THE BOTTOM LINE:
The S&P indices and the Dow fell below key supports implied by their 21-day moving averages. Can the Nasdaq be far behind!
I wrote last week in my Index wrap that: "An overall Market correction appears underway. A further dip ONLY back to prior highs (prior resistance), with this area acting as support, suggests a relatively minor correction."
NOTE: I basically projected a down March in my recent monthly technical review (Trader's Corner, 2/28/15)
as, in terms of the S&P 500, a 'maximum' upside projection for a March high was just to 2136, at the upper resistance end of the monthly chart uptrend price channel. Click the above link to see my Trader's Corner monthly chart analysis.
Unlike the S&P (SPX and OEX) and the Dow 30 (INDU), the relatively stronger Nasdaq Composite (COMP) and big cap Nas 100 (NDX) have NOT violated technical/chart 'support' implied by prior highs at 4820 in COMP and the 4350 area in NDX. These divergent patterns would suggest areas that the Nasdaq indices might find support. If so, look for potential upside reversals at the same juncture in SPX, OEX and INDU. Key support in SPX may develop around 2050, the low-900 area in OEX and around 17665 in INDU.
Further specifics on support and resistance levels are noted with my individual stock index charts further on, after my VIX comments. As usual, I view major stock indexes with sustained trade BELOW the 21-day moving average as showing downside momentum and sustained trade ABOVE the 21-day average as showing bullish upside momentum. Sometimes of course there is whippy price action above and below this key 'centered' moving average, which suggests a sideways or lateral trend.
Bullish/bearish sentiment levels as expressed by my CBOE ratio of daily equities call option volume relative to daily equities put options volume (CPRATIO) is mostly 'neutral'; i.e., suggesting a moderately bullish outlook but not a bearish one. My CPRATIO indicator is seen with my SPX and COMP daily charts.
The S&P 500 Volatility Index (VIX):
VIX traded 358,000 contracts on Friday, 3/6/15, up from 223,000 a week prior and second only to the S&P 500 options; i.e., the S&P 500 weeklys (SPXW) options expiring Fridays at 609,000 contracts and the S&P 500 (SPX) end-of-month options (1,250,000).
I wrote last week regarding the S&P volatility index that:
"13 is a next pivotal level for support or, conversely, piercing 13 suggests downside potential to 12." AND ..."Call purchases or short puts look favorable in the 13 to 12 zone."
The VIX HOURLY chart:
There was a brief opportunity to buy VIX calls/sell puts at my target level of 13. VIX made a double bottom low at 13 as can be seen on the extended hourly chart below. I view upside potential as being to the 17 area, possibly higher such as 18-19.
VIX support is highlighted at 14 near-term, extending to 13, with resistance suggested at 16, next to the 17 area.
The daily chart seen next suggests a pattern of a potential bottom in place and upside possibilities back to the 17-18 zone or a bit higher, to the 19 area. A move in the VIX to below 14 for more than a day would suggest a less bullish picture.
The VIX DAILY chart:
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) has turned short-term bearish given the decisive downside penetration below its 21-day moving average, with the weekly Friday Close also below support suggested by the prior top in the 2088-2092 area. A sustained rebound back above 2100 resistance is needed to suggest that SPX has regained upside momentum. Implied resistance extends to the 2120 area of SPX's prior peak.
Near support comes in at 2060, extending to 2040. 2050 represents a half or 50% retracement of SPX's prior run up. Major support begins in the 2020 area.
If the Index fell again to an oversold (low) extreme in the RSI, a supporting 'indicator' case is made to be alert to an upside reversal.
Trader sentiment remains moderately bullish but the trend toward greater caution or bearishness is seen in the declining line of my CPRATIO indicator. If the over-concern or preoccupation about possible Fed tightening continues, an 'extreme' in bearishness would be put me on alert to look for the contrary result of an upside reversal.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart has turned short-term bearish like the broad S&P 500. See my above SPX comments on this pattern. OEX of course also pierced its 21-day moving average and support implied by prior highs over 920.
Near resistance is suggested at 920 and the recent 'breakdown' point; resistance then extends to the 930 area. Near support is highlighted (green up arrows) at 910, then in the low-900 area which would also represent a 50% retracement of OEX's prior advance and a place to look for a possible bottom.
