THE BOTTOM LINE:
The S&P 100 and the Dow 30 joined the S&P 500 in breaking out above the top of prior trading ranges. It wasn't rocket science to figure that the S&P/Dow would join the Nasdaq in moves to new highs given Nasdaq's upside 'break out' back on 2/12.
Of course, since many or most traders assume that events 'determine' trends AFTER bullish news comes out, I could spend forever trying to convince that trend tendencies are seen AHEAD of such actual 'break out' confirmations. If you want to have the edge that professional traders I hold that it's necessary to study chart patterns.
In index options especially, if you buy index calls at the time of, or ON, obvious breakouts, you are going to be obviously wrong cost wise as the sellers will make you pay up for those options but good. Don't pay more than you should. Anticipate moves ahead of time. Yeah, easier said than done and it took me years of watching how prices move to convince me of buying when nobody wants em, shorting when everyone did!
Select Options Volume Watch:
VIX traded 426,000 (rounded to nearest 1000) options on Friday, down by a 100,000 from the prior week, befitting the gradual drop in volatility. As usual, VIX options volume comes in second to the S&P 500 (SPX) options at 917,000. The Russell 2000 (RUT) traded 49,000 options contracts, with the iShares (IWM) trading 85,000.
I've taken an increasing interest in trading VIX options, as well as buying RUT calls on dips as I think the longer range outlook for RUT is favorable technically over the coming weeks and months. RUT stocks are out of favor currently as they've been in relatively narrow trading range for the past year more or less. I don't anticipate we'll see the Russell Index LEAD the Market anytime soon however. Out of favor means that buyers aren't yet drawn to a good enough (i.e., bullish) story yet on the smaller cap sector.
I wrote a recent Trader's Corner (2/16/15)
on the Russell 2000 (RUT) chart/technical aspects I see as bullish on both daily and longer-term weekly charts. I refer you to my bullish technical take on RUT if you didn't see it previously, clickable on the LINK above.
The S&P 500 Volatility Index (VIX) DAILY chart:
I generally use a VIX Close-only 'line' DAILY chart. Intraday VIX fluctuations can be extreme and a visual distraction in terms of analysis on a day to day, week to week basis.
My take on the current VIX and it tends to trade very 'technically' so to speak, was stated by me previously in anticipating a gradual VIX decline back the 14 area. I consider the 14 to 12 zone to be a type of VIX 'mean', versus VIX extremes above 22.
This past week saw VIX drift down to near 14 and I anticipate better than even likelihood of the Index dipping below 14 again. Generally, in the 12 area, risk in buying VIX calls is relatively low. The trick and the key is 'timing' such a trade, since VIX can have lengthily periods when volatility remains relatively low, without reversing what may be a lengthily sideways trend, without a sustained upside reversal. Selling puts in the 12 area may be attractive for this reason.
I've highlighted VIX daily chart resistance on a Closing basis is highlighted in the 16 area, extending to 18. Support is suggested at 14, extending to 12 where fairly major support begins.
The S&P 500 Volatility Index (VIX) HOURLY chart:
The extended hourly VIX chart seen next provides a closer-in view of the past few weeks' action but there's a lot of added information to be gleaned with the hourly chart except that the Index looks to heading again into a 'typical' oversold zone according to the 21-hour Relative Strength Index (RSI). This doesn't mean that VIX will rebound soon but does suggest not overstaying in puts; if you got a few, exiting half seems prudent.
On an hourly chart basis, support is also noted at 14, extending to 13. Resistance is noted at 16.8-17, with next resistance coming in around 18.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) chart continues bullish with the dip to, then a rebound from, an up trendline connecting the early-February low. The primary chart consideration is the daily and weekly Close with some more distance above prior resistance in the 2095-2100 area.
A next upside target could take SPX to 2133-2150. A move to this area is my current 'maximum' upside objective for SPX before corrective action sets such as sideways price action or a pullback such as to the low-2100 area.
Technical support is highlighted at 2060, both chart support and that implied by the current intersection of the 21-day moving average. Technical support then extends to 2040 and my lowest expectation currently for a pullback.
Bullish sentiment, as seen with the CPRATIO line at the bottom of the chart, has climbed further this past week and is starting to flash caution about not getting overly bullish. I envision a gradual climb higher but not a major leg up from 2100, or a sustained move above 2150. I favored buying SPX calls on dips below 2000 but I'm not a raging bull if over 2130.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart has joined SPX in breaking out above its prior trading range. OEX is lagging the broader S&P 500 in climbing about ITS prior line of resistance but Friday's action was bullish. Next resistance looks to be in the 930 area, extending to 938-940. I don't see an extended move above 940 currently.
