THE BOTTOM LINE:
The Nasdaq Composite (COMP) and the big cap Nas 100 (NDX) have now retraced a Fibonacci 62% of their last run up (or very close to that in the case of COMP), found support at their up trendlines and have reached 'fully' oversold readings, at least at the top end of that zone. If a tech bottom is at hand, the S&P 500 (SPX) could break out above its relatively narrow 1840-1880 trading range.
Moreover, the sideways trend in SPX and the big cap S&P 100 (OEX) has 'thrown off' prior overbought extremes seen at the late-November Market peak. SPX and OEX are now registering a more 'neutral' mid-range reading in terms of the 13-day (and 8-week) Relative Strength Index. This pattern tends to 'set up' increased potential for a next up leg; at least in a bull market this is the pattern.
March, which often brings a seasonally mixed to lower price trend, ahead of Q1 earnings reports, is about over. March 'madness' doesn't just pertain to correctly guessing the college basketball tournament winners! Gee I missed getting them ALL correct and collecting the offered billion dollars!! Don't know how that happened :-) !!!
The charts and my associated commentaries below will tell the story of what may lay next or at least my version of it.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) index remains within its bullish uptrend channel but within SPX's broad uptrend, the Index has been going sideways since late-February within an 1840-1880 trading range. Generally, chartists assume, myself included, that sideways trends after a prolonged advance are consolidations ahead of another advance. Supporting this view so to speak is the fact that SPX is holding above the key 50-day moving average. Very strong index trends will tend to also trade above their 21-day averages, which isn't the case recently, although the S&P is trading mostly above this average and not far below it.
The sideways SPX trend also means that the Relative Strength Index or RSI continues to drift lower and this puts into a 'neutral' mid-range reading, which can be a 'set up' to a next advance. The broad S&P 500 index is holding up well in the face of the downside correction in the Nasdaq, which is also a bullish factor.
Bullish sentiment in the form of my daily volume ratio in CBOE calls to puts for equities has drifted lower, which in a contrary opinion sense, is bullish, 'perverse' that this may seem. I think all that's needed for another run up in the S&P is Nasdaq to put in a low for the current correction, which I think is near at hand for reasons discussed above and below with my Composite and the Nas 100 index commentaries.
SPX support is suggested at 1840, extending to 1830; next support then looks like it would come in around 1810, extending to 1800-1790. Near resistance is highlighted at prior intraday highs at 1880. Next resistance is projected for the upper end of SPX's broad uptrend channel.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart suggests the Index is holding up well in the face of sector weakness elsewhere. More so than the broader S&P 500, the big cap OEX is maintaining Closes mostly above its 21-day moving average. It's true that the 830-832 area is turning back rally attempts but not by much and in the face of tech stock weakness of late, this performance is mildly bullish and suggests that the line of recent highs will be pierced ahead. Especially as we get into Q1 earnings announcements and the more seasonally and bullishly favorable April time frame.
Another technical note is that OEX has not even retraced what I consider a 'minimal' Fibonacci 38% retracement of its last advance or up leg dating from a 770 low.
Support is suggested at 810-806, extending to 800 and what would amount to a 50% retracement of the last upswing. Near resistance is highlighted at 830 and extends to 832. Next key resistance I measure around 845 at this juncture.
The 13-day RSI has drifted down toward a mid-range 50 reading and that's about as low as I think we'll see in this price momentum type indicator. Stay tuned on that!
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
Within an overall bullish trend, the Dow 30 (INDU) daily chart shows the same sideways pattern as the S&P 100 which I think is a marking time pattern ahead of more news, especially on Q1 earnings, which look like they will be ok on balance even given the severe winter weather. I'm not the best judge of that here on the Pacific Coast, which has had a seasonally warm Dec-March period. I sympathize with my New York/Midwest friends though!
Of the 30 Dow stocks, we're down to 8 (from 10) this week (CAT, DD, JNJ, JPM, MRK, MSFT, PFE and UNH) that continue to have bullish patterns OR at least haven't had apparent downside reversals or ones continuing in corrections. For example, AXP has faltering above 90 with 94 acting as a key resistance, NKE traced out a minor double top at 80 and V also witnessed a minor double top in the 233 area before falling under a prior line of support at 220. Individual stock assessments of the 30 are not always the end all-be all, as a majority of Dow stocks tend to get bid up when a rally comes in.
