THE BOTTOM LINE:
Now that the market has snapped back to at or close to its prior highs (top of a broad trading range?), a major question is whether there's been 'too much' in the way of bullish expectations priced into the market.
The Nasdaq 100 (NDX) has been the strongest index and NDX has gone on to new daily and weekly high, above the pivotal 2400 level. NDX price action may or may not be a harbinger for the rest of the market given that the major indexes are again rather far extended above their pivotal 21-day moving averages as you'll see in my major market index charts.
Whether NDX is or isn't a bellwether for the overall market here will be seen ahead. The fact that NDX might occupy the position that 'as NDX goes, so goes the Market' makes it useful to look at the weekly NDX chart. The ability for NDX to hold above the 2400 level is as good a sign as I know of as to the overall market working higher. Conversely, a downside penetration of 2200 would suggest that the market was making a major top.
On a daily chart basis, the fact that there was only a single day Closing penetration of the S&P 500's 21-day moving average, followed by such a strong rebound, was a definite bullish development this past week. OEX, INDU, COMP, NDX and RUT only had minor to relatively minor intraday penetrations of this same key moving average support.
There may or may not be a move to new highs in the other major indexes, following the lead of the Nas 100, but I'm doubtful about there being a strong new up leg in the overall market. I would not be surprised to see prices start to work sideways to lower again consistent with the major indices being in a broad trading range.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart is bullish but SPX is now back at the top of a possible broad trading range. Triple tops aren't all that common in the major market indexes, so we may see a nominal NEW high in SPX, with the index coming down some thereafter.
It's of course also possible that SPX begins to work higher, going up along ('hugging') my upper (3%) envelope line, eventually reaching the 1400 area.
Resistance is assumed for the prior closing high, extending to the 1365-1370 area.
Support is highlighted at the 1319, at the current 21-day moving average, with next support at prior lows in the 1300-1296 area.
RSI AND TRADER 'SENTIMENT':
The most recent rally came after RSI got down to a 'neutral' 50 area, suggesting a still-strong uptrend. If the uptrend was a weaker one, it would have taken RSI getting to a lower level before a rally would set up so to speak.
My bullish/bearish sentiment indicator, also seen above, saw a 1-day extreme in bearishness and this was followed by another strong rebound. Bullish sentiment is not showing an extreme, which is a plus for the bulls.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart, what I rated last week as bearish in the short-term, mixed to bullish on an intermediate-term basis, has now resumed its prior strong bullish chart. The bullish tip off for me was the ability for the index to 'hold' at support implied by its 21-day moving average. After being at the upper envelope line, the 'centered' 21-day moving average either 'acts as' support or, if pierced, suggests further weakness.
What is hard to decipher is whether OEX again makes a top above 600, say at 608-610 or whether the index gradually works higher by another 20, or as much as 50 points. I currently don't anticipate another major up leg without prices working sideways to lower again beforehand.
Key technical support is at 588, extending to 580. Technical resistance is in the 603 area, extending to 608-611.
DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) has come roaring back to retest its prior recent high around 12753. The prior intraday top was made at 12876 and I've highlighted resistance at these two levels. At the prior 12876 intraday peak, INDU would be too far 'extended' in my opinion for the Average to continue to move much higher.
If there's rule of thumb to follow here it's to not expect a major new up 'leg' with the 13-day RSI at or near 70. While the major indexes can advance for some time and 'hug' the upper envelope line, just be aware that this is generally NOT a dramatic advance; e.g., don't expect a second dramatic up leg.
I pointed out last week that 2/3rds of the 30 Dow stocks were in a position to rally, so this past week's rally wasn't too surprising on the basis of the individual (30) stock charts. Still looking bullish to having bullish potential are the charts of AXP, BA, CSCO, CVX, DD, GE, IBM, JNJ, KFT, KO, INTC, JPM, MCD, MSFT, PG, VZ, UTX, and XOM.
Support I already talked about above as highlighted on my INDU daily chart. Resistance is at 12600, then in the 12750 area.
NASDAQ COMPOSITE (COMP) INDEX, DAILY CHART:
The Nasdaq Composite (COMP) chart is bullish. The odds of at least a nominal new high above 2879-2887 is fair to good. Conversely, prices could again begin to sink again in the near-term if the market continues to be confined to a broad trading range which is what the major indexes look like currently.
Triple tops are not all that common in the major stock indexes and I doubt that COMP is setting up for one. More likely in my estimation would be for a move to a nominal new high, with prices then again working sideways to lower. Eventually however COMP could reach 3000, but probably not without more sideways to lower basing type action coming first.
Resistance is assumed to lie at 2879, extending to 2887; with next resistance coming in around 2911.
Support is at 2786, then at 2744.
RSI AND TRADER 'SENTIMENT':
The most recent rally came after RSI got down to a 'neutral' 50 area, as seen above, suggesting a still-strong uptrend. If the uptrend was a weaker one, it would have taken RSI getting to a lower level before a rally would set up so to speak.
My bullish/bearish sentiment indicator saw a 1-day extreme in bearishness and this was followed by another strong rebound. Bullish sentiment is not showing an extreme, which is a plus for the bulls.
NASDAQ 100 (NDX) DAILY CHART:
The Nasdaq 100 (NDX) index chart is bullish as NDX rebounded strongly from the area of its 21-day moving average and then went on to make a new high. I myself am not looking for a big new up leg however, given that NDX is again almost to my upper 4% envelope line. We do see sometimes of course a rally up along this line and that's of course another possibility for NDX. Resistance implied by the upper moving average envelope line is currently at 2452. I would say NOT to expect a dramatic or strong further advance such as seen this past week or like the last week in June.
Immediate support may be found at the steep up trendline, but more safely so to speak at the current 21-day moving average, currently at 2346. Next support is assumed to lie (again) at the recent 2318 low, with support extending to 2300. Watch Apple Corp (AAPL) for signs of a weakening NDX as this stock is leading the big cap Nasdaq index.
'Resistance' is assumed for the upper envelope line, currently intersecting at 2452 but this is a 'soft' resistance so to speak as there's no prior high at this level; nothing hard and fast like that. In terms of years prior, we can assume major resistance may next come into play at the 2500-2550 price zone.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock has the same technical/chart considerations as the underlying NDX chart and is bullish.
Next resistance is assumed for around 60.2, extending to 60.5. Support is at 57.6, extending to 57.0.
Daily trading volume has been relatively low on this last rally, but individual price/volume patterns characteristic of individual stocks rarely apply to the Nasdaq 100 tracking stock, QQQ and I don't read too much into the low volume rally pattern in terms of it being a 'weak' rally.
RUSSELL 2000 (RUT) DAILY CHART:
The Russell 2000 (RUT) is bullish in its pattern but RUT has seen lower rally highs dating from the early-May intraday top at 868, extending to the 860 high earlier this month. The most that I currently anticipate, as far as a further advance, is to 860, possibly again to the 868 area.
On the downside, I've highlighted support in the 812-810 area. Major support is assumed to lie between 800 and RUT's 200-day moving average, currently at 793.
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 options (CPRATIO) with the S&P 500 (SPX) and the Nasdaq Composite (COMP) charts. However, this indicator pertains to the market as a whole, not just SPX or COMP. 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 2-3 or more weeks) rather than just 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.