THE BOTTOM LINE:
The S&P 500 has now been in a 2000-2130 trading range for 9 months, not crazy unusual given the prior 67 month monster advance. The Nas Composite has advanced some in the same period, but has resistance not far overhead at 5270-5300.
I wrote in my recent 7/30 Trader's Corner column as to what price and indicator patterns suggested recent lows as having made a possible bottom.
Since I usually do a month end review of monthly charts and I didn't yesterday on the July Close, I'll include one such chart here, that of the monthly S&P 500 (SPX). This helps visualize the prior 9-month trading range, a pattern in technical analysis called a 'rectangle'. Rectangle patterns after a prior advance are usually price consolidations. Assuming there's a decisive upside breakout ABOVE the top end of SPX's range, it would tend to 'confirm' the major bull trend. (Rectangles can be a top pattern also, which would be suggested with a decisive downside penetration of SPX 2000.)
The monthly SPX chart suggests major support beginning in the 2000 area and extending over time to the 1850-1900 area at the low end of SPX's broad multiyear uptrend channel. Major resistance begins in the 2130 area and extends to the upper (resistance) end of the uptrend channel.
I want to set the stage for what might be developing for August, which tends to be a seasonally weak month, although last year saw a rise of 3.8% in August. I told traders ahead of August not to get complacent in thinking that this has to be a down month. If the Market always did the same thing, we'd all be rich trading off this predictability.
I mentioned the past 9-months in the Nasdaq Composite (COMP) as advancing versus going strictly sideways. From its late-November low around 4600, COMP has advanced to a recent top in the 5200 area (5215). However, COMP's rate of gain has slowed from its prior 2009-2014 gangbuster advance, which I attribute to COMP hitting resistance implied in the 5270 area, at the top end of its upper monthly trend channel line (not shown).
Going back to the S&P and the idea of a trading range that 'consolidates' prior gains, there's another technical aspect to sideways consolidations. The sideways trend also tend to 'throw off' a prior overbought condition and I point out the 8-month Relative Strength Index or RSI below which has been trending lower and taken SPX out of its previous overbought range.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) chart is mixed intermediate term due to the sideways trend over several months, but SPX has resumed short-term upside momentum and I point to the Index recently trading back above its 21-day moving average. The long-term SPX trend is up per the monthly chart seen above.
In uptrends or even in a trading range pattern there can be advantage in buying retracements of between 62% (representing a Fibonacci 61.8) and 66%. On the recent downswing, SPX fell below this zone but then quickly rebounded after some panic and stop-loss selling ran its course.
Where to from here? I think SPX could reach 2120 again, and possibly re-test strong overhead resistance at 2130-2135. For this outlook to 'work' I'd also like to see the Index hold above its 21-day moving average; a single day below the average not withstanding.
I've highlighted pivotal near SPX support as around 2080, extending to 2065. Near resistance is seen at 2120, then 2130-2135 and already mentioned.
Bullish sentiment climbed quickly this past week to one 'overbought' reading as noted with my CPRATIO indicator. This may be a warning of traders being too quick to assume prices are going to have an extended run. Stay tuned!
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) had a retracement right into the zone I anticipated. Which is why I wrote last week that: "I'm bullish on OEX in the 915 area, but that area should be the low unless the Index is going to retest 900."
So far so good for a trade but the big cap S&P 100 has to first get through 938 resistance and then 945-948. I see potential for OEX to re-test its prior highs which was a bullish move to above the line of OEX prior resistance (935-938). Near support is suggested in the 925 area then back at 914.
OEX has seen a RECENT pattern of going from an oversold to an overbought 'extreme' as measured by the 13-day RSI. Trading at the extremes so to speak can be a good bet but this in-between stuff is murder waiting out how prices go next. Stay tuned!
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU), monster cap narrow index that it is, is nevertheless how the 'public' gauges the overall Market. INDU has enough 'dogs' of the Dow to wonder if there can be an extended lift off from beyond the recent rebound.
