THE BOTTOM LINE:
The S&P and the Nasdaq have bullish patterns. In Nasdaq, strength is concentrated in the big cap Nasdaq 100 (NDX) which is already testing, not yet exceeding, its prior (early-March) highs in the 3737 area. The Dow Average (INDU) is lagging here but INDU is also NOT a capitalization-weighted Index; unlike the S&P & Nasdaq indices.
Plenty of comments by the Market talking heads on low volume aspects to this recent rally as bullish 'sentiment' and participation is increasing only slowly. I would point out that Volume is NOT a primary forecasting technical indicator but is an ancillary one. You anticipate seeing stocks rising on rising or strongly rising volume but this isn't always the case. A check of your trading account P&L statements, is proof that PRICE alone determines whether you have gains or losses!
I wrote a sort of 'companion' piece to this one in my Friday, 5/30 Trader's Corner study. The principle subject was on overnight price gaps as forecasting events. You'll see that some of my charts below have the gaps sorted as to representing the early stages or start of a renewed upswing (upside breakaway gaps) or the further upside gaps that develop sometimes around the mid-point of a move (measuring gaps); at least such gaps are assumed to 'measure' the approximate middle of an overall price swing. From a trading perspective, what's important is that further advances are suggested from such gap events.
My companion Trader's Corner piece can be seen HERE. In it I go more into the theory of gaps more than I would in this, my Market forecast and prognostications piece. Including in my Trader's Corner piece, are examples of so-called 'exhaustion' gaps that sometimes alert us to an upcoming END of the move in progress.
Moreover, I want here to 'balance' my month-end review and monthly chart comments in the aforementioned linked article as, on a monthly chart basis, the major uptrend looks vulnerable to a correction or at least appears to not have much further upside and/or that 2014 upside progress will slow to a crawl, which has happened to date.
A 'balance' to this view is the more bullish current picture provided by the weekly S&P 500 (SPX) and Nasdaq Composite charts and comments seen further on.
The strongest movers in the current advance are the big cap stocks as seen with the S&P 100 (OEX), breaking out to new highs and the big cap Nasdaq 100 (NDX) which reached its prior high unlike the much lagging Nas Composite. Very much lagging the stronger sectors are the Dow 30 (INDU), the Nasdaq Composite (COMP) and the small to medium cap stocks of the Russell 2000 (RUT). Small is definitely not beautiful recently!
S&P 500 (SPX) WEEKLY CHART:
While the past week's advance (in a shortened 4-days) is not huge in SPX, the move bullishly STARTED with a move above a line of resistance at 1900 and the Index was up from there. The weekly chart uptrend channel suggests substantial upside potential before SPX would hit the resistance top end of its broad bullish channel. I'm not saying SPX is going all the way to that implied resistance but there's a good shot for the Index to reach 2000.
NASDAQ COMPOSITE (COMP) INDEX; WEEKLY CHART:
COMP got to the LOW end of its weekly uptrend channel on the dip to the up trendline just under 4000 and then started slowly rising, albeit slowly. Nevertheless and speaking of price GAPS, there is a bullish upside price gap seen. Even a move to the middle of COMP's broad uptrend channel would carry to the 4300 area and if COMP makes it there the Index would have a shot at least of retesting its prior highs in the 4370 area. Of course for COMP to get on such a roll implies that the big cap Nas 100 would achieve a decisive upside penetration of its Friday Highs in the 3740 area.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) Index is bullish in its pattern. The Tuesday Open of this past week saw the Index gap higher from the prior week's High. Since this is a second bullish upside price gap, such a gap event may represent an approximate mid-point in the current advance and suggests that my upside objective to 1980-1985 could be realized.
To maintain a bullish chart, I would expect to see SPX hold above the 1897-1900 support level. Next lower support is seen around 1870.
I've calculated resistance/selling interest as coming in next around 1940, with a next resistance in the 1980 area, at the top end of SPX's bullish uptrend price channel.
Bullish sentiment has been rising but slowly and trader bullishness has not jumped. In a contrary opinion sense this factor suggests that higher prices may be seen.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart is bullish and this past week's advance in OEX was close to that achieved by the S&P 500. To MAINTAIN a bullish chart, I'd now expect a support floor to be found on any pullbacks to the area of prior resistance around 840. OEX has found support on recent dips to its 50-day moving average, which implies that 830 is a second or next lower support.
I've projected a first area of resistance around 860, extending to 870. Whether OEX can or will get to the 900 level isn't clear to me. The Index could reach that milestone over the coming month. OEX is more than half way there (between 800 and 900) with its climb above 850. I'd note that it took a few weeks for OEX to climb the last 50 points higher.
