THE BOTTOM LINE:
The S&P is still working gradually higher but is no longer doing all the heavy lifting. The Nasdaq finally breaks out of a lengthily sideways move.
Someone not following the charts closely would probably assume that it was certain market related news that caused the big cap Nasdaq 100 (NDX) to finally lift. I would say yes to that but the 'timing' of such news often also relates to a technical pattern that would suggest it was 'time' for such news to come out so to speak. The NDX pattern is highlighted below in my hourly NDX chart.
There was a sideways or lateral consolidation after the NDX ran up from the low-2600 area to around 2750. This went on for some time. That is, until NDX finally reached chart support implied by the Index's hourly up trendline; also seen as the low end of NDX's uptrend channel. I can't predict if NDX is again headed for the UPPER end of its uptrend price channel but the length of the sideways move would 'support' a further advance, such as up toward the 2850-2900 area. If so, strength in Nasdaq would help keep the S&P and Dow rally going awhile longer.
Speaking of the Dow 30 (INDU), the Average is the one nearest to prior all-time highs. If INDU closed at or above where it went out on Friday, at 13992, it would finally achieve a new (all-time) monthly Closing high relative to the October 2007 close. Such a move, as I've been pointing out, could suggest the prospect of a substantial further up leg in coming months. In terms of Dow theory such a new monthly high gives a type of 'all-clear' confirmation of the primary, which is the very long-term investment-related trend that unfolds over many months and often, years.
I've been pointing out in this last advance that the S&P is vulnerable to a correction, mostly as suggested by overbought readings in the daily charts such as seen with the 13-day Relative Strength Index. However, periodic sideways moves also tend to 'throw-off' high RSI readings that run up into 'typical' overbought zones; readings that tend to precede pullbacks, often good-sized ones. The risk of a correction grows as the major stock indexes keep trending higher but it's also true that so-called overbought markets can continue for long periods.
What I tend to find the most telling then is whether bullish sentiment among options traders also gets to certain extremes; i.e., see my SPX and Nasdaq Composite charts for my CPRATIO indicator and the zone where I consider my sentiment indicator to show 'extreme' bullishness, especially on a 5-day moving average basis. This indicator is climbing but hasn't gotten to the extremes, often repeated 'extremes', that would suggest to me an even higher-risk situation for index calls and other bullish strategies.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P chart continues to maintain its strong bullish climb along the top of its projected uptrend channel. Friday's upswing was a bullish breakout above the most recent trading range in SPX.
I'll just repeat from last week that somewhere in here there will be a scare and prices will fall off and trader profit taking sets in. Meanwhile 1500, prior resistance, appears to have 'become' a technical support. Trendline support is current seen in the 1470 area.
Near resistance is seen at 1525-1532. The 2007 weekly Closing high, which is the last major peak (after 2000), comes in at 1562 and it would seem that SPX 'wants to' retest that area. As if the Market had goals! But it seems that the trajectory of a trend is headed to prior key levels.
I noted in my initial 'bottom line' commentary that bullish sentiment is climbing certainly but isn't yet at the kind of 'extreme' readings that might keep me up at night if I had a lot riding on the continuation of a bull move.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart continues on a bullish track and continued to trend higher climbing just under the upper end of the bullish uptrend channel line highlighted on the OEX daily chart. It would appear that the big cap S&P index can continue to work gradually higher, certainly in terms of the chart picture.
The 2007 highs range from 720 to 735. Regardless of how OEX gets there (e.g., whether after a substantial pullback or not) the Index appears headed to a test of those prior highs; i.e., highs made AFTER the 2000 peaks that were in the 830 area.
Technical/chart resistance is currently suggested in the 688-690 area, then at 700. Near-term support continues to be at 675, with more major support beginning in the 660 area.
As I wrote last week: "OEX's ability to hold above 680 keeps the index on a solidly bullish track chart wise ..." I also noted the high/'overbought' RSI reading but that has moderated some.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) is trending sideways most recently as INDU has hit fairly tough resistance in the 14000 area. If Nasdaq continues higher and the S&P indexes continue to act bullishly (they are) the Dow should be able to churn through the 14000 barrier.
The key line of resistance is at 14000, the pivotal line of support is at 13860 currently. A breakout above 14000 or decisive downside penetration of the lower line of support would suggest potential for INDU to climb or decline a couple of hundred points.
Resistance is projected at 14090-14100, then in the 14150 area at the upper trend channel line, with resistance extending to just over 14200.
I'm repeating myself but per last week's comments, "I don't want to bet again the Dow continuing higher, 'overbought' or not, but at some point such extremes suggest correction sooner rather than later. Still, bull moves do get extended. Stay tuned." Yes.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite has achieved a bullish upside penetration
of its recent trading range, setting up a potential test of key near resistance in the 3200 area. If 3200 is pierced, especially for more than a day, COMP could climb next to the 3250-3260 area, or the upper end of the Index's broad uptrend channel.
Near support and a pivotal one is seen at 3130, extending to 3100.
The RSI is now longer at the 'overbought' extreme it was with COMP and bullish sentiment isn't at the high levels where I would say that a pullback was quite close at hand. If equities call daily call volume starts getting to double or more total daily put volume (for all equities on the CBOE), that's especially when I want to be out of any heavy market bets on the call side or in other equivalent strategies.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) has achieved a bullish upside penetration of a lengthily trading range where highs were seen repeatedly in the 2750 area and lows repeatedly in the low-2700 area.
The aforementioned pattern and 'breakout' move suggest NDX could be headed to the 2800 area or higher; I've pegged resistance above 2800 as around 2850 as the Index nears its prior highs from September.
Key support is at 2715-2700, extending to the 2665 and the low end of the big upside price gap that preceded a major spurt higher, followed by a several week sideways consolidation or sideways trend. Such a lateral narrow-range trend, especially one that doesn't retrace much of the prior upswing, is assumed to be a consolidation of the prior ADVANCE and the most likely eventual move will be in the direction of the prior trend; i.e., higher. NDX seems to be following this script.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) has the same bullish pattern (what else!) as the Nas 100/NDX and I've highlighted what is called in technical/chart pattern terms a 'bullish rectangle' or just a rectangle or 'line' formation according to Charles Dow who named this pattern. A line formation is seen as bullish after the upside breakout but the bias in directional expectation by technical traders is toward a further up leg occurring at some point that continues the prior trend.
Next resistance now looks like 68.3, with more key chart resistance in the 69.8-70 area, at the upper end of QQQ's projected uptrend channel.
Pivotal support is at 66.5, extending to 66 even.
Daily trading volume surged a bit over this past week which is mildly bullish given the sideways trend.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) Index continues bullish as the Russell moves higher within its long-standing uptrend channel.
Support implied by the low end of RUT's uptrend channel or at its up trendline, is at 900. Support below 900 is seen at 880-875.
Resistance is projected currently in the 923 area, extending to around 940.
The recent (more or less) sideways trend has 'thrown off' the overbought RSI extreme to a degree. This action is like letting off a little steam pressure in a boiler that could blow. RUT has a seasonal tendency to rally in the early part of the year and in fact seemed to lead the Market higher before strong up trends were apparent in the major indexes.
GOOD TRADING SUCCESS!