THE BOTTOM LINE:
Bottoming action was apparent coming into this past week. Good sized rebounds followed that put the major indexes back above their 21-day moving averages in a 'confirming' upside momentum shift.
Secondary lows were traced out recently that formed lines of support that held a bit above the mid-December bottom in the S&P and Dow. At the recent bottom touching oversold readings again, the RSI was also suggesting upside reversal potential. As noted already piercing the 21-day moving averages is a potential confirming shift in momentum back to advancing.
The key Nasdaq Composite and Nas 100 traced out double and triple bottoms, with RSI 'oversold' readings at the mid-January bottom. The subsequent sustained move above the 21-day moving averages suggests more upside to come.
VIX Technical Commentary; Daily and Hourly charts
I'm featuring commentary on the VIX, the S&P 500 Volatility Index along with my commentaries on the major stocks indexes; this week will feature both the VIX daily and hourly charts. I may continue VIX commentary every week or for when a VIX trend develops (or one that may be developing) worth looking at.
My two most recent Trader's Corner articles were on the S&P 500 Volatility Index (VIX) in general and toward the goal of finding winning trade ideas:
1.) "Trading volatility, Pt.1"
(1/15/15): The tremendous growth in volume in VIX options on the CBOE, ideas on trading strategy and contract specifications.
2.) "Trading volatility with VIX options, Pt.2"
(1/22/15): Spotting tradable shifts in trend based VIX chart pattern and indicator analysis and discussed and illustrated.
VIX trends, both on a 2-3 day basis and on a 2-3 week outlook, can be assessed with the same chart analysis and related technical indicators, that work with any other index or stock; e.g., pattern recognition, overbought/oversold considerations (especially when VIX is at overbought extremes), etc.
My VIX daily chart below illustrates the recent 'extreme' upside area where VIX has been tending to make tops. VIX relative to the price of the S&P 500 (SPX) tends to have an inverse trend relationship. When VIX has shot up into a possible TOP in the higher 'extreme' ranges shown below we can anticipate a BOTTOM in the S&P. Conversely, when VIX has bottomed in the areas highlighted, we can anticipate a counter-trend move HIGHER in VIX at some point ahead, coupled with a DOWNWARD slide in SPX.
It has often been easier to anticipate VIX falling back toward the 14 to 12 range from spikes into the 22 to 26 zone, by buying VIX puts than it has been to anticipate a SIZABLE upside move per the VIX daily chart below. Although, 'oversold' RSI readings, at 40 in the period shown below (on a 13-day basis) in the Relative Strength Index (RSI) has suggested a reasonably good 'bet' on the Call side; e.g., late-August and early-December.
I find considerable value in analyzing the hourly VIX chart, accompanied by use of the 21-hour Relative Strength Index (RSI). There's quite a bit of trend analysis that can be made on based on the hourly chart seen next.
Note the periods since early-December with two bearish VIX/RSI divergences. In two instances per my chart highlights, VIX was going up but its 21-hour RSI was trending LOWER in the first example OR simply not 'confirming' VIX action into its second peak in the second example.
Also of course in the recent late-December to mid-January example VIX made a distinct double top which is a POTENT top pattern. RSI was trending lower during the period when this double top was made.
I made the point in my week-ago Trader's Corner to look for a potential break of the up trendline intersecting just under 21, which would then suggest a move to at least 18 and possibly or probably lower such as to support in the VIX 16 to 14 zone. I would exit VIX puts on dips to 16 or under. I'm less inclined to buy VIX calls in the 16 to 14 range (perhaps at 14) as volatility, represented by VIX can be down for weeks at a time as seen on the daily chart above. Whereas, peaks in VIX above 22, tend to be relatively short-lived.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The SPX index is bullish in its recent rebound form a line of support that formed just under 2000. SPX might continue to be confined to its current 1970-2100 trading range; hard to say, but this price range in SPX has been in place for nearly 3 months now. Upside potential for a time anyway could be limited to around 2100.
Near SPX resistance is highlighted in the 2063 area, then at 2090-2100. Longer-term weekly charts (not shown) suggest potential chart resistance in the 2130 area, also the current intersection for my upper 'resistance' moving average envelope line.