A drawback to a steady uninterrupted further climb is that OEX is getting into overbought territory in terms of the 13-day RSI. A pullback would not be surprising in the near-term.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 Average (INDU) chart is bullish. Its rate of ascent has been relatively slow but INDU did manage to go to yet another monthly Closing high; by a modest 137 points, but a new high is a new high. The month just ended marks the last 4 months of higher Closing monthly highs in the Dow.
I've highlighted resistance as coming in next around 16720; next resistance then is projected at 16950. Immediate near-term support is at 16600; I've then highlighted trendline support on the chart at 16500, with a next support area at 16400.
Dow components AXP, BA, CSCO, DD, DIS, GE, INTC, JNJ, KO, MMM, MSFT, TRV and VZ look capable of some further gains but the other charts look mostly mixed. And most of the aforementioned stocks are not on a bullish rampage. INDU looks like it will continue to lag gains in the capitalization-weighted S&P.
INDU isn't far over the middle of its typical range from oversold to overbought levels so can't be said to be overbought like the broader S&P 100 Index.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite Index (COMP) is bullish in its pattern and COMP has now retraced over 2/3rds of its prior (early-March to mid-May) decline, which is the sort of 'milestone' retracement point at which I assume an Index or stock could retrace fully 100% of its previous decline; and thereby retest the prior 4370 top.
4250 is immediate overhead resistance, with next resistance suggested in the 4275 area. If COMP was at an approximate mid-point move at its last upside price gap ('measuring' gap), it would reach the 4350-4370 area, suggesting the Index could re-test its prior peak.
Near support, at the bottom of the aforementioned upside price gap (where the gap would get 'filled in'), is at 4186; next support then is highlighted in the 4150 area.
There's nothing remarkable to say about my (technical) indicators except that, as I noted with the S&P, bullish sentiment has been slow to climb. I take this factor as an indication that this current rally may continue longer, perhaps after a pullback such as to the 4200 area.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) is bullish and NDX gains have outstripped the broad Nasdaq Composite in that the big cap Nas 100 has already reached the area of its prior top. In the case of NDX, if the most recent bullish upside gap were one that was 'measuring' an approximate midpoint in a move, NDX could reach 3800 or higher.
I've noted initial resistance in the 3738 area at the early-March top, then at 3800. Longer range resistance implied by the weekly chart seen above (as part of my 'bottom line' comments), comes in around 3900 by mid-June and then closer to 4000, such as by late-July. I'm getting way ahead of myself. Those in bullish positions will be watching what happens at recent highs relative to the prior top and concerned about the possibility of a double top. I anticipate NDX going to new highs above its prior price peak.
Near support comes in around 3678, at the LOW end of NDX's most recent upside price gap. Below the gap area, I've highlighted (green up arrow) 3650 as support, with next support at 3600.
NDX is now nearing an overbought extreme in terms of the Relative Strength Index. I don't think this 'derails' a rally but volatility could increase if a near-term correction sets in. Implied volatility for the Nasdaq 100 (VXN) in the 13.4-13.7 area is about as low as we typically see it, at least since last summer when VXN dipped briefly to 12.5.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) has made a strong bullish recovery off its double bottom low and is back at resistance implied by the prior 91.3 top. I envision QQQ going to a new high as I wrote regarding the underlying NDX. I've noted recent resistance around 91.3, then at 92 even. Long-term resistance comes in at 95.
Near support, at the low end of the recent bullish upside price gap, is at 89.9-90.0. Next chart/technical support is at 88. A Close below 90, lasting more than a day, is bearish in terms of arresting near-term upside momentum.
As is so common with the Q's, the recent advance didn't occur with a corresponding jump in daily trading volume. The important indicator of On Balance Volume (OBV) has climbed with prices. If there's a pullback, such as back to the 90 area, look for a jump in trading activity but I'm not suggesting shorting the stock, taking out puts, etc. to play a potential decline. It would look tempting to some in an assumption of a double top having formed.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart remains intermediate-term bearish as RUT hasn't yet traded consistently above its 50-day moving average and has yet to cross above key resistance at its down trendline, currently intersecting around 1157.
Key near support is suggested at 1126, at the low end of the recent upside price gap. Next support begins at 1100, extending to 1095.
I don't have any recommendations regarding bullish or bearish plays as the Index continues to chop around. If the Nasdaq 100 breaks out to a new high, RUT could follow suit and at least test trendline resistance at near 1160. Next resistance then is suggested at 1180
GOOD TRADING SUCCESS!