THE BOTTOM LINE:
The current most favored sectors, the big cap S&P 100 and Nasdaq 100, ran up to new monthly closing highs for 2012. Even the S&P 500 came close to exceeding its March high Close making it look like bullish influences are coming.
BIG PICTURE (MACRO) CHART VIEW; MONTHLY S&P 500:
I don't often show a monthly chart like my first one, that of the S&P 500 (SPX), but I myself look at the monthly chart periodically. In his day, Charles Dow would have only considered monthly Closes in terms of major market progress and relative to the primary trend in what became (after Dow) 'Dow Theory'.
With the SPX monthly chart here, I want to highlight that SPX is only within a couple of (S&P) points of a new 12-month Closing high. If there's a September Close above 1408, this would be the highest Closing monthly high since May, 2008. I'd also note again that 'overbought/oversold' concepts are all RELATIVE to the time frame being studied and on a 5-month basis SPX isn't yet at an historical overbought RSI extreme on this longest term chart.
A further note on the S&P is that the big cap S&P 100 has gone to a new monthly high close. You next have to go back to December 2007 to find the highest previous OEX closing monthly high. One point in this price history is to remind that the current market remains within a major/primary uptrend. Focus on bearish fundamental factors that are seen currently isn't the whole story, certainly not technically.
Comparing the S&P to Nasdaq, the Nas Composite Index (COMP) is nearing its prior monthly high (March 2012) at 3091 (August Close: 3067). However, the big cap Nasdaq 100 (NDX) is the other (besides OEX) major index to exceed its 2755 March 2012 Close as NDX finished August at 2772. This makes for NDX's highest monthly Close since October 2000. It also means that NDX is closing in on a 50% upside retracement (at 2806) of the massive March 2000 to October 2002 bear market decline. I view this 50% NDX retracement both as a milestone and as possible tough resistance.
SMALL PICTURE (MICRO) HOURLY CHART VIEW; OEX:
Picking an extended hourly chart to focus on the near to intermediate trend, the S&P 100 (OEX) hourly chart is seen next. Technically, a couple of things stand out: 1.) the importance of the lower (up) trendline, currently suggesting support coming in around 640 and that 2.) the sideways to lower move has brought the 21-hour Relative Strength Index (RSI) down to nearly what would be a short-term 'oversold' condition. Stay tuned as to whether there's a bounce soon, especially from a successful test of OEX support in the 640 area.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
As long as the S&P 500 (SPX) continues to consolidate prior gains and remain mostly above 1400 the chart remains optimally bullish in its pattern. There could be a day at or slightly below this line of prior support but as long as a rebound followed in the next 1-2 days, a bullish chart is intact.
1400 is a pivotal level, but also key in terms of potential technical support is the June-July up trendline, currently intersecting in the 1380 area. A close below this trendline would suggest the possibility or likelihood of a further drop such as for a retest of the prior (down) swing low at 1330.
Resistance is seen in the 1419-1422 area then up, around 1450. To keep a rally going, a couple of closes above 1420 is needed to suggest a move to the 1450 area as a next target.
Obviously, the S&P is marking time such as for some next (e.g., Fed meds) event(s). A sideways move can be a consolidation prior to another up leg OR price action that is 'building a top'. So far, a consolidation looks true. It's also true that a sideways move tends to 'throw off' a short to intermediate-term overbought condition; see the declining 13-day RSI. This would be a continuation of the pattern of recent weeks, whereby the RSI didn't fall lower than its 'neutral' 50-45 zone before another rally occurred. Another bullish plus is seen with my trader sentiment (CPRATIO) indicator hitting a low bullish/high bearish 'oversold' type extreme on Thursday.
S&P 100 (OEX) INDEX; DAILY CHART
I noted last week that the S&P 100 (OEX) chart would remain bullish as long a support holds at 643-640. This week I'd put technical emphasis on the up trendline currently intersecting in the 639-640 area. As long as this trendline (mostly)'holds' as support, there's little suggestion of a downside reversal. There is the possibility that both S&P indices are 'building' a top and a hint of a bearish Head & Shoulder's in OEX. Next support below the trendline comes in at 630; major support begins at 620.
I take a mostly bullish view of the chart pattern as a high-level consolidation prior to another rally. It's also true that the sideways move has been throwing off the 'overbought' 13-day RSI extreme of 8/20-8/21. In strong uptrends, sometimes the Relative Strength Index will only fall back to a 'neutral' 50 or so before another rally develops. A full-blown correction will of course tend to see a fully oversold extreme occur before a bottom, such as was only last seen back in May-June.
