THE BOTTOM LINE:
I noted last week that further upside looked limited and that may be the case awhile longer. That said, the sideways S&P 500 (SPX) and Dow (INDU) trends look most like consolidations ahead of a further move higher.
The big cap Nasdaq 100 had more of a dip than the S&P that took NDX in the direction of support implied by the low end of its bullish uptrend channel. NDX however rebounded 3 times from the area of its key 21-day moving average, then rallied back toward the line of its recent highs. This pattern in Nasdaq keeps bullish breakout potential going in the tech-heavy indexes also.
Generally, a sideways move after a strong prior rally should be assumed (until proven otherwise) to be a consolidation ahead of a breakout above the top end of the rectangular sideways pattern. Stay tuned on the eventual outcome.
INDU looks bullish as long as it continues to hold near support at 14400. I see the Dow as the 'lead' or bellwether index currently but SPX also has a similar bullish pattern in holding above 1540. The Nasdaq should continue to merely follow or be pulled up by the S&P and Dow indexes, which look headed still higher; WHEN a possible breakout above the line of recent highs occurs is hard to predict. The longer the sideways range-bound trade goes on, a breakout move above (or below) the prior price range tends to have a bigger move relative to such a 'base' or base-building process.
The Dow 30 looks to be the linchpin of this current overall Market advance and 17 Dow stocks, over half of the 30 Industrials, remain in powerful uptrends; i.e., AXP, BAC, BA, CVX, DIS, market bellwether GE, HD, IBM, JNJ, JPM, KFT, MMM, PFE, PG, TRV, UTX and VZ. Some other Dow stocks like HPQ, KO, T, WMT and XOM could advance some or some more with the lead stocks but I am mostly pinning bullish expectations on the 17 aforementioned Dow stocks in continued strong bullish trends.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart remains bullish although trend momentum has slowed as prices drift sideways. I take the fact that support has developed in a related area after relatively minor dips, with rally attempts that follow, as possible or likely 'confirmation' of the overall uptrend.
A sideways move after a strong prior advance is often if not usually a consolidation of the prior trend and suggests a next move will be higher. How long before a possible next up leg develops is another story and unanswered question. Sideways trends also tend to 'throw off' overbought extremes such as measured by the Relative Strength Index (RSI) indicator. Moreover, pullbacks that hold at or above the key 21-day moving average, is a bullish pattern within a continued uptrend.
Key near support is seen at 1540, then at the lower end of the current uptrend channel in the 1520 area.
Resistance is apparent in the 1555-1560 area and then is assumed to lie at the upper end of SPX's uptrend channel, currently intersecting around 1590.
The RSI (Relative Strength Index) as seen above has pulled back to a more 'neutral' mid-range reading, which is a characteristic of 'time' (sideways) corrections rather than substantial retracements of the prior advance.
Trader bullish/bearish sentiment (CPRATIO), on a 5-day moving average basis, is holding in the 1.6 area, which isn't at an 'overbought' (high) extreme. When the 5-day CPRATIO gets to, near or above 1.9-2, this kind of 'extreme' suggests high risk of a downside reversal ahead.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart is bullish and my comments on the chart mirror my S&P 500 comments above just the price and indicator trends are alike. I take the sideways move, with a limited pullback so far after a strong prior advance as a bullish consolidation prior to another possible rally. The duration of a sideways move isn't easily predicted but the potential for an eventual breakout move above prior resistance is good.
OEX has seen resistance/selling pressure develop on rallies above 700 with intraday highs in the 702 area. Next resistance looks like it would come in around 713 currently, at the top end of OEX's uptrend channel.
Near support is seen in the 693-692 area or specifically ahead at the 21-day moving average. A decisive downside penetration of 692-690, especially on a Closing basis would be near-term bearish. Support in the 685 area is suggested by the current intersection of OEX's uptrend price channel. Fairly major support is suggested at the index's prior downswing low near 670.
The 13-day Relative Strength Index seen above has fallen to a more 'neutral' mid-range reading recently from an overbought extreme in the 70 area. This action suggests somewhat less potential for a sharp downside reversal, but also should be seen within the context of an extended prior advance off the November lows; i.e., a 15% gain from low to peak so far.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) continues to be in bullish pattern even though the recent trend has been sideways. In technical analysis or chart terms, sideways consolidations or a range bound trade, in this case between 14400 and 14550, is assumed to be a bullish consolidation after a strong prior advance. Simple analysis, maybe not even 'technical' analysis per se; a trend in motion tends to stay in motion, etc. Support below 14400 looks like 14200-14175. Resistance above 14540 looks like it would come in to play in the 14800 area, at the top end of the bullish uptrend price channel.
