While the S&P is struggling to get back above 1350 resistance implied by 2011 highs in the 1350-1370 zone, Nasdaq continues to hold its own as Apple breaks out above a long-standing uptrend channel. The Nas 100 is especially on fire because of AAPL as the stock heads for (or not) $500.
From a technical standpoint, strength in the big cap Nasdaq 100 (NDX) Index was suggested 4 weeks ago when NDX rallied to above what had been its 2002-2008 up trendline; the significance being that NDX is back on the strong upward trajectory (what a 'trendline' is) that it had dating from its 2002 bottom. The NDX upside breakout also achieved a decisive upside penetration of prior highs at 2407-2430 that formed over Feb. into Oct-Nov of last year.
Tech rules, at least as long as the underlying economy is doing ok to well; certainly not IN recession.
A number of Dow stocks are showing signs of interim tops; especially relevant being S&P/Dow bellwethers GE and IBM.
Therefore, it looks like the S&P goes through a sideways to lower correction, while Nasdaq only pauses, or gives back a little in a sort of worst case scenario. Tech stocks continue to look strong but are they 'too hot not to cool down'. Looked at from the standpoint of an overbought market, you would think tech would have to fall. Big price dips are maybe not so likely with willing buyers on weakness. A sideways move would relieve the overbought 'pressure' so to speak.
Still lower on the S&P and Dow it seems, with February tending to bring some pullbacks from a strong January; e.g., SPX back to 1300 area? More modest pullbacks only in tech is what it looks like; e.g., NDX dips maybe to 2500 area. More specifics below.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) has stalled at the low end of a zone of prior highs/prior resistance between 1350 and 1370. Given the overbought RSI, a correction is bound to happen at some point and there's the tricky part, nothing said about WHEN.
Bellwethers GE and IBM are stalled here. The question is whether SPX is consolidating for another push higher or is going to fall back to test support such as in the area of the 21-day moving average; i.e., 1320-1325 area. Looks lower to me as in a short to intermediate correction; within of course an overall bull market which we've seen the power of in the past 8-week advance!
So, resistance pretty clear, from recent highs in the 1350 area, on up to 1370. Above that resistance is assumed for 1400 and up.
A good gauge of support here becomes the 21-day moving average providing one benchmark of momentum shifts. If there's buying interest, rallies often develop from the area of the average and if NOT, the index knifes through the average as often as not. Highlighted first support (green up arrow) is at 1320; next support in the 1300 area, at a well-defined SPX up trendline.
My trader sentiment (CPRATIO) model seen above is now coming off an overbought extreme. The quickness of the fall in the daily numbers to less bullish/more bearish suggests to me that we're not at a major top or anything. If it was a major top, daily call to put readings could go quite high for a prolonged period. Traders and Investors are cautiously bullish only, not wildly bullish. Bearish news is predictably coming up recently after the glow (generally) of earnings announcements.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart has maintained itself in its very strong upward track, making of course for its very steep up trendline. The stall in the 611 area is significant given that 611 represented a 3+ year high, made last May. The sharp dip on Friday could be the start of a long-awaited downside correction. A decisive upside penetration of the 610 area suggests potential for another 10 point gain and I've noted a projected next resistance for 620.
If the Index pierces its up trendline ahead, the odds for eventual retracements of 38-50 per cent of the last advance go up. Support looks like 600, give or take 5 points. I watch for any closes below the pivotal 21-day moving average in this kind of pattern. A couple of days running below the 21-day for OEX suggests we're in a bigger correction than the shallow dips of prior weeks. Next support below 600 is 590-588; then at 580.
DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) has a continued strong bullish pattern. INDU did mostly drift sideways this past week, at least into
Friday which saw a sharper drop, although brief, below 12800 support. I smell a further correction here to the 12600 area support, perhaps lower. I've highlighted next support (below 12600) at 12400.
