THE BOTTOM LINE:
Key resistances I was looking at suggested by the 21 and 50-day moving averages were pierced this past week, which is bullish for more upside. I still am cautious on jumping into this bull run. The S&P indices fell under their multimonth up trendlines and haven't gotten back above these trendlines, while the Dow 30 (INDU), the Nasdaq indices (COMP and NDX) and the Russell 2000 (RUT) held their support trendlines, suggesting that investors were willing to buy those dips and are looking more to growth now and less to the economic mainstay stocks.
While recent lows now look to have formed important bottoms, the current rally could still falter, especially in the S&P as the 500 (SPX) and big cap 100 (OEX) haven't gotten back within their prior bullish uptrend channels. It's a hot summer but the bulls aren't quite on fire again.
Recent lows completed measured move objectives as each of the two down legs from the late-May top 'measured' out to be very close to equal and is favorable for completion of a correction. Often in stocks and the stock indexes, the second downswing in a correction goes farther than the first decline but sometimes the point distance of a second decline just duplicates the extend of the first downswing.
If the lows are in for the overall correction, does this mean new highs are certain to follow without more chopping around? Of this I'm not convinced based on S&P trendline resistance just overhead, less than big turnaround retracements to date and based on how the patterns look. However, I'm more cautious about the further upside than I am a bear who can't wait to short this thing.
The technical outlook always reflects the underlying fundamentals of the economy and on earnings trends and it's not surprising that the rally would look hesitant at times and the S&P and the tech-heavy Nasdaq indexes swap Market leadership. The charts reflect cross-currents with anemic global growth, versus relatively strong earnings trends in the U.S.
Then, there's the Fed and when do they put up interest rates. Actually the Bond Market has done that for them to some extent. One Exchange Traded Fund (ETF's) greatly underperforming other ETFs this past week was the Mortgage REIT Income ETF (MORT), down about 7.5% on the week. Prices go down on bonds and high-income funds as yields go up. XLU, the SPDR utility index and a dividend yield play, was down on the week again versus a weekly gain, albeit modest, in SPY.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) is mixed like the big cap S&P 100. Overhead trendline resistance comes in at 1638. This is the key near resistance 'test' with resistance then extending to 1650-1654. Major resistance comes in at 1685-1687, which I don't expect to be tested near-term. But, stay tuned.
Deflection from resistance implied by the previously broken up trendline might mean a dip to the 1605-1600 area support. Next support then is seen at 1575, extending to 1560.
I'm more or less 'neutral' on the S&P. I don't have a strong conviction that there's a big follow though move that will carry SPX higher. Nor do I see 1600 support giving way near-term.
A decisive upside penetration above 1650 is bullish. 1700 is then a next possible target for July unless everyone stays at the shore which the heat waves around would suggest as a better move than trading the cross currents of summer!
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart is mixed. Yes, there's been a good sized rebound off the recent bottom near 700 AND the Index has cleared resistances at the 21 and 50-day moving averages. The next important test is whether OEX can pierce the 'kiss of death' trendline at 735. Michael Jenkins, an insightful analyst of years gone by, used to say that a long-standing trendline, once pierced, would often then prove to be a killer stopper on a subsequent rebound TO the trendline. We should find out on this soon.
Next resistance is seen not too far above the broken trendline, in the 743 area. Resistance then comes in at 750, extending to the 757 intraday high.
Near support comes in around 720, with support then extending to the 710 area.
I'm somewhat neutral on this chart as there's a lot of overhead resistance I'm seeing. The recent rally has been decent but now there's a lot of 'congestion' above current levels as they say. Sort of like heavy traffic I'm experiencing on the Pacific coastal highway where I try to stay out of the tourist bumper to bumper coastal caravan.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 Average (INDU), unlike the broader S&P indices, HELD technical support implied by its up trendline. Price action after that was mostly bullish and Friday's Close saw INDU clear the moving averages shown nicely.
I can see resistance at 15200-15300 being reached, maybe a bit higher. I've pegged next higher resistance at 15400 and haven't noted the obvious next resistance at prior 15500-15550 price peaks. I see little likelihood of those highs being overshot in the coming week. A move to 15400 would be impressive enough in the coming week but a close above this level seems doubtful based on the 30 Dow stocks, where I rate only 6 of the Dow Average as in very strong bull trends currently.
A line of near support comes in around 14875, extending to 14800 and a somewhat must hold support, although holding above the prior low around 14550 is a bigger deal chart wise.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) Index chart is highlighted with some chart/price aspects worth noting. COMP lead the way in its upside penetration of the two converging moving averages as seen on the COMP daily chart below. Important 'confirming' price action came from the subsequent rebound from the averages. Moreover, COMP broke out above the minor down trendline connecting the declining relative highs from the May top. Next up is key technical resistance at 3500, extending to the prior 3532 intraday high.
Near support is at 3420 and that should hold as support, especially on a Closing basis if this rally is going to keep chugging higher. Next support and a key one is at the well-defined long-standing up trendline, currently intersecting around 3340.
I anticipate COMP at least re-testing its highs in the 3530 area.
Depending on this outcome, we could see COMP work up toward resistance implied by its upper channel line coming in at 3630 currently. Stay tuned on that.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) is bullish in that the Index rebounded from its multimonth up trendline AND has cleared resistance implied by the 21 and 50-day moving averages. Tally ho.
There is a minor down trendline coming up just overhead. Odds to me favor a further move through this trendline rather than a deflection from it. A decisive upside penetration of 2965 would show continued upside momentum. Pivotal resistance then comes in at 3000, with fairly major resistance at the prior high in the 3050 area.
A first level of support is highlighted at 2912 and extends to 2900 even, with trendline support then coming in at 2870.
NDX should work higher based on the advance above the moving averages but bulls beware of NDX slipping back under these two key averages. More of sideways move might follow if that was the case. I suspect NDX will re-test 3000 at a minimum but that may prove to be stubborn resistance/selling pressure in the near term or next 1-2 weeks.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 (QQQ) is bullish. QQQ held technical support at its up trendline and now has pierced the two key moving averages of 21 and 50-days. This type action is bullish for a move still higher. But, watch that that the moving averages now 'act as' or define support on pullbacks.
QQQ has not yet pierced a minor down trendline that can be visualized by drawing a line through the highs dating from the late-May top. You can see this minor down trendline on the NDX chart above. In the Q's a decisive upside penetration of 72.7 is needed to clear this minor but still-significant down trendline. I've highlighted first resistance based on prior highs at 73.6, with a next level of potential resistance extending to 74.6.
Support is seen at 71.3, then at QQQ's up trendline, intersecting at 69.8 currently.
The On Balance Volume (OBV) line is going up strongly with the recent rally, which suggests buying is coming in on the rally although as usual not in a big way unlike a regular (company) stock which tends to see 'confirming' volume spurts on rallies.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart is bullish as RUT has pushed to a new closing daily and weekly closing high above 1000. RUT has at times this past year been a reliable market bellwether and may be here. Certainly, the Index is back in the center of its uptrend channel and has had a tendency to work back and forth between the high and low ends of its uptrend channel.
I don't see resistance coming in until RUT closes in on the upper end of its channel around 1030, then at 1050 which is the current intersection of the upper channel line.
Near support is at 980, at the 21-day moving average RUT recently pieced on the upside. Next support at the multimonth up trendline comes in around 963 currently. There's no reason I see based on the chart not to anticipate still higher levels ahead for RUT.
GOOD TRADING SUCCESS!