THE BOTTOM LINE:
The S&P 500 (SPX), S&P 100 (OEX) and the Dow 30 (INDU) climbed to further all-time Closing highs, although INDU looks toppy at its prior intraday highs. Nasdaq had earnings woes (Advanced Micro and Microsoft) and gapped lower Friday.
If the tech sector has topped for now, can the S&P be far behind? Since the tech-heavy Nasdaq Composite (COMP) held technical support at recent lows, unlike the S&P, and then led the way to new highs for the current advance, can the S&P now just detach from this tether? It seems unlikely.
Healthcare and energy were the top gainers among the S&P 500's major sectors, while technology was the biggest decliner.
I'm not anticipating much further upside progress in SPX, OEX and Dow given technology stock weakness. SPX could touch 1700 but I'm not expecting much more. Moreover, the S&P is at an overbought extreme both in terms of the 13-day RSI and my bullish sentiment indicator is at or near an 'overbought' extreme. COMP gapped lower by week's end, suggesting at least an interim top after it got to such extremes.
If you've been involved in bullish options strategies, consider taking profits. If a next move in the S&P is simply sideways more than lower, this may impact you adversely also.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) is bullish as it pushed to yet another all-time daily (and weekly) closing high. A further push higher is complicated technically in that the rate of change has slowed somewhat, but more importantly, the RSI and my CPRATIO sentiment indicator are at or near 'overbought' extremes.
It wouldn't take much in the way of earnings disappointments (e.g., with Apple, etc.) to result in a pullback. SPX might get to 1700, but I don't expect much above that without some corrective action even if its more of a sideways move for a while. Next pivotal technical 'resistance' is seen at the top end of SPX's uptrend channel, currently intersecting in the 1750 area.
Support is highlighted at SPX's up trendline, at 1656 currently. Next support looks like 1640. Fairly major support begins in the 1600 area.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart is bullish like big brother SPX in that the Index has gone to yet another all-time Closing high both on a daily and weekly chart basis. Its rate of change has slowed a bit, which doesnâ€™t mean much in and of itself. A slowing of the rate of price rise does have greater meaning in terms of OEX being at an overbought extreme in terms of the 13-day Relative Strength Index (RSI). Another type of 'overbought' in the market is when traders and investors develop higher than average or extreme expectations for further gains. This I measure by my CPRATIO indicator graphed above.
760 is near resistance and 782 is high resistance, at the upper end of OEX's broad uptrend price channel. Channel lines being one of the tried and true methods of projecting the extent of back and forth price swings in bull markets and down in bear markets.
Near support is seen at the up trendline. Although this trendline was pierced on the sell off below 730, prices have regained this line and as this trendline was a longstanding one, this trendline remains a way of measuring potential support; or, potential resistance. We know if the support trendline is still 'valid' so to speak on a next decline. Support as suggested at OEX's up trendline comes at 743 currently. Next pivotal support is 720.
A strong and prolonged move above 760 would suggest a 20-25 point next objective. OEX is more or less in the middle of its uptrend channel and could swing toward the upper end or down to the lower end or to the 740 area. Closes above the trendline maintains a bullish outlook until proven otherwise.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 Average (INDU) chart is bullish. INDU has gone to a new high like the S&P. We have one chart factor that's different in that we need to be alert to a (downside) reversal in INDU in that the Average is at the prior intraday high AND is nearing an overbought RSI extreme. Such extremes can of course come repeatedly before a strong bull market like our current one will see a meaningful correction. High RSI readings coupled with a slowdown, although minor, coupled with a possible double top, just means that more attention should be paid to a possible reversal.
If tech stumbles here, I don't see how INDU doesn't have some struggle or decline occurring too; maybe, delayed as the stronger indices stay up the longest before a sell off.
Near resistance is at 15550-15600, with next technical resistance suggested at 15800. The Dow looks headed to 16000 and higher but how it gets there is the question.
Technical support is seen at 15400, with next lower support int eh 15200 area.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) Index had a maximum bullish chart but was nearing the top end of its uptrend channel where rallies often go to die. Upper channel reaches is sometimes where a strong advance fails and other times where there's just a slowing or more moderate rate of climb price wise.
The downside price gap after a strong upside move is suggesting a bearish reversal. Whether such a reversal is more than short-term would be suggested by whether COMP holds above 3520-3530. If this area gives way, pivotal technical support is suggested in the 3450 area. To remain within its broad bullish uptrend channel COMP needs to stay above 3360.
Resistance in the short-term is in the 3625 area, then at 3670 at the current upper channel line.
I see COMP heading back into its upside gap area. If so, support will either develop there or around 3475 most likely. But, stay tuned!
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart was climbing at a very strong, often unsustainable, rate of change. When prices are running fast but near the upper end of a broad uptrend channel, bull trends can die of their own 'weight'. Prices just get bid up too high to be sustained after a lengthily run up. The Relative Strength Index gets up to 70-75 and you have to worry about a correction if you're still in calls, etc. You have to especially worry if all this is going on as we get into earnings reports!
A downside gap after such a strong move higher is often a reversal type 'alert'. Support in the 3000 area is technical support suggested by the upside gap from when NDX last leaped higher. Support below 3000 is at 2975, extending to 2950. NDX remains within its bullish uptrend channel as long as above 2875.
Near resistance is at 3093-3095, extending to 3137-3140. I didn't highlight on the chart but very near resistance is the top end of the recent overnight gap down, or simply the Thursday low at 3072. If NDX doesn't fairly quickly climb back above 3072, I would anticipate further downside weakness.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 (QQQ) chart picture is mixed. Unless QQQ climbs back above 75.25 fairly quickly, further weakness seems likely, especially a dip to the 73.5 area support. If 73.5 is pierced, pivotal chart support comes in around 72.
Resistance is highlighted on my QQQ daily chart at 75.7, with next resistance at 76.8, at the current upper channel line.
This recent break didn't occur with the usual big surge in daily trading volume. If prices don't rebound fairly quickly, look for a sell off to possibly 72 on heavy volume. I don't expect a decline all the way back to trendline support but it comes in at 70.2-70.3 currently.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart is major league bullish and RUT has been a kind of bellwether for the overall Market. It's a bullish factor to me that RUT didn't experience some related weakness along with Nasdaq on Friday's decline. RUT continues to chug higher and could be the one to reach the top end of ITS uptrend channel or the first one to do so. Resistance suggested by the upper channel line comes at 1072 currently.
Near technical support is at 1020, with support extending to the important 1000 level.
RUT has moved fast enough and far enough to get to an 'overbought' extreme in terms of the RSI indicator I rely on more than most overbought oversold measures. The thing with such extremes is simply that the probabilities of a shake out and counter-trend move gets significantly higher.
GOOD TRADING SUCCESS!