The Dow has had a 'minimal' 38% retracement and then rallied, which is a bullish plus. Support is seen at the prior intraday low at 16060. Next support is suggested in the low 15900 area.
Near resistance is seen at 16500, with next resistance at the prior 16600 high.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
I wrote last week on and showed on an hourly chart basis, how the Nasdaq Composite (COMP) was in a bearish rounding top pattern suggestive of further downside ahead. Now however, at recent lows, COMP has retraced close to a 'Fibonacci' 62% of its early-February to early-March advance, which is about as much of a correction as we tend to see in the major indexes short of a 'round-turn' 100% correction back to a prior low; and how double bottom lows sometimes occur.
I don't assess COMP falling back to the 4000 area of the key prior low and figure the 4100 area as the lowest low for the current correction. I've noted support at 4145, at the up trendline, where we've seen COMP stop at already and this being yet another bullish factor.
Near resistance is highlighted in the 4250 area, then at 4333, extending to the prior intraday top around 4370.
A secondary bullish influence may result from COMP having reached a 'fully' oversold RSI reading, which was also seen in early-February just ahead of the rally that occurred from the dip under 4000 up to early-March highs around 4370.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart is bearish on a short-term basis, within an overall bullish uptrend. There are several 'technical' (as in technical analysis) reasons why I assess NDX as being at or close to a correction low which I've discussed already but here they are again in synopsis: 1.) Technical support likely having been reached at NDX's longstanding up trendline. 2.) Support suggested by completion of a Fibonacci 62% retracement of the last upswing; Retracements of 62-66 per cent are a common stopping point for bull market corrections. 3.) NDX is again at an 'oversold' reading according to the 13-day Relative Strength Index, which I also find as a good omen for the index in question to be at or near at least an interim, if not 'final', bottom.
Support is highlighted by green up arrows at 3560, extending to the 3540 area. If these levels are pierced and the downside correction resume, I've projected a next downside target and potential support to come in the 3500 area. If there was a sharp intraday dip to this area, I'd be looking at buying April NDX calls. This would add to bullish positions suggested in the 3550 area by the extent of the downside retracement and oversold readings. It's higher risk of course to ASSUME a bottom will be made before there's an actual upside rebound.
Overhead resistance is seen in the 3650 area, then at 3700. Very pivotal resistance then begins at the prior highs made at 3738.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock, QQQ, is short-term bearish, within an overall bullish uptrend. QQQ remains, barely, within my projected
broad multimonth uptrend price channel.
For the reasons listed above for the underlying Nasdaq 100 Index, I anticipate that the QQQ ETF is at or near a bottom. I've noted expected/anticipated support coming in around 86.6, with support extending to near or at 86 even. If there is a decisive downside penetration of 86, I've noted a next downside target and potential next 'support' at 85.
As is common in corrections in QQQ we've seen daily trading volume 'spike' higher on downside price breaks. Just when I'd look to be buying in the 62-66% retracement area, traders/investors are selling or shorting on breaks of anticipated chart supports. This is the psychological pattern that favors many of the savviest most successful traders who buy when others are selling.
Near resistance is pegged in the 89 area, then above 90, at 90.6, extending to prior intraday highs at 91.3
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) has retraced 50% of its last advance and got to the 1150 area; I wrote last week that " a decline to the 1150 area is the most I envision currently." Stay tuned on what the next few days bring as to the truth of my statement from a week ago.
Key resistance is seen in the 1170 area, then around 1190, extending then to prior highs ranging from 1205 to 1212.
Near support is down to 1150-1147 and if this area is penetrated by much at all we could be looking at a retest of trendline support implied by a dip to RUT's up trendline, currently intersecting in the 1130 area.
As with the Nasdaq, I consider RUT to be in bullish territory based on it having again reached what I rate as a 'fully' oversold condition in terms of the Relative Strength Index indicator. Rallies from at or near this level of 'oversold' (between 35-40 in the 13-day RSI) has been quite common in the bull market to date for the Russell.
GOOD TRADING SUCCESS!