Major support continues to be seen in the low-2100 area.
NASDAQ 100 (NDX) DAILY CHART:
My general comments on the chart and its indicators are basically the same as for the Composite above; i.e., bullish near-term upside momentum continued this past week with the breakout above the bearish down trendline. A true chart turnaround (intermediate trend) occurs IF prices pierce prior highs.
The recent close hit 'resistance' implied by the 3% upper envelope line; a line that floats 3% above the centered 21-day moving average. This envelope line is not resistance in a classical chart sense, rather is an area where the index may be overly extended and vulnerable to selling pressures.
I speculated last week on NDX possibly being in a 1900-1750 trading range and the index nearly hit 1900 this past week; stay tuned on a further attempt to climb above 1900.
Currently, I doubt that NDX is going to break out above resistance implied by its prior highs, especially if the RSI climbs to overbought levels again. The fall off in bullish sentiment is a bit encouraging for a further advance but we'll have to see if bullishness picks up substantially again.
Pivotal resistance is at 1910-1920, then at 1925, extending to 1939-1940. The 1840 to 1853 area should be initial support, with lower next support implied by the 21-day average, at 1825 currently. The emerging up trendline, currently intersecting at 1768 may act as a major support if there's another bid dip ahead.
NASDAQ 100 TRACKING STOCK (QQQQ); DAILY CHART:
My take on the Nasdaq 100 (QQQQ) tracking stock chart and indicator picture is the same as the underlying Nas 100 index comments posted above. With QQQQ the key resistances are at the prior highs between 47.2 and 47.7. A future move above and away from these highs would turn the intermediate trend higher in terms of the chart.
As long as the On Balance Volume (OBV)line keeps pointing higher, this is a volume 'confirmation' for the advance seen in QQQQ.
Near support: 44.9-45.0
Next support: 44.0
Near resistance: 47.2
Next resistance: 47.7
RUSSELL 2000 (RUT) DAILY CHART:
The Russell 2000 (RUT) price action this past week basically was a consolidation and churning just below 640. RUT was down on the week. I noted last week that "...further upside potential isn't ruled out in the chart but I don't see a lot of upside ahead..."
Substantial resistance may come in at the 200-day moving average, currently at 645; assuming RUT can climb above its 200-day average, an even more key resistance area is at 665 extending to 672. RUT has achieved an upside penetration of its down trendline, which is a bullish plus but buying so far has failed so far to lift the index above the other key chart points.
Near support looks like 628, with pivotal support starting at 600. On the chart below the line drawn between the two key lows is captioned at a 'possible' double bottom. The reason for indicating this formation this way is that 'confirmation' for a double bottom hasn't occurred; it happens IF/WHEN the rally off the second low exceeds the high that lies between the two lows, which is at 672 in this case.
GOOD TRADING SUCCESS!