THE BOTTOM LINE:
The major indices have seen repeated lows in the same area but each rally has failed at progressively lower levels. Lower upswing highs suggests diminishing buying interest and also suggests that the recent line of support may not hold.
If so, the major indexes could end up back in a broad trading range; e.g., 1980 on the downside to 2120 on the upside in the S&P 500 (SPX), 17050-17200 to 18200 in the Dow 30 (INDU), 4550-4600 to the 5000 area in the Nasdaq Composite (COMP), 4100 to 4450-4475 in the Nasdaq 100 (NDX).
If the areas that have offered repeated support continue to hold up, that's a bullish plus of course but yet to happen in a rally that goes to higher highs than the prior advance(s).
The Russell 2000 (RUT) has had the most bullish looking chart in recent weeks but also seems to be struggling to gain further upside traction. If a 'rising tide lift all boats', a falling one carries all lower too.
At the start of this past week (Monday), bullish sentiment got high enough to suggest the 'seeds of the contrary', a level of bullishness that is unrealistic given how far up all the indices have come already in recent months.
The long-term trend remains strongly up as seen in monthly charts in my month end technical review (Trader's Corner, 3/31/15)
but there are levels noted which, if pierced, would suggest a substantial pullback.
Sizable pullbacks would likely still be within broad uptrend price channels. The Market on a long-term basis could be said to be 'too strong for too long' to be expected to carry on to ever higher levels; e.g., a new up leg in COMP above 5000. I refer you to the aforementioned article LINK as an adjunct to my shorter-term daily chart reviews seen next.
Friday's reported drop in job creation might be construed as a longer-term bullish plus in that the Fed may hold off on raising rates. Time will tell if the winter from hell in the East and Mid-west is responsible for the most recent dip in job numbers and therefore a temporary phenomenon. A substantial Market correction could be construed as DUE and overdue. And, there's always an economic reason for it.
You may notice that I now have more 'target'/support levels on the downside than on the upside. If they can't take em up, they'll try to take em down!
Lastly, low bullish expectations/high bearishness is again in evidence as seen on the SPX and COMP charts with the CPRATIO indicator. Normally, dips to an 'oversold' zone in this indicator suggests potential for an upside reversal but trader 'sentiment' seems bearish enough to pull stocks still lower.
The S&P 500 Volatility Index (VIX):
The VIX DAILY chart:
The VIX Index is trending sideways and it tends to spend more time in a lateral non-trending direction overall than it does strongly trending. Rallies to the 22 area have offered good trading opportunities in VIX puts but such extremes are not seen often.
Near-term, an upside penetration of 16 could lead to a test of next 'resistance' at 17.
VIX has been holding 13 on dips, and 12-13 has been the 'support' zone for the SPX Volatility Index. Declines into a typical 'oversold' readings in the RSI, such as on the last two dips to 13, have offered short-term trading opportunities for 2-3 points on the upside.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) is mixed in its pattern. Since double highs made in the 2120-2113 area in late-February and late-March, the Index has been in a relatively narrow trading range with support found in the 2040-2050 area twice. SPX again looks headed to a re-test of support in this area.
If buying interest is not enough to carry the S&P to new highs and has resulted in LOWER rally peaks, buying may not be sufficient to stop SPX from sinking to new lows for the current move; i.e., to below 2050-2040. Next support is highlighted at 2020 and lower support/buying interest may not be found again before lows that existed prior to late-February at 1990-1988, extending to the 1975 area.
Near resistance is highlighted in the 2080 to 2090 zone. Next resistance as noted is assumed for the prior intraday highs at 2113-2120. As seen in my monthly review per the LINK above to my end-of-March monthly review, major resistance looks to come in at 2136, then at 2150, at the top end of SPX's broad monthly uptrend price channel.
While on SPX's most recent pullback, the Relative Strength Index (RSI) did not reach an oversold extreme and a possible buy 'signal' there. However, this past week saw my (CPRATIO) sentiment indicator hit an 'overbought' extreme, showing high-bullish expectations sometimes linked to tops.
Most recently, low bullish expectations/high bearishness is again in evidence. Normally, dips to the 'oversold' CPRATIO zone is enough to suggest potential for an upside reversal but trader 'sentiment' may be bearish enough to see stocks down for awhile.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) looked bullish on the run up above 920 but this last sizable rally stopped well shy of prior highs in the 932 area. I was bullish then but also assumed the Index would hold above its 21-day moving average which didn't happen. In fact recent rally highs have stopped at resistance implied by the 21-day average.
Near resistance is noted at 910; next resistance then comes in around 920, extending to the 925 area. Near support is highlighted in the 896-893 price zone. Fairly major support then begins at 880, extending to 875.