Of course tops can be built in a sideways move after a strong prior advance; e.g., an index or stock CAN'T make further upside progress after a major advance and starts topping out in the same area. Beware of this possibility of course. It's only prudent, especially when the Market gets into overbought territory at or above 70 on daily and weekly charts; e.g., RSI 'length' setting at 13 on both daily and weekly charts.
Overbought markets often tend to stay 'overbought' for lengthily periods of time so I go less with such indicators of risk (of a pullback) and more with the overall trend. However, I'm also not buying into every pause and pullback on the way up and like to buy into oversold conditions WITHIN a primary bull market; e.g., see the November low and the 13-day RSI.
The Dow as I noted already in my initial 'bottom line' commentary looks to be the key segment of this current Market advance and 17 Dow stocks, over half of the 30 Industrials, remain in powerful uptrends; i.e., AXP, BAC, BA, CVX, DIS, market bellwether GE, HD, IBM, JNJ, JPM, KFT, MMM, PFE, PG, TRV, UTX and VZ. Some other Dow stocks like HPQ, KO, T, WMT and XOM could advance some or some more with the lead stocks but I am mostly pinning bullish expectations on the 17 aforementioned Dow stocks in continued strong bullish trends.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) chart remains bullish along with the other major indexes on the S&P side. Support on recent dips held at or above the 21-day moving average which is a bullish pattern in the major indexes generally.
Near resistance comes in around 3260. A decisive upside penetration of 3260 would suggest potential for a move to 3300 or higher such as to the upper trend channel boundary, currently intersecting around 3330.
Near support comes in around 3200-3175. Next intermediate technical support comes in the low-3100 area.
The RSI (Relative Strength Index) as seen above has not hit extreme 'overbought' highs, but I would take note that a longer period ahead of a sideways trend is what would tend to bring this reading down to a more neutral 45-50 reading where I'd take on added bullish strategies more readily.
Trader bullish/bearish sentiment (CPRATIO), on a 5-day moving average basis, is holding in the 1.6 area, which isn't at an 'overbought' high extreme either. When the 5-day CPRATIO gets to or near 1.9-2, this marks a time of higher risk of a shakeout ahead.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) also appears to be in a bullish consolidation still, with prices drifting basically sideways. The most recent weakness took prices back to the area of the 21-day average, which held up as support, followed by rebounds toward recent highs, maintaining a bullish 'consolidation' pattern. Chart analysis suggests that an uptrend will continue as long as prior lows are not pierced. So far NDX has pulled back no lower than to support implied by the low end of NDX's prior upside price gap; this pattern is one that 'fills in' the prior gap and where support is expected to be found. .
Near support is seen at the 21-day moving average in the 2775 area, extending to the low end of NDX's uptrend channel at 2750. Fairly major support is then suggested in the 2700 area.
Key near resistance is suggested by the line of recent highs at 2812. This is a finely delineated or etched series of intraday highs and suggesting that a strong move above 2812 would imply a next up 'leg' was underway, perhaps one that would eventually carry to the upper end of NDX's uptrend channel around 2900. Most significant from a potential chart resistance standpoint is the cluster of prior (September) intraday and Closing highs in the 2862-2878 zone.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) remains in an overall bullish pattern. QQQ has a similar 'line' of repeated prior highs that implies resistance in the 68.9 area. QQQ had a 1-day Close below its 21-day moving average but not more. I often say that its takes a second consecutive day above or below key chart of indicator points to suggest a trend change.
I've highlighted support in the 67.5 area, at recent lows, in the area of the 50-day moving average and at the current intersection of QQQ's uptrend line.
Key resistance as noted is 68.9-69, with next resistance at prior (September) highs in the 70.5 area.
On Balance Volume or the OBV line continues to decline which is a mild bearish divergence in terms of the OBV indicator. However, this divergence is occurring in a recent sideways trend (not an uptrend). Moreover, as noted, the overall chart pattern with prices holding within its uptrend channel is bullish. Price trumps volume so to speak. Volume is a sometimes important secondary indicator.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) Index remains bullish in that RUT remains within its uptrend price channel. There is a minor recent 'line' of prior highs/resistance that needs to be overcome to continue RUT's bullish chart pattern going forward. Key near resistance is at 953. Next major resistance, implied by the top end of RUT's uptrend channel comes in around 983 currently.
Near support remains in the 940 area, with lower trendline support suggested now around 929, extending to 920. 900 offers fairly major technical chart support in the Russell 2000.
GOOD TRADING SUCCESS!