THE BOTTOM LINE:
The recent Market high is now a third point forming April-May-July down trendlines. This pattern suggests downside pressures ahead and to sell rallies, especially to back up near the bearish down trendline.
What looks to be the dominant down trendline is seen below with the Nas Composite (COMP). Unlike an earlier internal down trendline or my 'best fit' trendline, recent highs in the major indexes intersected with the prior two intraday highs. This is the type trendline (external - trendline drawn through prior highest highs and lowest lows only) that tends not to show reversal points as often as internal/best fit trendlines; but, NOT ALWAYS. Sometimes the 'best fit' down trendline is the line that intersects the highest highs alone.
Another way of anticipating upside resistance is seen by my highlights of a broad upward price channel on the Nasdaq 100 Index (NDX) hourly chart below. In terms of what we can know from price channels like NDX's, the Index is in the middle of a possible price range that continues to see higher lows on pullbacks. Indexes best traded with entry at the upper or lower trendlines. Not a strong advancing trend but, like the economy, stocks are moving gradually higher.
I suggest paying some attention to the down trendlines seen on my major index charts. Short rallies and especially ones to near those resistance trendlines; and using an exit point just above the down trendline.
Conversely, a couple of days spent ABOVE the bearish down trendlines seen with my various index charts, would suggest another abrupt shift in upside momentum. Lower summer volume contributes to making for wider price swings than we might otherwise see.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) remains in an uptrend pattern dating from the early-June lows. However on a larger scale the recent SPX high now forms the third point in a well-defined down trendline, suggesting likely tough resistance at 1372 and limited further upside above 1360-1370. Selling rallies is suggested in the near-term. More major resistance begins at 1400.
Pivotal technical support is suggested at the emerging up trendline, currently intersecting around 1336. Next support is in the low-1300 area.
SPX hit resistance at a key down trendline, after getting near to an overbought extreme. Bullish/bearish sentiment is meandering in a neutral range; characteristic we could say of summer markets that have wide-swinging trading ranges.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) index chart is mixed; on one hand the index has trended higher since the early-June low. A pattern of higher rally highs and higher reaction lows DEFINES an uptrend.
On a broader or bigger picture basis, the down trendline highlighted on my OEX daily chart is one to watch. Resistance is suggested near-term at 625 at the trendline; resistance then extends to 630. The down trendline also suggests that the S&P is still in an overall downtrend. A technical/chart breakout would only occurs on a decisive and sustained move above the highlighted down trendline.
Technical support is suggested at 612 at the emerging up trendline dating from the early-June bottom. Key support then extends to 600 area and an area I see as the low end of a trading range in the next 1-2 weeks.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) of course hit down trendline resistance along with the broadly based S&P indices. The key resistance (down) trendline currently intersects at 12920. The pivotal ZONE of Dow resistance is 12900-13000.
On the downside near support could develop in the 12700 area, with next support at 12600. Fairly major support should be found in the area of the 200-day moving average, currently intersecting in the 12400 region.
Last week I wrote that the last strong upswing was suggesting (finally) that 13000 could be tested. The rally got within a hair's breath of it but we didn't see the 'magic' 13000 level as the even-1000 levels of the Dow tend to be.
INDU's pattern suggests selling rallies and doesn't suggest buying dips until or unless the there's a decisive upside penetration of 13000. Cover shorts on pullbacks to the 12400 area.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
I've been seeing the chart as having potential for another up leg only if and as 'activated' by a bullish advance above the 3000 level. This last COMP rally was nearing 3000, but upside momentum stalled. I figure we've seen our maximum upside for a while but on the other hand wouldn't fight an upside trendline breakout by doing further shorting.
More downside potential than upside is suggested by the current pattern as there's potential for a pullback to/toward 2800 ESPECIALLY if trendline support at 2900 gets pierced. A lower downswing closing low than seen on the last downswing (to below 2818-2800) would turn the intermediate-term trend down. If however, this lower support holds up on another dip to this area, it becomes an area to exit shorts and/or reverse to bullish strategies.
NASDAQ 100 (NDX); DAILY CHART:
The recent intraday high for the Nasdaq 100 (NDX) Index now forms a 'picture perfect' down trendline as is learned in basic charting. The bearish down trendline that's come into play here recently suggests we've seen the highs for this move for now.
The chart pattern after the recent downside reversal (at the down trendline) also suggests that the overall or dominant trend remains down, the rally from early-June notwithstanding.
A decisive upside penetration of 2650-2660 is needed to suggest that NDX could move on up to test resistance at 2700; or, to 2750.
There is an UP trendline that has emerged on the rally from the early-June bottom and which intersects currently around 2575-2576. A move to below this trendline suggests downside potential back to the low-2500 area or below.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) reached down trendline resistance in the 65.1-65.2 area and that was the recent end of the rally over the past month. I anticipate more downside selling pressure(s) from here especially if trendline support at 63 gives way.
A decisive upside penetration of the down trendline leading to a sustained advance above 65 is needed to suggest the recent rally could extend and carry still higher. An advancing trend is again 'confirmed' by prices climbing above 65.2.
On the other hand, there's no bearish downside reversal suggested until 62 is pierced. Low daily volume reflects less trading interest in the holiday shortened week.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) had a strong spurt higher after its down trendline was pierced (to the upside). After such bullish chart action RUT then got pretty far out 'in front of' of the rest of the market.
The recent pullback looks like it will lead to short-lived rallies. Support may get tested next in the 800-795 area. Next key support comes in at the intersection of the previously broken down trendline, at 776 currently and which is also the low end of the prior upside price gap; 'closing' a gap can mean renewed support/buying interest.
Key resistance is at 810, then 820; above 820, fairly major resistance begins in the 830 area.
GOOD TRADING SUCCESS!