Continued trade below the 21-day average suggests that this time prior lows in the big cap S&P 100 may not stem a decline.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) Average sank again this past week. I noted the problem of bullish expectations last week when I wrote that:
... "bullish Dow stock patterns don't add up currently to more than about approximately a third of the 30; i.e., stocks without the sharp retreats that others have seen over the past 1-2 weeks. Bullish longer-range uptrends remain mostly intact (only) in: AAPL, DIS, GS, HD, JPM, MMM, NKE, PFE, TRV, UNH, and V."
The aforementioned 'bottoms' up bearish analysis for the 30 Dow stocks continues, especially so as possible interim tops may have been reached in GS, JPM, MMM and V. There's some potential for bottoms to have formed in CAT and IBM but no upside reversals are at hand. On balance currently bullish DOW 30 stock patterns are down to 7 from 11 last week.
Near INDU resistance is at 17800-17875, with next overhead resistance in the 18000 area. Near support comes in at 17600, extending to 17500. Fairly major support begins around 17300.
Given the bearish mood that seems to have gripped the market as lower earnings expectations are feared for the Dow, I doubt that potential for an upside INDU reversal will be seen before a 'fully' oversold reading occurs again in the 13-day RSI. Stay tuned on that!
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) chart remains mixed in its sideways to lower decline since the Index failed to climb above the 'milestone' 5000 level. Declining momentum is suggested by the COMP's recent inability to get back above its 21-day moving average.
Overhead resistance is seen in the 4950 area, then at 5000, at what looks to be the start of fairly major resistance. It would take a sustained move above 5000 to suggest upside potential to 5100. Near support is highlighted in the 4850 area, then at 4800, extending to around 4750.
Comp has the somewhat irregular appearance of a Head & Shoulder's top pattern. A decisive downside penetration of 4850 would suggest downside potential to 4700.
COMP has been declining on balance but has yet to reach an oversold RSI extreme; if it did, this could suggest a bullish capitulation so to speak and possibly set up an upside reversal. What we have now is a sideways trading range with a slight downward bias in a pattern of lower lows. Ability to hold the 4750 area, if reached, could suggest a bottom was forming.
Bearish sentiment has grown as seen with the CPRATIO indicator but greater extremes of bearishness may be needed to 'signal' a potential bottom.
NASDAQ 100 (NDX); DAILY CHART:
The big cap Nas 100 (NDX) is mixed in its pattern with a similar rationale as the Nas Composite per its commentary above. NDX support is suggested at 4300-4289. A Close below 4300 that continued into a second day would suggest a possible further down leg perhaps one that carried to the 4150 area.
Near resistance is highlighted at 4370-4380, with next resistance suggested at 4420-4430. A sustained move above the 21-day moving average is needed to suggest regained upside momentum in NDX.
Lows in the 4289-4280 area have been seen 3 times now but this implied line of support may not hold up on a re-test of it. If buying interest couldn't take prior rallies to higher highs, support may not hold up on another wave of selling given a current bearish mood. This may continue and 4200 may be a target, possible with dips toward 4150.
I noted last week that "If AAPL saw a decisive downside penetration of 120-116, I'd believe in a possible sizable next down 'leg' ahead." Apple looks vulnerable for that possibility and is a 'bellwether' tech stock to watch. Stay tuned!
The NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
A potential QQQ triple bottom is seen in the 104.6-104.2 area but the failure to gain traction on rally attempts may also mean a failure ahead to maintain prior support also. Next technical support is suggested at 103.4.
Key overhead resistance is suggested at 106.5, at the current 21-day moving average. Next resistance comes in at the 108 'breakdown' point.
The On Balance Volume line is trending sideways to lower. Traders may be turning bearish but as of yet a new down leg has yet to be seen. Any sharp decline to below 104 would likely 'bring out' heavy volume. To date, given the long-standing advance in the big cap Nas 100, bullish QQQ holders are not abandoning ship. Monday should tell the story given Friday's employment numbers as the business media said the sky could be falling on the US economy!
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) remains bullish in its chart pattern but has resistance at 1260 that may be tough to overcome. Moreover, it the other major indices start falling under prior lows, RUT may break below support implied by its up trendline and to below support implied by its 21-day moving average.
Pivotal resistance above 1260, is at prior intraday highs at 1268. If the Russell breaks out to new highs and I think it can at some point, next resistance looks to come in around 1280, then at 1300.
Key near support is at 1240, extending to 1230, then to 1220. 1200 begins longer-term support. A weekly Close below 1200 would suggest back to the 1150 area.
The best buying opportunities on pullbacks in RUT have mostly come when this Index has gotten 'fully' oversold in terms of the 13-day Relative Strength Index. Stay tuned on that possibility!
GOOD TRADING SUCCESS!