Support is highlighted in the 910 area, then back at 900.
OEX will move into its 'overbought' zone according to the RSI in short order if the Index continues higher in the near-term. If the 13-day Relative Strength Index gets up into the 'overbought' zone and near 940, I'd favor exiting bullish positions, a least partially. I'm still seeing possible OEX trading ranges, just with the upper end of such a range as a notch higher than in past weeks.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) Average has achieved a minor bullish breakout above its prior top in the 18100 area. Next resistance looks like 18200, extending to 18350.
Support is seen in the 17800 area and just under at the 21-day moving average (17730), with next support extending to 17600.
Dow stocks that preformed well or at least didn't hurt the bullish cause included BA, CSCO, DD, DIS, HD, IBM (rebounding some) MMM, PFE, TRV, UNH, UTX, and V. From last week's mentions, WMT fell away as did CVX. IBM rebounded some and BA and UTX saw accelerated moves higher.
Most all the bullish INDU stocks mentioned were the same ones I shouted out from last week. Not a huge change in the lineup and no powerhouse team for the bulls. I'm bullish but I don't see huge further upside without more of the 30 stocks participating.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) is strongly bullish in its pattern as the Index continued higher and is tracking an up trendline that's pointed strongly higher. Near support is now up to 4900 and next support under is 4820-4800.
It's been my projection for some time that 5000, a major 'milestone' number, is an objective for COMP. This target is certainly closer to being achieved currently and 5000 is highlighted as next resistance. Fairly major resistance is projected at 5100-5120.
COMP has gotten (just) into its 'typical' overbought zone in terms of the 13-day RSI. Bullish sentiment is growing; enough so to cause me to look for an out on bullish Nasdaq positions. Above 5000 and overbought by these two key indicators means higher risk of a shakeout. Be bullish when you got little company, exit when you got too much!
NASDAQ 100 (NDX); DAILY CHART:
NDX is in a very strong move after piercing the top end of its prior 2-month plus trading range. I was looking for 4500 last week as a major target-objective and that looks even more possible after this past week's continued strong advance. I've noted resistance in the 4460-4500 zone.
Support is seen back at the prior line of resistance at 4347; support extends to 4300 and a bit lower at 4273; at the current 21-day moving average.
The Nasdaq 100 volatility index, VXN, continues to drift toward 14, which is a typical low reading in a strongly trending NDX. If VXN again spent an extended period in the 14 area and under, coupled with an overbought RSI, this is could be a warning of at least a minor pullback. If in bullish strategies such as long NDX calls bought at the low end of the recent NDX trading range, the recent rally has been good to you. Don't risk giving back much.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The QQQ trend is strongly up like the underlying NDX of course. The latest rally has been on relatively low volume, but that's the way of it with the Q's. On Balance Volume is pointed higher but wait until there's a shakeout and to see big bumps in daily trade volume. I'd quietly exit QQQ before that and not get caught in a lemming like exit.
Resistance is seen ahead at 109, then at 110. QQQ support comes in at 106, then in the 104 area.
I don't tend to trust 'straight up' moves but the big cap Nasdaq gets its share of them and I won't get bearish in terms of shorting the stock, buying puts, but am ok to exit with good gains when they come. The October-November rally extended from around 92 to 106 for a gain of 14. The current rally is from 100 to just over 108 so far. Maybe QQQ is headed to 114 over time but I'd be out at 110 if seen in terms of a trading turn. At least if long the stock I don't have to worry about eroding option premiums given a stretched out move!
RUSSELL 2000 (RUT); DAILY CHART:
Last week I noted that the "Russell chart pattern is slightly better (more bullish) than the other indexes after RUT traced out a symmetrical triangle that was followed by the Index's breakout above the upper trendline, suggesting upside potential to 1260 or higher." That's still my view. Next resistance on a daily chart basis is seen at 1240, then at 1260.
Longer-term, RUT might have potential to 1400 or even to 1500 but that's looking much farther out than I normally predict. Just saying as a contrarian bull; RUT stock group isn't the flavor of the day, week or month currently.
Near support is seen at 1220, extending to 1205-1200 currently.
It seems worth repeating that once the RSI indicator reaches an overbought extreme, this has often been a harbinger for a pullback; e.g., RUT hits 1250-1260 and is at a high (overbought) RSI reading and proceeds to pull back to 1220-1215 or even 1200 support again before resuming a further rise.
GOOD TRADING SUCCESS!