THE BOTTOM LINE:
It was two steps 'back' with the S&P and Dow and just one back with the tech heavy Nasdaq. I have few over-arching comments this week except to say that the S&P and Dow looked top-heavy and vulnerable to a deeper pullback than the Nasdaq and as the charts suggested, so it went this past week.
The S&P 500 (SPX) has retraced a key 66 percent of its last upswing, which may establish a low for SPX's current pullback. The big cap S&P 100 (OEX) as of Friday fell to potential trendline support. The Dow 30 (INDU) is near the lower (support) end of its broad uptrend channel and nearing an 'oversold' reading in terms of the 13-day Relative Strength Index/RSI.
The Nasdaq doesn't look capable of mounting a sustained rally currently but also doesn't look likely to have more than a continued sideways to slightly lower trend. There is a more bearish scenario where COMP and NDX test the low end of their uptrend channels which would mean deeper corrections. See the charts.
A noteworthy indicator reading was seen in a 1-day jump to an 'overbought' bullish extreme in my bullish/bearish Trader sentiment indicator (CPRATIO) just prior to Thursday-Friday weakness; CPRATIO indicator accompanies the SPX and COMP daily charts.
The S&P 500 Volatility Index (VIX):
I liked buying the S&P 500 (VIX) volatility index at 12 and under either for a speculative play OR as a portfolio hedge due to the tendency for VIX to move inversely to SPX. My upside VIX target is modest currently, to 15.5 - 16. Intraday, the Index already traded at 15.5 but briefly, near week's end.
The trading range market of the past 3-4 months has not generated VIX readings above 16, at least not for long.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) has retraced a key 2/3rds of its prior upswing. Potential support at this key retracement, plus the intraday rebound Friday, suggest that the lows for the current move may be in. Maybe not also. A more bearish outlook would be for a re-test of intraday lows in the 2067-2070 area.
In any case, no bullish sparks should fly until there's an upside breakout above SPX's down trendline, currently intersecting just over 2100. Next resistance is at 2120. Support is highlighted (green up arrow) at 2090, extending to 2080, with next support suggested at 2067-2070.
I noted the 1-day spike in my trader sentiment indicator (CPRATIO) that occurred just ahead of Thursday-Friday weakness. Even 1-day jumps like this, after a steady rise in bullishness, can be quite significant. The trouble traders might have in 'using' this indicator to help with (trade) timing is that peaks or troughs tend to be seen from 1-5 days BEFORE trend reversals.
Trader sentiment readings continue in mostly bullish territory. I noted last week that: "The bulls don't see the bears as able to 'break' the Market and tend to think it's only a matter of time before higher levels are seen across the board. But bullish fever is NOT raging due to Euroland and Fed uncertainties; amid other worries!" I hate to REPEAT myself but I don't have more to ADD to the foregoing a week on!
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) is being challenged at trendline support around 918, at what would be technical support if the bullish OEX chart pattern extends to current circumstances. If implied support at the trendline, 920-918, is pierced, look for next support/buying interest around 910. 900 is fairly major support.
Near resistance in OEX is highlighted at 930, extending to 937.
I didn't have time to add the long-term weekly OEX chart, so not shown here, but can say that MAJOR resistance isn't seen until around 965 in the OEX, with major support coming in around 860. The OEX remains in a major or primary bull market.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) ended up seeing more than a 2/3rds retracement of its prior upswing and instead made a round-turn back to early-May lows. Those prior lows stopped at that time at INDU's support trendline and a repeat of this pattern is my expectation again if INDU falls to its up trendline.
Along with nearness to possible technical support at 17800-17700, INDU is the first of the major indices to be near to an oversold 'extreme' in terms of the 13-day RSI. There's upside reversal potential seen in an 'oversold' market, coupled with support showing up at prior lows or up trendlines along with high bullish sentiment or strong bullish expectations.
Near resistance is highlighted at 18000, extending to 18100 and the 21-day moving average.