Near support is suggested at 2020, extending to the 2000-1990 area. The recent bottom also saw the RSI back into it's typical oversold zone, so the subsequent rebound was 'supported' by that oversold reading even if it was 1-day there only. In a rising trend, as we continue to have in this 6-year bull market, oversold 'extremes' such I highlight on the chart are potent places to look for 'confirming' upside reversal PRICE action.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) has regained bullish upside momentum after continuing to find support/buying interest on dips to the 880 area. The longer that similar lows were traced out (2-3 days might be it), the stronger the potential for a rebound. An upside penetration of the 21-day moving average line then 'defines' for me a bullish breakout. Not so if prices start quickly sliding back below this key trading average.
Near OEX chart support is suggested at 890, extending to 880. Near resistance in the Index is at the line of prior highs in the 910 area. Pivotal technical resistance is anticipated in the 920-925 price zone.
From current levels the odds favor some further upside. A key upside test for the bull would be their ability to push OEX above 920 and go on from there. Even so, OEX might not have potential to beyond 933-940 for awhile.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) Average is neutral to bullish in its pattern. INDU has rebounded from the line of lows seen in the chart and of course bullish price action. The 'neutral' consideration relating to INDU's now 3-month old trend that the Dow has been bouncing between repeated highs and lows, perhaps stalling the intermediate-term to long-term trend in coming weeks.
A continued broad trading range has opportunities if the Dow were to remain within 17100 to 18100. A 1000 point price range, as long as it's predictable, is a great environment for my options account, not so much for owned stocks.
INDU needs to climb above 17800 to get enough momentum to suggest a test of resistance in the 17920-18100 zone. Fairly major resistance starts in the 184000 area.
Support is expected around 176000, with more pivotal technical support at 17400 in the near-term.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) is trending a bit above the middle of its nearly 3-month old price range. Upside potential is to a retest of 4800 resistance most likely and possibly for a further rally above 4800 that carried to a peak 4875-4900.
Upside potential would look increasingly promising if the 4800 level was not only exceeded but then became a support on pullbacks. Good potential from 4800 would then project to the 4900 area. Eventually COMP looks headed to 5000.
Near support is 4700. Next support is 4600. I'd look for good bounce back potential on dips to under 4700. Inability to find support in the 4700 area suggests a possible dip again to 4600.
Nothing more than neutral in the RSI or CPRATIO (bullish/bearish) sentiment) indicators. Price action above the 21-day moving average suggests a projected 'maximum' upside potential to my upper trading 'band', at 3 percent above the 21-day average.
NASDAQ 100 (NDX); DAILY CHART:
The NDX 100 (NDX) made a bullish double bottom in the 4100 area then has rallied strongly as seen in the Index cutting sharply through implied resistance at the 21-day average. 4300 is near resistance, but above 4300 there are prior highs in the 4327-4347 area that is a next implied resistance.
A bullish pattern continues given a move above 4300 and support established after that close the 4300 breakout point; if this pattern then on perhaps to 4400 and my 'maximum' upside target on a 2-3 week horizon.
Near support is in the 4200-4215 area, extending to 4150.
The Nasdaq 100 volatility index, VXN, is trending lower with the Index now at 17, but which could be headed back to 16 at a minimum and perhaps back to very low volatility implied if VXN dropped back to the 14 area. From there a next rally around the corner? Stay tuned!
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The QQQ pattern of the rebound from long-standing support in the 100 area wasn't surprising. The strong subsequent rebound took the Q's swiftly back above its 21-day average and it appears that QQQ could next challenge its most recent prior high at 105.2. 106-106.2 then looms as a next key resistance.
Near support begins at the 21-day average at 102.6 and extends lower to the highlighted (up green arrow) 102 support. Should 102 give way, 101 is a next likely support.
Upside potential looks like from 104 to 106; downside 'risk' suggests from 104 back to 102. A balanced 50/50 risk relative to reward potential is a new directional trade (calls or puts); not my kind of risk-to-reward. I don't like could be heads, could be tails.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) is bullish near term; intermediate-term we have to see the Index as in a sideways trend; actually commonly called 'non-trending'. No, RUT is just going laterally.
The 1160 area was and is key support. Near support is 1180. Assuming no break below 1180 I anticipate further upside, such as to 1200 next, then to a re-test of the prior 1220 high.
Odds suggest a move to 1220 quite possibly, no certitude beyond that but downside doesn't look lower than to 1165-1160.
GOOD TRADING SUCCESS!