THE BOTTOM LINE:
The Market is correction mode but in the Nasdaq it's a sideways move and with the S&P and Dow, there's been a 25% retracement of the last advance; fairly minimal so far. In either case, the indices are 'throwing off' their overbought condition.
I'm keying off the Nasdaq 100 (NDX) right now as technically I've got more to go on so to speak. NDX has been turning back from chart resistance implied by the upper end of its weekly chart trend channel. Strong technical support is implied back at the 4000 level in NDX versus its Friday Close at 4069.
In the SPX 500 (SPX), the Index hasn't been able to hold about the milestone 2000 level. SPX technical support looks to come in at 1980-1960.
In the Dow 30 (INDU) chart support is suggested at 16900-16800. Too many INDU stocks are in correction mode as I've been saying.
For more on support and resistance levels for the major indices, scroll down.
Bullish sentiment still looks optimistic for the trend ahead at least with trader types. However, with longer-term investment oriented money managers and with individual investors, there's of course Fed worries. This anxiety of when the Federal Reserve might start raising rates again seems to come and go with the monthly employment report and other key indicators of US and global economic weakness, or strengths.
I save myself considerable stress and just focus on the charts and let the worrywarts sort it out by their buying and selling of equities. So far, I don't see in chart and indicator patterns, more than a relative minor correction going on in September, after very strong gains in August.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) Index has gone from bullish to correction mode based on its minor rounding top formation. To date the pullback from its prior highs has been relatively minor.
After strong August gains, it's not surprising to see SPX in a sideways to lower correction, which 'throws off' any overbought extreme and puts such measures of overbought/oversold like the Relative Strength Index (RSI) into at least a neutral mid-range reading.
I don't envision a major pullback/correction ahead and have noted support at 1980, extending to the 1960 area. 1960 would represent a 50% retracement of the last SPX advance; a more 'minimal' 38% Fibonacci retracement would be reached at 1971.
Immediate overhead resistance is at the milestone 2000 level, extending first to 2010 and later to 2030. Major resistance begins around 2060; major support begins in the 1940 area.
S&P 100 (OEX) INDEX; DAILY CHART
The big cap S&P 100 (OEX) has gone from 'marking time' as I said last week into minor correction mode as prices have trended sideways of late, but with a line of support that's been defined at 880.
As with the broader S&P 500, I don't see OEX falling into a deep correction, such as in a move back to trendline support around 865. Near support is highlighted at 880, extending to 875 which also represents a fairly 'minimal' 38% correction of the strong August advance. A bit deeper give back of half (50%) of the prior advance would take OEX back to the 870-869 area.
I've noted overhead resistance at 892, but resistance begins at 887-888. Resistance above the prior recent intraday high at 892 is assumed for the milestone 900 level, the next big round 100 level that could be achieved for the big cap S&P 100.
The current correction (to the longer term bull trend) has the effect of 'throwing off' the prior overbought condition and could set the stage for the next up leg.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 Average (INDU) has gone from mixed in its chart to a corrective pattern as 17000 gave way as support this past week. Previously, INDU was simply trending sideways in a narrow trading range. This situation of just sideways, not lower, didn't seem likely to last as fewer and fewer of the Dow 30 stocks were still in clear cut uptrends.
Near support is seen at 16900, with support extending to 16800. In terms of the common (Fibonacci) retracement levels, a minimal 38% of the last upswing in the Dow would be reached at 16843; a one-half/50 percent pullback would occur if INDU traded at 16746. Major support, at the dominant up trendline intersects in the 16600 area.
Overhead resistance is highlighted at 17150, with next resistance projected in the 17280-17300 area.
In terms of overbought/oversold, the Dow is a 'neutral' mid-range reading at 50 currently. I'd be surprised if INDU got 'fully' oversold (around 30) as measured by the 13-day Relative Strength Index or RSI but if it did I'd be looking at price action for a possible upside reversal and considering buying Dow Index calls; e.g., the October 1700 strike.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite Index (COMP) has gone from bullish to 'mixed' in that its recent trend has been sideways as COMP has been unable in the past two weeks to pierce key near resistance at 4600. Above 4600, resistance is highlighted in the 4700 area, at the upper end of COMP's uptrend channel.
COMP remains overall bullish in its pattern. In terms of how I usually define the trend, which is whether the Index in question is trading above or below the important (from a trading perspective) 21-day moving average, the COMP's trend remains UP. Current levels are near to possibly dipping below this average currently intersecting at 4552. I've highlighted near support at 4540, extending next to 4485.
The RSI is moving lower as the sideways trend 'throws off' the prior overbought condition. Bullish 'sentiment' is at a more or less 'neutral' mid-range reading.
I think Nasdaq can lead a next up leg higher in the overall Market. A Close below 4485 for a couple days running would be bearish however.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart has been bullish but the Index has been marking time in a sideways pattern and by this past Friday, its intraday low touched the trading-wise key 21-day moving average. A move below the 21-day average would suggest that the key 4000 level could be tested as support.
I favor buying NDX calls in the 4000 area if reached, assuming buying comes in this area as I believe it will; the idea being that what was a key chart resistance should now offer technical support on pullbacks. If not, a deeper correction may be 'signaled'.
Near resistance is seen at 4110, extending to 4140. Implied volatility as measured by the VXN has come up from the very low 12 level. I consider some volatility to be a bullish plus if it implies that there is less complacency on the key tech trend as just up, no downs. A little fear is a good thing if it keeps us more sharp!
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) has the same near-term mixed pattern as NDX as would be expected. The Q's are in a narrow trading range and this sideways trend is pulling the Relative Strength Index lower, which is a bullish plus if looking for a next up leg.
Near support is seen at 99 even, then at 98, which is not far above QQQ's up trendline.
Near resistance is highlighted at 100.3. A decisive upside penetration of 100.3, that found support at 100 on pullbacks would look good for a possible move to the 102 area.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) can't get no (bullish) respect! RUT retraced half of its last down leg at a point where a down trendline could be drawn. I've noted resistance at this line or resistance, which intersects at 1175; resistance then extends to 1185 and eventually to 1196-1200.
Support is highlighted at 1158-1160; with next support of technical importance at 1140.
No trading recommendations with the Russell as far as betting on a direction. RUT maybe can't go up, but maybe is not going to dip much and hard to say if there's much of a move coming. It is holding its 50-day moving average which is a bullish plus. Maybe the Russell can climb back up to the 1200 area if 1160 continues to find buying interest.
GOOD TRADING SUCCESS!