Key technical resistance as I've said for awhile looks like 13000. Near resistance is at the line of prior highs of this past week, at 12900-12925.
There are number of Dow stocks that look toppy to me, not enough for a major fall in INDU, but yes on a possible retracement of a quarter to a half of the prior advance. Strong trends up or down, rarely see more than 33-38 percent retracements.
Faltering Dow stocks include BA, CAT, CVX, GE, IBM, JNJ, MCD, MRK, PFE, VZ and XOM. If this batch fell a nominal amount, it could translate to a 200 to 400 point correction in the Dow (from 12800). The 5-7 of the 30 Industrials in strong looking trends won't offset 11 that look bearish for a further correction and 10-12 that 'project' mostly sideways.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) chart remains pretty strongly bullish in its pattern, although COMP was off a hair's breath on the week, at 23903 versus 2905 the prior week.
Apple accelerated its hyper-advance as it seems to race toward $500; this powerful move has kept a Nasdaq correction to mostly sideways. Per my chart below, 2900 is just a bit over midway in COMP's broad uptrend channel; the upper end of this channel and implied resistance, is at 3000. [The breakout of COMP above a bullish 'triangle' formation some weeks back suggested upside potential to 3000.]
The lower end of the aforementioned uptrend price channel, suggests strong technical support in the 2800 area.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX), unlike the Composite, gained a bit on the week on the strength of AAPL especially. It's worth talking about AAPL here as the stock did an uncommon jump above the stocks broad multimonth uptrend channel, suggesting frothiness in the stock yes and any failure to hit and/or hold above $500 (Friday Close: 493) as a 'bellwether' for a interim top in NDX with downside potential suggesting an exit to bullish plays finally...
I've pegged the 2600 area as resistance (per the red down arrow) not only from the upper envelope line tagged as 'overbought' (a line that 'floats' 5% above the 'centered' 21-day moving average), but as technical resistance implied by 2600 intersecting at the top of NDX's uptrend price channel.
A key technical support is suggested by the current intersection of the well-defined up trendline, currently intersecting in the 2500 area. Next support is in the 2450 area.
Before leaving the subject of prices being up so much with little interruption, which is how 'overbought' indications are arrived at; as in the recent sky high RSI indicator seen above. At the very least, such extremes heighten the prospects for volatility and shifting gears as in a pause or pullback. Doesn't mean it WILL happen, does mean to be more guarded and keep in mind PROTECTING profits, rather than imagining how much more could be made.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock continues to power higher with the underlying NDX index. The equivalent level for pivotal technical resistance in QQQ is in the 64 area. It's the only resistance that I can 'measure' on the daily chart. Based on a broad uptrend channel on the weekly chart, not shown here, major resistance can be calculated closer to 68.
Near support suggested by QQQ's up trendline is currently (intersecting) at 61.5. A break below the trendline suggests potential for the stock to dip to 60 or a bit lower.
In a sign that traders may have FINALLY perceived that the Nasdaq 100 is in a super strong uptrend, there's been a steady rise in daily trading volume over the past week. This has to be the 'kiss of death' or near to it! It's long been the case that rising prices in QQQ rarely cause a big jump in volume; FALLING prices do that!
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) pulled back from resistance implied by the upper channel line. Unlike the Nasdaq, the Russell fell steadily into week's end. RUT has occasionally been a forecaster of strength OR weakness that's coming for Nasdaq. Maybe smaller cap stocks more sensitive to economic possibilities and potential and that then spreads upward into big and small tech companies.
I've projected resistance in the 845 area for RUT, at the upper channel line; I didn't highlight on my chart the line of resistance that developed this past week at 828-832.
Near support is 808, extending to the 798 area; next support is 780.
It may have finally happened, which is the start of RUT retracing a larger portion of its last advance then has been the case in the strong prior 7-8 weeks. A 38 to 50 per cent retracement of the advance from the mid-Dec lows equals 785 to 770, respectively.
GOOD TRADING SUCCESS!