THE BOTTOM LINE:

The intermediate trend remains down until there's a new closing index high above the early-May top, whereas the short-term and long-term trends are up.

To assess the long-term trend your 'homework' (should you chose to accept it) is to look at the monthly S&P or Nasdaq Composite chart. The pattern you'll see since the late-March 2009 bottom is one of higher highs and higher reaction (pullback) lows and the 'classic' definition for an UP trend.

SHORT-TERM: In what's been a common pattern over 3 years anyway, summertime becomes a short-term trader's market. To assess the short-term chart picture my first chart is the Nasdaq Composite (COMP) hourly chart dating from COMP's early-June low.

The pattern here is of higher highs and higher (corrected from 'lower' - 7/15/12) lows as you see. A reliable way (for the time frame shown) to assess shorting/bearish opportunities (tops) is by trading contrary to 'extremes' (overbought and oversold) suggested by the 21-hour Relative Strength Index (RSI). You see the same or similar hourly chart patterns in the S&P, Dow, Nas 100 (NDX) and the Russell 2000 (RUT). Except for RUT, this last panic low took prices to a bit under the hourly up trendline, but prices then rebounded quickly. The uptrend channel remains basically intact.

The most bullish technically of the 3-month hourly index charts currently is the Russell (RUT). Because RUT has maintained a classic bullish technical chart and stayed within a well-defined uptrend channel, I'm watching the RUT hourly chart (seen next) as a current Market bellwether; e.g., if RUT's up trendline gets pierced this warns of possible further Market weakness or, conversely, if RUT's prior top is exceeded, it suggests upside breakouts may follow in the S&P and Nasdaq.

Even if you don't follow the Russell the daily RUT chart is of interest so the best is also the last (chart).

My bullish/bearish sentiment indicator, on a single day basis, fell to an 'oversold' 1.2 reading on Wednesday, one day prior to the Thursday panic low; i.e., CBOE equity call volume on Wednesday was 1.2 times total daily put volume. It's typical for sentiment to 'bottom' anywhere from 1 to 5 days before a price low. It was a pretty good ancillary tip off of being close to an upside reversal. That and the low extreme seen in the hourly RSI indicator (indicator length setting: 21).

MAJOR STOCK INDEX TECHNICAL COMMENTARIES

S&P 500 (SPX); DAILY CHART:

The S&P 500 (SPX) continues in the same uptrend pattern dating from the early-June lows, as our most recent low was ABOVE the prior (down) swing low. Successively higher relative highs AND reaction/pullback lows equals an UPtrend.

The key resistance trendline remains as highlighted below; the key point of resistance at this trendline currently is 1368. A decisive upside penetration of 1368, then 1375, is needed to suggest a bullish upside chart breakout. However, the intermediate uptrend resumes only on a Close above 1405, the early-May top. This event seems doubtful in our current low- volume 'whippy' summertime environment.

Pivotal short-term technical support is suggested at the internal up trendline (connecting the greatest number of lows) currently intersecting at 1340; support then extends to 1325, with fairly major support in the low-1300 area.

Repeating from my initial Bottom Line comments on the most recent trader 'sentiment' readings: my sentiment indicator, on a single day basis, fell to an oversold 1.2 reading on Wednesday, one day prior to the Thursday panic low; i.e., CBOE equity call volume on Wednesday was 1.2 times total daily equities put volume.

It's typical for sentiment to bottom anywhere from 1 to 5 days before a price low. It was a pretty good ancillary tip off of being close to an upside reversal. My trader sentiment indicator is seen above. The CPRATIO low was coupled with a low extreme seen in the hourly RSI per my first chart, the hourly Nasdaq Composite.

S&P 100 (OEX) INDEX; DAILY CHART

The S&P 100 (OEX) index chart is mixed, but the most recent Close in OEX has brought it right TO my internal down trendline. I've noted first resistance and a possible breakout point, at 623.

More broadly speaking, OEX would need to churn through resistance and pop out above the 623-629 price zone to suggest that the index was again capable of a sustained advance. In terms of what would shift the intermediate-term trend higher would be for OEX to pierce its 638.8 Closing high of 5/1.

Key near support could be thought of as first at the up trendline at 615 (not highlighted), with next support in the 610 area per the green up arrow highlight. Major support begins at 600. A break below 610 for more than a day suggests 600 may again be tested.

