THE BOTTOM LINE:
As I've been anticipating, all the major market indexes broke out to new highs relative to the prior peaks of early-April. The strong move of this past week 'confirms' a renewed intermediate-term up trend. On a technical basis, an uptrend is composed of a series of higher highs and lower relative (reaction) lows. The last index lows made in mid-April were higher than prior lows and now the latest highs have pierced prior price peaks. I'm stating the obvious I suppose but it's necessary to define technical trend criteria. The tricky part now is to make some projections as to possible upside targets from here.
The Dow 30 (INDU) is the only major index to have regained its prior daily chart up trendline. Therefore INDU is also back into its prior uptrend price channel. The upper end of that channel currently intersects in the 13500 area. This upper channel line over time becomes both a potential objective and possible resistance. Sometimes rally failures occur around the middle of these type channels.
All the other major indexes I follow for this column have yet to regain their prior rate of upside momentum by climbing back above previous up trendlines. Resistances implied by such previously broken up trendlines are not too far off; e.g., in the S&P 500, the current intersection of this trendline is 1380. The Nasdaq 100 (NDX) has 3 lows that allow drawing a new up trendline and which can define a 'stop-out' point for NDX calls, However, NDX needs to climb above 2450 currently to get back above the dominant up trendline dating from its late-August 2010 lows.
My individual index charts shown below highlight the aforementioned trend and channel lines as guides to potential resistances ahead. Those resistances will either be implied by previously broken up trendlines or by the upper end of the prior uptrend price channels. We're in a strong move that should continue but a cautionary note is seen by the indexes being at or near overbought RSI readings. This (overbought) aspect is not showing up yet in terms of my sentiment indicator, which keeps me overall bullish. Once traders get much more active on the call side, I'll turn more cautious.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
I've held the view for awhile now that the S&P 500 (SPX) would NOT form another top in the 1340 area and would pierce its prior highs. Another top in this area would have been a triple top, which are rare in the indexes and is a bit more common in individual stocks and in the commodities markets.
The chart is bullish. To regain its prior up trendline, SPX would need to move to above 1380. I've noted potential resistance there and extending to 1400. Fairly major resistance then begins at the upper end of SPX's prior uptrend channel, which currently intersects around 1440. A 'measured move' objective, where the current up leg at least equals the last, is to around 1385. I think that this current leg could exceed the last (up leg), so stay tuned for that. Assuming SPX gets back up into the highlighted prior channel, there's some likelihood of at least a move to the middle of the channel.
Support is seen at what had been resistance, at 1340, extending to 1320.
RSI and TRADER 'SENTIMENT'
The 13-day RSI has now reached the low end of its 'typical' overbought zone but which, at most I think, only suggests a vulnerability to minor pullbacks. If bullish sentiment, as seen with my indicators above, was at an 'extreme', I might be more concerned about topping action. It's quite bullish that SPX and the other major indexes have gone to new highs with a some neutral stance shown by traders in terms of market sentiment. When the next significant top occurs we'll likely have some bullish extreme readings in my CPRATIO model beforehand.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) is bullish in its pattern with its strong move above prior tops in the 599-602 area. To regain its prior uptrend line, would take a move to above projected resistance at 615. Next suggested resistance is highlighted well above this area, at the top end of OEX's uptrend channel currently intersecting at 643. I foresee OEX moving back into its prior uptrend channel and moving up within it.
A 'measured move' objective, where this up leg equals the last, is to 617. However, I'm assuming at this point that OEX can climb back into its uptrend channel, in which case even a mid-point move within the channel is to 629-630.
OEX technical support is now assumed to lie at the prior high (prior resistance, once penetrated, 'becoming' new support) in the 600 area, extending to around 590.
DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) average is no longer alone among the major indices in going to a new high. INDU is however the only major index that's gotten back above its prior longer-term up trendline. Needless to say the chart is bullish in its pattern.
I've been saying that I thought that INDU would at least climb to the 13000 area and that looks to be on track. Short-term, the Average is overbought. Pullbacks should be well supported however. I've noted technical support at around 12500 and below this in area of the 50-day moving average currently at 12240.
AXP, CAT, DD, INTC, JNJ, MMM, PFE, T, and XOM have joined BA, IBM, KFT, TRV and UTX as having made new highs for the current move. The Dow 30 stocks at such new highs now number 14, which considerably broadens out the INDU move; last week it was just 5 stocks leading the Dow to a new high.
NASDAQ COMPOSITE (COMP) INDEX, DAILY CHART:
The Nasdaq Composite (COMP) chart is bullish, as it has gone to decisive new highs above 2840. The only implied resistance I can see now is at the previously broken up trendline in the 2900 area. The even 100 levels tend to often act as key support or resistance areas anyway. If COMP can climb above 2900, the index would regain its prior uptrend channel. Next resistance, at the channel midpoint, comes in around 3000 in my estimation. The 1000 point increment is even more pivotal as potential resistance.
I've noted a first key support as 2800, then at 2750. COMP has reached an overbought 71.2 in terms of the 13-day Relative Strength Index or RSI, making the index vulnerable to pullbacks.
I rarely mention it but I suppose I should occasionally that the concept of 'relative strength' within stock groups is a different concept than the RSI indicator here; i.e., relative strength in individual stocks is about a stock within say, the services or financial sector, as to its RANKING in terms of its performance relative to its group.
NASDAQ 100 (NDX) DAILY CHART:
The Nasdaq 100 (NDX) is bullish but the move to new highs above 2403 hasn't yet been decisive. I've noted resistance at an extension of the previously broken up trendline, currently intersecting around 2450.
Slowing of NDX's upside momentum in the area of prior highs should put holders of NDX calls on alert to possible selling pressures or, conversely, just not enough buying to pull many big cap tech stocks much higher. As a key example, I've been thinking that Apple (AAPL) could be building a top. Stay tuned on that. A lot of money is now flowing into less glamorous NYSE listed stocks that have underperformed tech for some time.
Above pivotal resistance around 2450, I've noted next potential resistance for NDX at 2500.
Key support is highlighted in the 2350 area, then at 2300, extending to 2280, at the intersection of the up trendline.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) is bullish in its pattern, but as with the underlying index, momentum slowed when the stock hit the area of its prior highs from mid-February. If support in the 59 area holds up, next resistance comes in around 60, then at 61, with fairly major resistance at 63.
Support below 59 is at 58.0. Major support currently is seen in the low-56 area.
On Balance Volume (OBV) is a key volume indicator, along with just daily volume figures and the OBV line has turned lower. As is often the case, daily trade volume jumped on the initial breakout move, but QQQ buying wasn't heavy after that. We tend to see spikes in QQQ volume on sell offs. The current lackluster volume pattern fits with a lack of heavy buying in calls relative to puts, for individual equities. NDX is definitely lagging here but it did lead the market higher for many months in the 2009 and 2010 up legs. At some point leadership always changes.
RUSSELL 2000 (RUT) DAILY CHART:
The Russell 2000 (RUT) chart is bullish given its move to new highs. The index is also now at a key technical resistance in the 868-873 area. Based on what else I'm seeing in the overall market, I think RUT could climb above this near resistance and go on to challenge anticipated next resistance around 900.
If RUT can't gain further traction, look for support back in the 840 area, extending to around 831 currently.
On the bearish side, RUT could be tracing out a bearish rising wedge but this is an early cautionary note only as the pattern is not yet well formed or defined.
GOOD TRADING SUCCESS!