THE BOTTOM LINE:
The recent rebound was predictable in that the leading S&P 500 (SPX) index got 'fully' oversold (see the 13-day Relative Strength Index/RSI on the daily SPX chart) and the Dow and Nasdaq rallied from their still (mostly) intact up trendlines.
SPX eventually faltered on its rally once the Index neared its previously broken up trendline, as well as when SPX, the Dow (INDU) and Nasdaq Composite (COMP) got at or near resistance suggested by the 21-day and 50-day moving averages. These key trading averages in the major indexes, once pierced, often then 'act as' resistance later on. Technical support in the major indexes, including support implied by key moving averages, once pierced, tends to 'become' at least initial resistance on a subsequent rebound.
The Russell 2000 (RUT) was an exception as RUT closed back above its 50-day average and within a hair's breath of its 21-day simple moving average. Sometimes we've seen RUT act as a bellwether for the rest of the market but I'm not reading this much into our current stock index chart picture until or unless I see SPX, the Dow and the Nasdaq Composite close and stay above their pivotal 21 and 50-day averages. Absent that I anticipate that stocks will be trending sideways to lower again.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) rallied from what I consider to be a 'fully' oversold condition; i.e., the 13-day Relative Strength Index dips into (or below) the 30-35 zone. I was seeing likely support/buying interest in the 1580 area and of course SPX overshot that level some. 1540 however still looks like fairly major support.
SPX's rebound faltered at technical resistance implied by the 21 and 50-day moving averages, which is a common pattern. Support implied by a previous low, support trendline or with such indicators of technical support implied by the pivotal 21 and 50-day moving averages, once pierced, will tend to become resistance on a subsequent rebound.
Repeating again this week, 1540 should offer fairly major support. A close below 1540 is bearish but SPX would still be within what is a correction pattern, rather than a trend reversal, even if 1500 was touched briefly. A weekly close below 1500 puts the bull market in question however.
A move back above 1619-1625 would be a bullish breakout above the 21 and 50-day moving averages that have currently converged. A couple of back to back closes back above the prior up trendline would put the S&P back into its prior rate of upside rate of (price) change, which is what trend momentum is basically. Next key resistance is in the 1650-1655 area.
S&P 100 (OEX) INDEX; DAILY CHART
Even with a decent-sized rebound, the S&P 100 (OEX) remains below its long-standing broad uptrend channel. Selling pressure came on OEX's approach to resistance implied by a return to the previously broken up trendline and to near the 21 and 50-day moving averages that have converged at 730.
The Index needs to climb back above 730-732 and stay above the trendline and the two key moving averages to suggest that the bullish prior trend is back on track. If so, next resistance is at 740-743. Absent a move back into OEX's uptrend channel OEX is likely to drift lower again.
Support is highlighted in the 710 area, extending to 700. Per my comments of last week, I anticipate OEX holding above 700, although the last downswing low was in the 694-692 area which could get tested again.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 Average (INDU), as I've anticipated for a couple of weeks now based on my 'bottoms up' study of the 30 charts involved, didn't have enough collective strength to hold above 15000 support; or, enough strength in the Average to climb back ABOVE 15000 during the recent rebound.
On the bullish side, with the exception of the early week spike lower, INDU has to date held above its multimonth up trendline. On the basis of this trendline, I've pegged near support at 14747 where the trendline currently intersects. Next technical support is 14600-14550. Major support is at 14500 even extending to 14400.
On a bearish take of the technical aspects of the chart, the recent rebound couldn't make headway above the 21 and 50-day averages. Resistance at the two moving averages is noted at 15039, with next overhanging resistance at 15200, extending to just over 15300.
The pattern looks like another test of trendline support could be in the offing and potentially another test of the recent lows or a fall to the 14400 area even. Conversely, a couple of closes above the two key moving averages would suggest that the recent low might have formed at least an interim bottom.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) Index chart presents a mixed chart picture. COMP rebounded from support implied by its up trendline, which is bullish, but the rally hasn't cleared resistance implied by the two key moving averages, the 21 and 50-day, that are worth paying attention to.
COMP has seen descending relative highs at the tops of rally attempts which is a bearish pattern. To get back on a more bullish track, the Nasdaq Composite should first clear 3418-3420 and then 3465, at the minor down trendline (red dashed line). Next resistance is then seen at 3485.
It looks like COMP could start drifting or falling lower again. Depending on the stopping point of any such next pullback, should tell the story on whether COMP would then be in a position for a sustained advance.
Support is highlighted at COMP's up trendline, currently intersecting at 3323 with further support around 3300. Fairly major support should come in at 3200, extending to 3170-3150.
Note the single day 'sentiment' reading at the lower 'oversold' line just prior to the rebound of this past week. This Index may again reach what I consider a 'fully' oversold condition in terms of both RSI and my CPRATIO indicator before the current bearish correction has run its course.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) rebound this past week from its up trendline, albeit with minor intraday 'slippage' below this line of support, which is keeps the Index within its bullish uptrend channel.
Not so bullish is the limited rally that followed Monday's rebound with NDX yet to test resistance at 2940, at the juncture of the 21 and 50-day averages. If there's a decisive upside penetration of 2940-2950, next key resistance is at the well-defined line of resistance at 3000.
If the Nas 100 again starts drifting (or galloping) lower, key near support is at the trendline intersection at 2955, with support extending to 2825, at the recent intraday low. NDX is in a declining trend until there's a rally that carries above the prior upswing peak. That would be at 3000.
2750 is major support, with a weekly Close below this level turning NDX bearish on an intermediate-term basis.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 (QQQ) remains within its broad bullish uptrend price channel given the recent rebound from the low end of this channel. I don't think that this successful test of trendline support is yet conclusive until or unless QQQ can get back above 72. Next resistance is then at 72.6.
Support at the up trendline comes in at 69.6, with next lower support beginning at 68, extending to what should be 'major' support at 67. If the trendline continues to hold up as a technical support then it may just be a matter of further consolidation before there's a move higher that would test the last rally peak (at 73.7). Right now I don't see that happening anytime soon.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart is bullish in that prices have remained within its broad multimonth uptrend price channel. I'm not sure based on the pattern I'm seeing that the lower trendline won't be tested again.
Resistance is anticipated at the recent rebound peak or a bit higher once the prior downside price gap has been 'filled in', specifically by a move to 985 resistance. More pivotal resistance then comes in at 1000 which has stopped several rally attempts to date.
Near support implied by RUT's up trendline is seen at 956, with next potential support at the recent 942 intraday low. 900 continues to be a key major support. It wouldn't be surprising to see another test of 900, with a trading range setting up between 900 and 1000. I'm getting ahead of myself in that RUT's up trendline has held as a recent support, with the exception of a 1-day (only) Close under the trendline. Stay tuned!
GOOD TRADING SUCCESS!