THE DOW 30 (INDU) AVERAGE; DAILY CHART:

The Dow 30 (INDU) will hit key resistance implied by its down trendline at 12880 near-term. The Thursday panic low pulled INDU briefly below (intraday low: 12492) the daily chart up trendline I was working with. I consider 1-day intraday spikes ONLY below such trendlines, followed by a strong rebound, as part of the heavy stop-loss selling and culminating panic mood that often 'sets up' an upside reversal.

Key resistance is seen initially at 12880 and extends to 12961, with a next key resistance at the even 13000 level.

Near support is at 12600, extending to around 12500. Major support begins at 12400.

There are a number of (around 13) Dow stocks that are in strong weekly uptrends and that could keep a rally going, especially looking out past August. The stocks include AXP, DIS, possibly GE, HD, (not HPQ, which looks like it's going to 0$!) IBM if it holds $184, JNJ, KFT, KO, possible MCD, MRK, T, VZ, and WMT (to the moon!).

NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:

The Nasdaq Composite (COMP) daily chart is mixed. The intermediate uptrend resumes if/when the prior 3069 Closing high of late-April is exceeded. However, bullish upside potential resumes if resistance implied by COMP's down trendline is pierced at 2966, as well thereafter the prior intraday high at 2988. I've noted via the red down arrows resistance at 2966, with next key resistance at 3000.

On the recent decline, the COMP intraday low at 2837 held above the previous 2818 (down) swing low. Absent a 1-day spike low, COMP mostly held the up trendline shown on my most recent chart, which is a bullish plus. Yet to come is decisive UPSIDE action.

In the sense of price action since the early-June low, COMP is showing a rising stair-step price trend of higher relative highs and higher downswing lows. Yet to come is a decisive upside breakout above the dominant down trendline. The 3 extreme intraday highs in COMP make for a well-defined line of chart resistance so there significant focus on a possible (or not) trendline breakout.

Repeating from my initial Bottom Line comments on the most recent trader 'sentiment' readings: my sentiment indicator, on a single day basis, fell to an oversold 1.2 reading on Wednesday, one day prior to the Thursday panic low; i.e., CBOE equity call volume on Wednesday was 1.2 times total daily equities put volume.

It's typical for sentiment to 'bottom' anywhere from 1 to 5 days before a price low. It was a pretty good ancillary tip off of being close to an upside reversal. My trader sentiment indicator is seen above. The CPRATIO low was coupled with a low extreme seen in the hourly RSI per my first chart, the hourly Nasdaq Composite.

NASDAQ 100 (NDX); DAILY CHART:

The key upside test for the Nasdaq 100 (NDX) Index is the ability for NDX to pierce its down trendline, currently intersecting at 2643; resistance than extends to 2660 at the prior intraday high.

Key support comes in just under 2550 and extending to Thursday's intraday 2523 panic low. Next pivotal support begins at 2515.

In this market it's hard to predict week to week given the whippy price action. The near-term trend is up but the prior 2660 high needs to be exceeded at some point to suggest a continuing up trend. That should happen over time. Eventually, the really KEY test is the ability (or not) for NDX to go to a new Closing high above 2741 and to thereby exceed the late-April top.

Meanwhile, it's also important for the bulls that the recent rally find some legs. A move above the 21-day moving average would be a plus.

NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:

The Nasdaq 100 tracking stock (QQQ) stock has the same technical dynamics, properties and potentials as the underlying Nas 100 Index so I won't repeat those here. A trendline 'breakout' level for the QQQ tracking stock is at 65-64.9, with a further move above the most recent swing high at 65.2 as being a strong indicator of further bullish potential.

On the recent decline, QQQ Closed above the up trendline highlighted below and this action suggests the trendline is still the one to watch ... enough so that I've noted near support at 62.5, at the intersection of the trendline. 61 is rock bottom support. I'm not expecting it but a weekly close below 61 yields a further downside swing objective to around 59.3.

RUSSELL 2000 (RUT); DAILY CHART:

The Russell 2000 (RUT) has evolved into the most bullish looking chart as seen in its well-defined up trendline and apparent both on the daily chart below but also on the hourly RUT chart seen at the top of this column (my 'bottom line' comments). All this don't mean a (bullish) thing as the song says unless there's an eventual move that exceeds the 825 late-April Closing high. A typical bull move keeps taking out prior significant highs until it doesn't any more and the trend shifts to sideways or lower.

I said last week that I thought that: "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..." The low was 778 so the further trend unfolded pretty much as the chart pattern would have predicted.

Ahead, the chart dynamic is whether the recent rally has much in the way of legs and there's a test of resistance at 810 to 820; resistance then extends to 830, and a most pivotal resistance. The intermediate uptrend resumes on a move above 830.



GOOD TRADING SUCCESS!