Key overhead resistance is at 652-656. Next projected resistance, at the intersection of the upper channel line, comes in around 670.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
Key technical support in the Dow 30 (INDU) Average is at 13000 and that held mostly into the Thursday low; see chart highlights. Next support looks like 12800, with major support beginning in the 12600 area.
INDU is lagging the other key indices as we know, as attention has turned more to higher-growth stocks. Of course we still have Dow stocks that are seeing continued strong earnings, but they are mostly consumer defensive/consumer staple type companies. Namely or especially AXP, CVX, DIS, HD (wish I'd bought more!), KFT, KO, MCD, PFE, TRV, WMT and probably still XOM (there's some question as to it topping out). We can probably safely say that a third (10) of the Dow 30 could pull the overall Average up further but there's 10 that are lagging and dragging and another 10 that will mostly get pulled up with a continued strong market.
As to further upside potential or possibilities, a better play that the Dow is in OEX or NDX. On the next full-blown Market correction, it looks like DJX puts would be a way to play the downside.
Resistance is still the same as noted last week as those prior closing and intraday highs at 13280 to 13340 haven't changed any. Major resistance begins around 13600 in my estimation. The 'MAXIMUM' Dow upside is probably back to the 14000 area; the all-time INDU peak is in that area per its late-2007 top.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) continues to manage its bullish consolidation above support implied by a line of prior highs in the 3030 area. Key support is there and next at 3000. Continued ability for COMP to stay above its 21-day moving average maintains a bullish chart picture.
Next up for further bullish possibilities is for the Index to Close above 3085. Next resistance then comes in at 3122-3134, at the top end of COMP's uptrend channel.
Key support as already noted is 3030, extending to 3000. Trendline support comes in at 2960. Major support begins at 2900, extending to 2850.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) Index continues to stall out when there have moves into the area of yearly highs around 2800. On the other hand, a line of support has been seen on dips to the 2750 area. NDX is in a narrow trading range. Usually, in chart or technical (analysis) terms, give the benefit of the next move to the prior trend, which has been strongly up of course.
On the other hand, a sideways drift after hitting a prior key high starts to look like a double top. The only 'sure' way so to speak to play or stay in the next move is to wait for either a bullish (upside) breakout or a bearish breakdown below a prior pivotal chart low or lows; or, sometimes as seen with a move to below a key moving average like the 21-day average.
So, PIVOTAL near support is at 2750, then down at 2700. Major support begins at 2650-2625.
A clear cut line of resistance is at 2785-2800. A Close above 2800, that wasn't reversed a day or two later, looks good for another 50-75 points higher.
NDX bellwether Apple Corp (AAPL) flirted with key technical resistance in the 680 area this past week, up a bit from the prior week. AAPL's chart pattern isn't clear yet either. A decisive upside penetration of 680 sets up a possible test of pivotal resistance at 700 in AAPL. Stay tuned. iPhone 5 is coming folks as the Google and Apple giants fight it out for dominant market share in phones and operating systems!
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) chart pattern remains bullish like the underlying Nas 100 index but QQQ has the same bullish 'challenge' so to speak, which is to pierce a well-defined line of resistance in the 68.5 area. Next resistance and what may prove to be fairly major resistance then looks to come in around 70.
Implied support is at the 21-day moving average at 67.5 currently, with next support coming in at 67.0
Volume jumped on Friday on the rally which is unusual for the Q's. I take it as bullish and suggesting short-covering and some new buying likely based on the strong Bernanke speech regarding doing more as unemployment is still 'too high'. Elements in this discourse of further easing or Fed action seem to minimize one aspect of the Fed's DUEL mission of fostering low inflation AND strong employment. I don't think inflation is AS low as I'd like (e.g., commodity prices) but I KNOW that unemployment is too high for our young graduates and young and older in general.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) remains within its broad bullish uptrend channel but also continues to drift sideways of late. A strong line of resistance comes in at 820, extending probably to the one intraday high that spiked to 827. Major resistance begins at 850 in my analysis.
Near support is at 806, 800 and then at 795 at current trendline support. Major support is anticipated in the 770 to 760 price zone.
I don't have a solid conviction on the trend of the Russell 2000 except that it should follow Nasdaq higher if there's a further up leg coming later in the month. Or, RUT will follow the rest of the market down if that's the way it goes later in September. I don't see much 'independent' strength in the small to mid-cap RUT sector, a theme that seems to play out more strongly in Q1.
GOOD TRADING SUCCESS!