THE BOTTOM LINE:
The very strong move of this past week puts the market into overdrive as it were. It looks to me like there's one further spurt higher before there's a dip. It won't take long for the bears to regroup.
Key technically this past week, at least as money fund managers would view it, was that all the major market indexes closed above their 200-day moving averages.
The key levels on a further push higher are seen at 1300, then 1350 in the S&P 500 (SPX) and 2800-2850 in the Nasdaq Composite (COMP). Whether our two key indexes make it through these levels or not, I anticipate them at least getting into these areas. Measured move objectives are to 1350 in SPX and the 2880 area in COMP; this based on the predominate boundaries of the August-September-October wide swinging trading range.
This recent breakout above a long extended trading range that had a LOT of volatility is important in terms of seeing where we are in this market cycle in terms of the all important public take on the market. At the end of the wave of numerous sharp and wild price swings, we arrive at the point when the public finds stocks and the market very unappealing or at least very scary. This is the point also perversely enough that are among some of the best times to buy from a trading perspective.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The result of the S&P 500's accelerated move of this past week carried SPX to well above its prior 3-month range. The longer a sideways trend, the stronger a subsequent 'breakout' move above or below the prior 'rectangle' highlighted on the daily chart.
If the early trading in the coming week doesn't see SPX dip much under the top end of the big Thursday rally (the way it was Friday) I think its part and parcel of a further spurt higher.
We could open strong on Monday and stay strong but there may another day of hesitation. The hourly chart patterns (not shown) are suggesting itâ€™s the former and follow through strength.
If on the other hand there's early weakness on profit taking; or, analysis of possible European snafus relating to the grand consensus announced in the midnight hour last week, the downside risk looks to be a dip to the 1250 area, possibly back to 1225, which is a key support and this extends to 1200. A Close below 1225 for more than day would turn the chart mixed as it represents such a lack of follow through to the strong upside momentum seen in the spurt above the SPX 200-day moving average.
At some point there should be a challenge to the prior high. The upside measurement implied by the rectangle pattern is to at least 1350 as a 'minimum' objective.
RSI values seen above are extreme and on this basis alone there's an increasingly likelihood of a correction. Sentiment numbers got close to extremes on a couple of occasions this past week but the indicator registers nothing like what I anticipate seeing if the market was major league overbought and frothy. It's far from that.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart continues to be bullish. With the last spurt higher, the pattern is one that has become almost 'too' bullish as is suggested by how far the index is above its 21-day moving average. When prices get to levels that exceed 4% above or below the 21-day average for OEX, its typically EITHER 1. the tail end of a move; 2., the rate of climb will stall or 3., the index is in a new up leg. That was the case and it became time to shift my upper envelope value from 4% to 6%, equal to the percentage OEX was BELOW its 21-day average at the last low.
OEX hit the my raised 6% upper envelope line on Thursday, suggesting that the more likely trend forecast is that gains from here won't be dramatic; not like last week. If they ARE, it could be a pretty rapid retest of the prior highs in the 1350 area.
A pullback to key near support at 560 would be a key test of buying interest. Next very key support is in the 540 area.
DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) chart was bullish last week and more bullish after this past week's upside acceleration and INDU looks headed to a test of prior highs in the 12750 area whether that is this coming week or after a pause or pullback. It looks right now like there's another substantial rally ahead and a move to the 12400 area would be a next test of a pivotal technical resistance. Major resistance begins at 12800.
11800 is highlighted as a key support; better is to say 10800 to 10700 is the key zone of support. Below this area, major chart support is at 114000. Only a couple of Closes below 11400 would turn the intermediate trend lower.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) chart turned from somewhat mixed as long as the index couldn't get above resistance in the 2650 area. Last week saw finally a strong breakout move from there, up of course and the Close above the 200-day moving average is important as a bullish indicator. Look for near support now in the area of this key longer-term average in the 2700 area.
Key resistance begins around 2750, extending to 2800. I don't anticipate COMP getting above 2800, or 2850 without at least some backing and filling. In terms of the 13-day RSI indicator, the index isn't yet in the 'overbought' areas that I would expect before there was an extreme likelihood of a good sized correction.
COMP is finally well into an area of 'supply' or price areas at and above which more stock will be offered for sale. Buyers may start backing off above 2800.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) continues to rally but it's a slow slough to the upside as highs continue to 'hug' the upper 5% trading 'band' or moving average envelope; this line represents a rising line of 'resistance', not in a conventional sense but more in that at least without more fuel for the bullish fire, the index is going to only go so far above its 'mean', for which the 21-day average serves very well from a trading perspective.
Key near resistance is highlighted for the 2320 area but this should be thought of as extending to the area of the July intraday top at 2438. Some technical projections suggest to me that 2470 to 2500 will also be a key resistance zone.
Ability for the index to hold above support in the 2350 keeps the chart looking quite bullish, but another brief dip to the 2300 area wouldn't go against the bullish outlook seen here; a couple of closes below 2300 would suggest higher risk in remaining in bullish positions.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) is bullish and is approaching key resistance implied by the prior top that formed in the 59.6-59.8 area and forays into this area have brought downside reversals on THREE (Feb, April and July) prior occasions this year. Let that fact speak for itself. A decisive upside move above 60, with establishment of a support floor in that area after that, would be a big deal.
Near support is at 58, then in the 56.4-56.0 area.
It's likely that QQQ will retest prior highs and touch 60, maybe even the 61 area. On Balance Volume (OBV) considerations suggest some internal weakness here. I see 60, maybe 61, but some corrective action after that; e.g. a pullback to the 58 again.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart remains in a bullish pattern as it decisively pierced a prior important high at 738. RUT 'gapped' above 740 on the news out of Europe and this area now should be a support floor if the Index is in a new sustainable up leg.
RUT has yet to cross above its 200-day moving average which will be a key test of how far the Index can get on this recent accelerated move. It could be to 820 in my most bullish view of progress in the next 1-2 weeks. A key test in RUT showing increasing strength will be seen by it crossing or not above its 200-day moving average, currently 780.
A retreat wouldn't be a surprise technically as RUT got far extended above its prior rate of advance. Support points look like 740, the 720 area and at 680.
Looking to buy RUT stocks becomes tempting on dips to 740-730. 740 was the key recent 'breakout' point and becomes in effect a key support and test of how much bullish follow there is ahead. Support extends to the 720 area at the trendline and the 700 to 690 zone as next and most pivotal support in terms of any change in the intermediate trend.
GOOD TRADING SUCCESS!