I wrote about INDU last week: "A 100% retracement is back to the area of prior lows in the 17500 area and if reached, this area down to 17430 has favorable risk to reward on bullish strategies. Controlling risk is the key by setting an exit point at just under 17400." The lowest 'print' of the Dow for this past week was 17399 and I don't consider that as just 'under' 17400 and will track a bullish play and update accordingly.
To gain much upside traction, INDU needs to clear 17800 and the 21-day moving average. Next resistance is probably 17900, but pivotal resistance looks more like 18000, with fairly major resistance coming in the 18100 to 18200 zone. Technical/chart support is at 17600, extending to 17500 currently.
Buying the Dow when it's oversold according to its 13-day Relative Strength Index has been a good bet for at least a short term upside play. I think the Dow could make it to 18000-18100 next but haven't bet the ranch on it.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) remains bullish in its pattern as the recent retracement stopped AT the Fibonacci 62% mark, which was a good bet on the lows for the recent pullback.
I wrote last Saturday that "A bullish buy into dips into the 62-66 percent retracement zone at 5027-5011, with an exit below 5000, offers a trade look." This past week's downswing low was 125.6, so it was a tight fill going strictly by my suggestion.
Immediate overhead resistance is suggested in the 5150 area, then at 5200, extending to recent highs around 5223-5231. Technical/chart support is suggested in the 5050-5025 zone. 4950-4900 begins major support.
I mentioned before that bullish trader 'sentiment' may have gotten a bit carried away this past week, on Thursday specifically. But if you are going to play the best bet for further upside, the tech heavy Nasdaq is the playpen you are going to be in.
NASDAQ 100 (NDX); DAILY CHART:
The big cap Nasdaq 100 (NDX) is bullish in its pattern with the retracement of 'just' 50 percent of the prior upswing and by rebounding strongly from its brief touch to support implied by its 21-day moving average.
I wrote last week that: "I favor looking at possible bullish plays on pullbacks to the 4500 area knowing a sell off in that area could extend to at or near 4450. I wouldn't stay in with Closes below 4400." No indeed and to update my suggestion, I wouldn't want to stay with NDX calls if 4500 is pierced. I'd also look to take profits on NDX calls if the Index hits 4700 or not wait and exit on a move to near prior highs at 4645-4650.
Resistance is highlighted around 4645, extending to 4693-4700. Near support is noted at 4506 currently, with next support coming in at 4435, extending to 4400.
To anyone who played the downside from the recent 'extended' highs, the dip to, and rebound from, the 21-day average suggested that the pullback had run its course at least short-term.
The NASDAQ 100 ETF STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) is bullish and mirrors the underlying Nas 100 chart. Only the names have been changed, err, in this case price support/resistances.
The QQQ pullback was also exactly to ITS 21-day moving average and I alerted you to this possibility by writing last week that my: "next expectation is the Q's drop back to the 110 area and hold around its 21-day moving average." So, where to next?
The Q's would need to climb above 113 near resistance in order to to re-test prior highs in the 114-114.4 area. I don't have current expectations that there will be a substantial further up leg above 114.
Near support is highlighted at 110, then around 109, extending to 108.5 which is seen at the up (green) arrow. Fairly major support begins in the 108 area.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) fell to another recent oversold RSI extreme. That fact and that recent pullback lows were at the extreme suggested by my lower moving average envelope line suggested bullish expectations for a rebound. I wrote last time that:
"In the 1220-1215 area, if reached, RUT seems like a 'low-risk' buy adhering to a 1205 exit anticipating a potential rebound to near 1260." All looks good there except I'd raise my exit point to 1220 and keep the 1260 trade target. It's a trade, not a long-term buy!
Near resistance is suggested in the area of the 21-day moving average, currently intersecting at 1247. Next resistance is projected for 1260. Fairly major resistance begins at 1273-1276 and extends to the prior top at 1295-1296, extending to 1300.
Technical support is highlighted initially around 1230, extending to 1220.
GOOD TRADING SUCCESS!