THE BOTTOM LINE:
The major indexes are showing a mixed picture, with the S&P 500 (SPX) and S&P 100 (OEX) rebounding a bit from their up trendlines, the Dow 30 (INDU) drifting sideways (in a narrow 200 point range) well under its prior multimonth up trendline and with the Nasdaq Composite in an unusually tight 6-week 3590-3690 trading range. With all that, traders show fairly high bullish sentiment, suggesting optimism the bull market will resume ahead.
I'm leery of being in this market with bullish positions with what I consider to be 'overly high' bullish trader sentiment. I'm also reluctant to play the downside with SPX having rebounded some at least from its November-August up trendline. INDU fell well under its up trendline in mid-August making me wonder if this pattern is a bellwether for a next downturn in even the tech sectors. COMP hasn't had occasions in several years of a number of weeks peaking at the same highs without a downturn occurring later.
Is this where I should say that "past performance is no guarantee of future results"! Or, maybe better is to say that there are times where uncertainty is such that it's a good time to not have outright bullish or bearish strategies. Standing aside is always an option in trading, especially with a mixed trend.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart is mixed with SPX remaining below its key 21 and 50-day moving averages. SPX came up to resistance in the 1665 area on Friday and backed off. Next resistance comes in around 1683.
Near support is seen at the November-August up trendline, currently intersecting at 1633. The fact that SPX has to date managed to stabilize and hold above its multimonth up trendline is a bullish development. Next up to suggest renewed upside momentum is for a move above 1680-1683 that was sustained. Technical support in SPX is suggested by the 62-66% retracement zone at 1616 to 1608.
There has been one sizable down leg, followed by a rebound. If SPX can rally back up to the resistance overhang in the 1680-1683 area but fails there, I can envision another decline developing from this area, especially a downswing that fell lower than has been seen to date.
I'm keeping an eye on the support trendline for possible breaks, a further rally that clears the two moving averages; if so, next is what happens in the 1680 area, which looks like a pivotal resistance overhang.
Per my initial 'bottom line' comments, my trader 'sentiment' indicator seen above to me reflects an overly optimistic market outlook. It's true that SPX held its up trendline after getting into oversold territory, so betting on calls isn't a wild speculation either. However, it's rare to see traders and investors get or remain solidly bullish at bottoms. More likely is my CPRATIO line rising this high at or near tops. I'll be interested to see if the recent increase in bullish sentiment turns out to be foretelling of a next sizable move higher.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart is pretty much a mirror of the S&P 500's in OEX's bullish action in holding above its November-August up trendline. Friday's OEX low was right at the Index's up trendline and best single day rally in awhile followed. While OEX went to a higher high for this move, its Close was a hair's breath under Thursday's. We still have a kind of 'indecision' pattern going with buyers getting scarce as the major indexes get near prior recent highs.
I've noted resistance in the 744 area, then up at the top end of the downside gap, which would get 'filled in' at 753. Overhead price gaps tend to act a resistance. A move above 753 that persisted would suggest a possible retest of highs in the 760-765 zone.
Near support is seen at the up trendline, currently intersecting at 734. Next support is suggested by the levels representing the 62 to 66% retracement levels at 727-724. A Close below 720 that persisted would suggest a possible move to near 700 again.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) has attempted to rally from at or just over 14800 over the past two weeks but with limited ability to extend its gains above 15000. Near technical resistance is at 15000, extending to 15040. Pivotal higher resistance at 15300 is suggested at the previously pierced up trendline dating from INDU's November lows.
The Dow has seen support/buying interest develop in the 14755 area but the Average still looks vulnerable for a move back to the 14700-14660 area, with further support looking to come in around prior key downside lows in the 14600-14550 zone.
There's been no noticeable turnaround in bearish patterns seen in most of the Dow 30 stocks. I noted last week bearish charts seen with AXP, BA, CSCO, DIS, GE, HPQ, INTC, JNJ, MCD, PG, WMT and XOM. ExxonMobil stock (XOM) may stabilize at or above a line of prior support at 85 as crude prices have risen on how Syrian military action might affect oil prices. T and VZ are looking vulnerable to further declines also.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) Index is mixed in its pattern in that COMP has been unable to achieve an upside penetration of the top end of its 6 week 3585-3700 trading range. They can't take COMP down and can't take it up or up by much so far anyway. Normally, a substantial move higher such as seen from the 3300 area up to 3700, followed by a sideways consolidation is bullish. An upside move that takes the Index into a new up leg would be a common outcome of this pattern.
The caveat is that the longer COMP is range bound and it has had approximately the same tight 3590-3690 weekly range for 6 weeks now (and the same repeated high), the more there's the possibility that the Index will stumble and fall into a steeper decline. Stay tuned. A next substantial move is seen in whether COMP achieves a decisive upside OR downside penetration of the relatively narrow 100 point range of the prior 6 weeks. A Close above 3700 that was sustained, could lead to a test of COMP's upper channel line. Stay tuned!
There's bullish sentiment (see my indicator above) that seems 'overly' bullish to me and a Relative Strength Index (RSI) that is more or less in 'neutral' middle ground. If anything these technical indicators point to possible trouble in mounting a next sustained rally.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart is in a similar sideways mixed pattern to the Composite, even more so as this past Friday's high equaled the prior couple of Nas 100 intraday price peaks. A Close above 3150, not reversed the next trading day, would be bullish and could lead to a test of possible resistance in the low-3200 area, at the top end of NDX's uptrend channel.
I've highlighted potential support in the 3067 area, at the 50-day moving average and in the area of prior recent intraday lows. Next lower support is suggested around 3025, which is close to the bottom end of NDX's trading range and also represents a Fibonacci 38% retracement of the late-June to mid-August advance.
As noted with the Nas Composite (see above) commentary, 'normally' in chart patterns having a strong prior advance, followed by a sideways consolidation type move (we assume, until proven otherwise, that such a the sideways trend 'consolidates' the prior advance), will lead to a next up 'leg'. However, the longer this kind of range-bound trade goes on the more that all bets are off so to speak. Tops do get 'built' by repeated sell offs from highs in the same area.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 (QQQ) chart is mixed in the short-term and remains bullish on an intermediate and long-term basis. The repeated but unsuccessful attempts to penetrate highs in the 77.3 area makes for the 'mixed' near-term pattern as such repeated rally failures could lead to another sell off and possible lower lows than seen since the sizable upside overnight price 'gap' of July 10-11.
The QQQ price gap exists from the 73.6 intraday high of 7/10 and the subsequent trading day's low at 74.25. Gap areas below current price levels tend to act as support. When such technical type support gives way, a further downswing is anticipated, even back to support implied by the up trendline currently intersecting just over 72.
Conversely, a decisive upside penetration of 77.3 resistance could lead to test of next implied resistance at the upper QQQ channel line, currently intersecting at 78.5
Near support is seen at 75.2, then at 74.3-74.1.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) is mixed on a short-term basis after RUT retraced not quite half of its strong advance from late-June into a mid-August price peak. What keeps the RUT daily chart technically bullish is the fact of RUT rebounding from its up trendline, which maintains its longer-term uptrend pattern.
I've highlighted anticipated support in the 1010 area, extending to around 988. If the 1000 level is pierced it would not be surprising to see the Index drop another 10-12 points and hit the next 'Fibonacci' retracement level of 62%.
If RUT stays above 1020 the Index 'holds' or maintains its support (up) trendline. Near resistance is seen in the 1040 area, with next higher resistance at 1060-1063.
GOOD TRADING SUCCESS!