THE BOTTOM LINE:
The rally has slowed down some but the trend is up and the recent sideways consolidation in the Nasdaq is bullish until proven otherwise. I project next 'resistance' as possibly equal to the same percentage ABOVE the 21-day averages (in the major indices) as seen below the 21-day at the last bottoms.
The other aspect keeping me bullish near-term is moderate trader bullishness, with no extremes in bullish 'sentiment'. Traders are not bucking the rally, are not especially in disbelief about further upside potential but appear to have toned down expectations relative to the barn-burner of a rally that has come in the prior multimonth/multiyear advance fueled by the Fed's Quantitative Easing (QE), as well as positive earnings expectations.
This market is also nearing an 'overbought' condition and relative to buying at recent lows, the risk to reward outlook in calls isn't nearly as favorable as it was.
Current charts are bullish, just not wildly so when calculating the technical potential for a major extension of the current advance.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 is bullish in its pattern as it penetrated its prior highs and was holding this past week anticipated support at the Index's prior line of resistance. (Per my mantra that "resistance, once penetrated, tends to 'become' subsequent support on pullbacks".)
I've projected potential 'resistance' or a next upside objective for the 2060 area (then next at 2100) with 2060 being where SPX would be at the same 'extreme' in terms of a move to 5 percent ABOVE the 21-day moving average; which is where SPX got to BELOW the same (21-day) average at the last bottom.
This is not to say that I wouldn't be already be out of bullish positions if they were bought 'right'; e.g., at the last set of extremes, namely with price, an oversold RSI and overdone bearish sentiment of at least 1-2 days duration.
Support is highlighted at 2000 this week, with what should be substantial buying interest or next lower support, in the 1960 area.
Bullish sentiment has not hit extremes although the 13-day Relative Strength Index (RSI) is nearing its 'typical' overbought zone. The S&P 500 (VIX) volatility index has gone from a high of 26-30 at the recent bottom to 13 at the Friday Close.
S&P 100 (OEX) INDEX; DAILY CHART
The OEX is bullish, especially last by clearing resistance in the 900 area. My further upside projections are to a maximum of 917-920, possibly to as high as 935 over time.
If OEX was to extend its gains such that it reached 5 percent above its 21-day moving average, which was the percent 'extreme' seen on the downside recently that would equal a price around 917 near-term. This based on the idea that such extremes can be equal on a percentage basis; at least relative in the major indexes to the 21-day moving average. Stay tuned on that!
Key support now is suggested in the 880 area in OEX, with support then extending to 870.
The 13-day RSI is now in its 'overbought' zone and this suggests that the upside potential may not be huge absent a consolidation such as in a sideways to lower pullback. This would not have to be a deep pullback to 'throw off' the overbought RSI 'extreme'.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) has had a terrific run up from its lows in the 16000 area. How much further upside on THIS move is a big question.
I've projected a next 'resistance' or upside target to the 17750 area, extending next to 18000. This rally has been impressive but now that the Average is 'overbought' according to the Relative Strength Index, I'm typically cautious on holding on for the last bit of this first wave higher.
INDU support is seen in the 17300 area, with next Dow support coming in around 17000 which should be fairly major support.
INDU is now at an overbought extreme in terms of the RSI as mentioned, which doesn't imply the rally will stop or reverse but the odds increase relative to this possibility.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite is bullish in its chart pattern as the Index cleared substantial resistance at 4600, with the Index then bullishly consolidating above this level.
The next advance, assuming 4600 continues to hold up as support, could be to 4700 or a bit higher; I've highlighted the specific level as 4740 which is at the 6% upper envelope line where the percentage ABOVE the 21-day 'centered' moving average would be the same as the recent decline below this key trading average. This equation sometimes plays out with the major indices relative to moving average envelopes. Stay tuned on that.
Near support as mentioned is at 4600, with next support then seen in the 4500 area.
The RSI with Nasdaq is not quite showing the same overbought 'extreme' as with the S&P and Dow but its also closing in on it. Sentiment readings are more or less 'neutral' or at least not showing extreme bullishness by traders as measured by the CBOE daily equities call to put volume figures.
NASDAQ 100 (NDX); DAILY CHART:
As with the broad Composite, the big cap Nas 100 Index is bullish as it cleared its prior highs in the 4100 area then has appeared to 'consolidate' these gains above the top end of the recent upside price gap area.
Next resistance for NDX looks like 4200, extending to the 4265 area, at the upper 'resistance' envelope line or band equal to 6% above the 'centered' 21-day moving average. When these envelope values get to an out of the normal range extreme on the downside, a similar such implied 'extreme' on the upside will often occur.
Near support is highlighted at 4100, extending to 4050 to 4000 even. 4000 should offer good technical support on the downside if 4100 gets penetrated on a Closing basis beyond a day.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
QQQ is of course tracking the bullish underlying Nas 100 chart higher only with the Q's there is a somewhat more clear cut 'line' of resistance showing up (in the recent sideways consolidation) at 102, which naturally is seen as near resistance.
Next resistance is implied by the upper 6 percent 'envelope' line and comes in around 104. I can see a move to this area, but not a lot higher without a pullback or sideways move that consolidates the very strong rebound from the recent bottom.
Near support is at 101 then is highlighted on the daily chart at 100 and next to 99 even. The lowest I can envision the QQQ (ETF) tracking stock pulling back to is 98 currently.
The On Balance Volume (OBV) line continues to point higher, although daily trading volume has diminished after it spiked higher on the sell off into the bottom. Unlike company stocks, volume in QQQ rarely expands on rallies. Sell offs that break perceived support levels scare the bulls out, rallies typically bring in only gradual accumulation.
RUSSELL 2000 (RUT); DAILY CHART:
RUT has again moved toward the upper end of its broad trading range although the most recent bottom did extend the prior 1080-1200 price range to near 1040 on the downside.
I wrote last week that I though "RUT could have potential to the 1200-1210 area in the current move. That's an optimistic target."
This still seems optimistic but if the broad Market keeps charging ahead, the 'obvious' target for RUT would be a retest of prior highs just over 1200. Meanwhile, I've noted near resistance in the 1180 area, then at 1200-1208.
Support is highlighted at 1160 at the bottom of the last upside price gap with next support at 1140, possibly extending to around 1120.
GOOD TRADING SUCCESS!