THE BOTTOM LINE:
No harm to the 1150 level in S&P and 2400 in the Composite and a 5-day advance followed. A good week technically in the key month of September when the market tends toward recovery after dismal summers.
The S&P would have looked like a goner if it had pierced 1150 last week. It did, only briefly, then it was up up and away after that with the first 5-day rally in some time.
The S&P broke out TO, not yet ABOVE, 1220 per a key guideline I described last week. A move above 1220 in the week ahead would suggest a next target of 1260-1280.
A pattern with the CBOE VIX Volatility Index (VIX) for the recent cycle has been that 'spikes' in the VIX Index followed by upside breakouts above a down trendline were followed by strong advances. This pattern is seen 3 times as highlighted in my first chart. The last move above 1160 was good for 1220. 1260 is the next most key overhanging resistance (i.e., supply).
The index with the biggest recovery bang was of course the big cap tech index Nas 100 or NDX, with Apple Corp (AAPL) leading the charge. NDX closed back above its prior weekly up trendline. That same trendline now suggests NDX 2265 as key chart support in the coming week. A feasible next upside price target is 2400, to the prior 2438 high. This past week could be a head fake but it looked like a solid rally to me.
I've completed my move back to my Pacific Coast haunts and the ocean seen out from my office window below sees only gentle ripples on a sunny day. Too beautiful to be inside writing this but I will persevere here and move on to an examination of the daily charts of the major market indexes.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart is showing an emerging uptrend after a steep decline and a lot of volatility since. Key support is up a notch this coming week, at 1160. 1260 is a possible upside target if SPX can climb above 1220 for more than a day or two.
I'm watching the 1160 level on the downside in SPX as a key level; trade above 1220 suggests further bullish potential, such as to the 1260 area. Trade below 1160 suggests a possible retest of key support in the 1120 area.
RSI & TRADER 'SENTIMENT':
This latest rally has finally carried SPX's 13-day RSI indicator (seen above) thereby getting beyond a 'neutral' midrange reading and suggestive of surging upside momentum.
Also suggesting further upside potential is the fact that my trader sentiment indicator (seen below the RSI) hardy budged on the strongest rally in some weeks. This suggests that potential buyers/bulls are cautious, which is favorable for a continuation of the recent rally. LESS favorable is when the CPRATIO number spikes for one or several days after a strong rebound like we've seen this past week.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart has gone from one of a 'mixed' pattern to a mild recovery advance, which looks to retest prior highs in the 550 area. Supply (i.e., of OEX stocks) starts to get heavy above 560 and I assume there will be increasing selling from 560 on up to 570, assuming the recent rally has enough buying/momentum for it to continue into the coming week.
The pattern of higher reaction lows allows the drawing of the up trendline seen on the daily OEX chart. Use of the 4% moving average envelope lines (relative to a 21-day moving average) gives an idea that 560 and above is somewhat 'extended' relative to its 'typical' price swings.
I've noted near resistance at 550, extending to the low-560 area. Near support is in the 530 area, with pivotal (up) trendline support around 520 currently.
DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) has rallied near to the top end of what has been a broad trading range between 10800 on the downside and 11700 on the upside. INDU might squeeze a somewhat above 11700 on this current advance, such as to 11900 or so. The Dow could certainly go higher than 12 thousand but it would more likely do so after a pullback. Near resistance in the Dow is in the 11600-11700 zone, with more major resistance coming in around 11900 and extending to the 12000 area.
Of the 30 individual INDU stock charts, I assess 10 as bullish and a sizable 17 that are what I characterize as 'neutral' which is mostly when stocks consolidate at their recent (2-3 week) lows; i.e., the trend is basically sideways. Only 3 Dow stocks I see as currently bearish. The 'drag', so to speak is the 17 that are marking time. 10 stocks might not be able to pull the Average much higher, which is why I see 12,000 as at least a temporary 'stopper' to a further extension of the current rally.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) had a bullish chart 'breakout' in that, as I wrote last week: COMP is "bearish as long as the index can't climb back above its supply overhang at 2600..."
It did so this past week in the key month of September when the dominant trend tends to reassert itself.
I also wrote last week that "A decisive upside penetration of 2600 that was more than a single day affair would activate further upside recovery potential to around 2750 to 2800." NDX has now had two consecutive closes above 2600, which is bullish, but I continue to pay attention to 2600. As long as consolidation is mostly above this level, it activates a 2750 target; but not easily for levels above this in the near term.
The COMP chart pattern shows the most rudimentary or 'basic' characteristics of an emerging uptrend in its series of higher ('stair-step') lows highlighted on the chart.
The 13-day Relative Strength Index or RSI seen above has gotten above a 'neutral' midpoint reading which suggests further upside momentum can carry the day. Bullish sentiment has NOT risen overly much on what was a very strong rally this past week, which is (in a contrary opinion sense) bullish.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) index overcame key technical resistance in the 2250 area then tacked on another 50 points for a good week for the bulls. There's potential to 2320-2350 easily but the Index is 'extended' after that.
Key near support is 2200-2180 this week, with secondary support at 2150 as what was resistance 'becomes' support.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) chart is bullish again as QQQ rallied strongly from the area of the 21-day moving average. Key resistance is 56.8-58.0 in the coming week.
Key support is 53.5-54.0 with fairly major support at 52.0.
This is the first rally in some time where we've seen On Balance Volume soaring higher along with daily trading volume, which is bullish.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart has traced out a 'W' bottom and has a rising trendline given its series of higher reaction lows, a primary consideration when seeing the dominant trend on a week over week basis. But the true test of this bull (price) swing is sailing above the prior 738 high. If that happens, 775 in RUT looks like a next possible upside.
Conversely, if RUT broke under 672, it would suggest a further test of support, in the 650-640 area.
GOOD TRADING SUCCESS!