THE BOTTOM LINE:
The Nasdaq Composite rallied strongly above what had looked to be tough resistance at the pivotal 4000 level. This continues the pattern of the S&P, then the Composite, alternatively rallying then laying back. As was highlighted in my Trader's Corner of yesterday (11/29/13) and seen online HERE, the 4000 level, extending to 4080, showed up in COMP as possible technical 'resistance' at the upper end of a broad weekly chart uptrend channel; and around 3530 in the Nas 100 (NDX). However, in very strong bull markets like this one, prices may break out ABOVE such price channels, even when longstanding.
This brings me to another means of 'measuring' upside potential before an Index may be at an upper trading 'limit'. Moving average envelope lines are described as a trading tool in the aforementioned companion peace to this (Index Wrap) column. The (moving average) envelope technical indicator will be shown with the Nasdaq indices further on. 'Envelope' lines set at 4% above and below a centered moving average of 21-days are seen on the daily COMP an NDX charts. The upper envelope lines or 'bands' in the two Nasdaq indices plus the related ETF stock QQQ, suggest target areas on the upside where a 'maximum' upside advance is suggested based on historical tendencies. This indicator can be a useful tool to set potential objectives where, if reached, market action related to bullish or bearish strategies should be evaluated at least.
The S&P 500, 100 (OEX) and Dow 30 (INDU) may have reached a temporary or interim high but the Nasdaq looks to have assumed the upside leader role again for the overall Market. All the indices are quite overbought in terms of conventional measures of such things. Unfortunately, in this kind of market, 'overbought' measures are of limited use in terms of suggesting that the major indexes are at or near points where corrections will set in.
Pullbacks or corrections may continue to be limited; more sideways to slightly lower than sharply so. Very tough predicting turning points in this kind of runaway bull move but there are always corrections that set in at some point. But you have to 'know' them when you 'see' them and we just have a low volume holiday hint of a pullback starting in the mainstream stock indices (SPX, OEX and INDU) that more closely reflect the stocks prevalent on the NYSE.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart continues to trade above 1800 which is bullish. Friday could have begun a minor downside correction although this isn't clear yet given it was a slow Black Friday, volume wise. Lower volume means smaller amounts of concerted selling can have an exaggerated effect on price action. Stay tuned on bigger trading volume in the coming week to see what buying comes in.
An ability to rally from 1800 could lead to a test of expected resistance around 1825.
A couple of back to back closes below 1800 support would suggest declining momentum and a next key test would be an ability for SPX to mostly Close above its 21-day average at 1782, with support extending to 1775. Buying interest in the 1750 area is suggested by the 50-day moving average. In a strong bull market there's rarely a prolonged dip below the 50-day average, a benchmark that's stood the test of time.
Notes on key technical indicators are below the price chart.
SPX continues in overbought RSI territory as seen above, which continues a multiweek pattern.
Bullish sentiment hit another high extreme this past
week suggesting traders have little fear factor going.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) continued to move higher above 800 maintaining a dominant bullish chart. OEX hit some selling pressure at 810. 815 is potential resistance implied by the upper end of OEX's broad uptrend price channel and a 'natural' place for the rate of price advance to at least slow its rate of climb.
Like big brother SPX, the big cap 100, OEX, could have begun a minor pullback such as a dip that 'tests' 800 again. From 800 down to the 21-day average (795) is key support. 790 is my next highlighted support.
A better than even chance there's no decisive downside penetration of 800-795 and instead another rally carries to 815-820. Conversely, a couple of closes below the 21-day average suggests potential for a dip of more size, such as back to the 780 area.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) by the end of this past week climbed above a line of resistance at 16100, got near to my next anticipated target area around 16200. But, by day's end the Dow slid under 16100 in minor league bearish action in terms of the 2-3 day trend best measured on an hourly basis with a 21-hour RSI to spot overbought/oversold areas.
Not surprisingly, volatility came on low volume Friday trade. Expect support in the 16000 area, extending to 15950 and the 21-day moving average which is a key trading average for INDU for projecting a 2-3 week forecast of trend direction.
19 stocks, of the 30 (approximately 2/3rds), Dow Industrials are in strong uptrends which is the reason for strong upswing in the Average in recent weeks and months. In strong primary trends are: AXP, BA, DD, DIS, GE (and INDU bellwether), GS, HD, JNJ, JPM, MMM, MRK, MSFT, NKE, PFE, PG, TRV, UTX, V, and WMT. This is a quite bullish picture given 2/3rds of the 30 Dow Stocks in strong advances.
Near-term support is suggested in the 15950 area, then at 15800. Major support is suggested now at 15500.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) came on like bullish gangbusters this past week as COMP played leap-frog ahead of the S&P which lagged due to profit taking selling.
Next COMP resistance/selling pressure could come into play around 4080. I've then pegged possible next resistance for the 4130 area at a 4% moving average 'envelope' line. The 4 percent upper envelope line doesn't represent 'resistance' in the usual way of this concept but rather is where COMP gets about as far above its 21-day moving average as it tends to get before either a slowing sideways trend OR getting pulled lower again; e.g., COMP rallies to 4130, falls back to 4000-3990.
Near support is at 4000-3990, extending to 3955 at the 21-day moving average.
COMP is overbought on a short-term basis and the Index could dip back to the 4000 area and then rebound again strongly. I anticipate some short-term weakness such as over the next 2-3 trading days.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart has seen a bullish accelerating advance from its earlier lift off from support in the 3400 area of the 21-day moving average. The Friday bout of selling wasn't surprising given how far and fast NDX had run up over the holiday-shortened week and given the low volume of Black Friday not too much selling would tip prices lower more readily.
There may be selling spilling over into the early 1-2 days of the week ahead, especially if NDX started trading below 3470. However I also look for significant support/buying interest on a dip that carried toward 3400 support; again, stressing the key role of the 21-day average.
From any such dip to low-3400 support, a next rebound could carry again to the 3500 area then perhaps to the 3550 area and the upper moving average envelope line; set to 4 percent above that day's 21-day moving average and often suggesting upper price limits.
The 4% upper 'band', relative to the key 21-day moving average, has often pinpointed the furthest reaches of an advance before upside momentum slows a bit and more as when there's a more significant pullback such as when prices dip well under this 'centered' moving average.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 (QQQ) tracking stock is bullish like the underlying NDX index of course so just to focus on the support/resistance levels here relative to QQQ.
I look for resistance coming in starting at 86 and then extending to 87.
Substantial support is seen in the 84 area. I anticipate QQQ being well supported in the 84 area, assuming there's even that much of a dip. Fairly major support looks to begin around 82.
Daily volume was quite low this past week as expected and also as expected I'd say, the On Balance Volume (OBV) line continued to point higher in a positive upside (bullish) direction. The bulls should come in with some buying if there's a dip into the 84 to 83.3 zone.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart is bullish, especially so with the accelerated advance of this past week. Upside momentum slowed on Friday.
Some number or traders, including me, tend to be leery of an accelerated upswing after what was already a prolonged advance. Leery at least when holding positions overnight where bearish news could whack you in a overnight gap lower opening. Big rallies can lead to big volatility and surprise dips.
Resistance/selling pressure starts coming in around 1150. On a 'breakout' move above 1150, further upside potential is seen to the 1168-1170 area, at the upper end of RUT's broad uptrend price channel.
RUT should see good buying interest if a dip developed that carried RUT into the 1130-1120 price zone.
GOOD TRADING SUCCESS!