A 'fully' oversold (low) reading in the 13-day Relative Strength Index (RSI) is something to watch for as this pattern is correlated with bottoming action.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
I wrote last week that: "The Dow 30 (INDU) Average is faltering some after INDU's move to new highs. Pivotal support is suggested by the prior resistance or the recent upside 'breakout' point, at 18100. If 18100 is pierced on the downside look for initial support at 17900, and then next at highlighted support (green up arrow) at 17800."
Friday saw the Dow end up quite near the aforementioned 17800 support I previously forecast. I have 'next' support highlighted (green up arrow) at 17500, which is a next expected pivotal technical support; however, near support below 17800 should also be noted at 17700.
Last week I saw enough Dow stocks with further rally potential to "rate the likelihood of INDU holding above 18100 as reasonably good." How about 'reasonably' BAD! I can never account enough for FED DREAD when there's too much 'good' news on the employment front or otherwise suggesting better than expected economic growth!!
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) has faltered in its strong uptrend but not to the degree of the S&P and Dow. Still, the decline to below support around 4950 is enough to suggest an alert to any daily Close below the 21-day moving average. A sustained decline to BELOW this key 'centered' moving average highlighted on all my index charts would tip COMP momentum lower.
I did note last week that "COMP continues in a strong uptrend but that uptrend has traced out a quite steep rate of gain and suggests a trend steepness susceptible to a corrective pullback." You would think that a steep advance would be bullish but too much of anything can end up being a 'bearish trigger'; e.g., also suggested by 'too much' employment growth!
Resistance is most definitely seen at 5000 which I've been saying; and, well, even by the talking heads on the business media. Next resistance above 5000 is projected at 5080 currently, rising to 5100.
The RSI is trending lower, as is bullish sentiment. I think we should 'believe' the downward slopes involved and not be surprised if even the tech-heavy Nasdaq might not dip further ahead.
NASDAQ 100 (NDX); DAILY CHART:
The big cap Nas 100 (NDX) saw the same tripped up bullish momentum as the broad Composite and turned the NDX chart similarly bearish. The Index ended the week quite near its 21-day moving average currently intersecting just under 4400, at 4387. Next support under 4387-4400 comes in at 4350-4347.
Overhead resistance is at 4450, extending to 4463, on up to 4500.
NDX, like the other major stock indices has an eventual tendency to find a 'reason' for a corrective pullback AFTER hitting overbought readings in the 13-day Relative Strength Index (RSI). Moreover, the tendency for sell offs has frequently been the case after a period of LOW volatility (around 14) that is seen in the VXN Nasdaq 100 volatility index line at the bottom of the NDX daily chart.
I anticipate a possible re-test of support below the 4347-4327 zone, with the Index perhaps reaching 4305-4320. However, bearish aspects are 'triggered' so to speak only with a move below the 21-day moving average. Support at the average might still hold up. Stay tuned!
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The QQQ chart has the same pattern as the underlying Nas 100; only the price levels are different. The QQQ 'breakdown' point came on the fall below key near support at 108. Chart support/buying interest is seen next at 106, assuming the 21-day moving average gives way in the 107 area. Below 106 projected next support is highlighted at 104.
Overhead resistance is notated (red down arrows) at 108.9 and next in the 110 area.
The On Balance Volume (OBV) was trending lower with the sideways move in the 108-108.9 zone and was a tip off to a sell off to come. I'd rate the chance of further downside as more than 50-50 as I assume that the possible support at 107-106 may give way.
104.4 as a 'reference', if seen, represents a 50% retracement (and also a possible support) relative to the February-March advance.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) has turned short-term bearish as prices fell below technical support in the 1220 area. RUT is fairly predictable in its tendency for corrective pullbacks AFTER reaching overbought extremes as measured by the 13-day Relative Strength Index (RSI).
The longer-term chart weekly chart picture (not shown) for RUT remains bullish as long as support/buying interest develops in the 1200 area or above. Upside potential longer-term is to 1350 in my estimation.
If the Russell experienced a 50% retracement of its most recent advance, RUT could dip to support highlighted in the 1200 area. Support is highlighted (green up arrows) at 1200, extending to 1190.
A move back above the 21-day moving average and for more than a single day is needed to suggest renewed upside momentum. Near resistance is suggested at the 21-day average at 1223 currently. Next resistance is seen in the 1240 area.
GOOD TRADING SUCCESS!