A dip into the 177-178 range in the Dow Index (DJX) would be a tempting call buy, risking to 176, with upside potential back to 181-182 or higher such as to the top end of INDU's broad uptrend channel. Last week I made the bold (kidding!) prediction that a pullback to 17800 was a 'worst-case' scenario for INDU. Stay tuned on that!
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) continues 'mixed' in its pattern. More so than the prior week as the one past saw a breakdown to below pivotal near support at 5050 although with a strong rebound back above 5050 and its 21-day moving average.
I primarily see this current stall and sideways trend as a 'consolidation' for a later up leg above 5100, possibly next to 5200. That may be weeks off or closer.
A dip to the 5000-4975 area in COMP would offer a test of buying interest. A rebound from the COMP's up trendline, especially coupled with an oversold (low) reading in the 13-day RSI would attract my attention to a possible bullish play in Nasdaq. My type of buy side trade: at technical support, oversold and with spikes in bullish sentiment per the chart below!
I wrote LAST week and it's still my view this week of "no strong conviction of the Composite getting and holding, above 5100 in the coming week on out to 2-3 weeks. COMP has major resistance showing on weekly charts (not shown) at 5160, not far above the line of recent highs. The Nasdaq Market may have reached at least an interim limit to how high for tech stocks for now."
NASDAQ 100 (NDX); DAILY CHART:
The big cap Nasdaq 100 (NDX) slipped lower this past week as buyers couldn't take the Index above 4540 for the most part. By week's end NDX closed at 4477 and below key near support at 4500 which also took the Friday Close below the 21-day moving average which had been acting as support.
Assuming that NDX remains within its broad uptrend channel which is my best guess also, key technical support lies in the 4400 area, just below near support assumed at 4450.
Near resistance is at the recent 'breakdown' point of 4500. Next resistance is in the 4550 area which made for tops in late-April and again late-May. The longer the time duration between the same/similar highs the more potent they seem to be. The current 'double top' hasn't yet spanned a long enough duration to suggest more than a possible interim top. Stay tuned on that!
On a risk to reward basis, bullish plays in NDX between 4400-4350 are favorable, given a Close below 4330 as the trade exit point and assuming an upside target to the 4600 area.
The NASDAQ 100 ETF STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) remains barely within its current uptrend price channel so needs to find support at its up trendline to maintain its bullish chart and pattern of gains dating from mid-March. A bearish aspect is the Friday Close below the 21-day moving average. I watch for a further slide below it OR it wouldn't surprise to see Monday's Close back above this key trading average; especially given the Friday intraday bounce from QQQ's up trendline.
I noted last week that "...some further downside for the Q's looks more likely than a decisive (and sustained) upside breakout above 111.'Some' downside potential is potentially to the 109-108 zone." Also from last time, I continue liking buying dips toward the 108 area if seen, risking to 107, looking for a rebound back to 111.
Highlighted support is at 108.6, extending to 108, with next projected support in the 107 area. Near resistance is at 110, extending to the 111.2 area. Long-term resistance is 115, long-term support, 106.
The On Balance Volume (OBV) line is pointed down/bearish as was the case last week and a tip off to the relative weakness of this past week in the Nas 100.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) is in a bullish longer-uptrend and mixed in the short term as resistance noted last week at 1260 is keeping a partial lid on the recovery bounce from 1240.
I've noted key near resistance at 1265, extending to the 1275 area. Near support is highlighted at 1240, extending to 1233.
RUT seems to 'want' to go higher but is struggling to gain much traction as is the case with Nasdaq; i.e., also in a strong long-term uptrend but may have reached some equilibrium for now. A couple of back-to-back Closes above 1260 (with support on subsequent pullbacks to this area) would set up a possible retest of the prior top. Longer-term charts suggest substantial resistance lies in the 1276-1280 area.
I continue to favor bullish plays in the 1220 area if seen, bearish plays around 1280.
GOOD TRADING SUCCESS!