THE BOTTOM LINE:

The Market has finally gotten to major oversold extremes in the S&P, Dow and the Russell but not quite yet in the Nasdaq indices. This dynamic accompanies possible long-term Dow support reached around Dow 16000.

The Dow 30 (INDU) has been the laggard among the major stock indices for some time but sometimes is pivotal in terms of chart/technical analysis. INDU tends to have support and resistance trendlines that will often mark important lows, highs and trend turning points. It makes some sense that the previously laggard Dow might be the first to find bottom.

With this in mind, the weekly Dow chart seen first is of interest in terms of calculating potential support and a possible turning point ahead in the current and seemingly relentless selling pressures of recent weeks. Assuming that INDU holds mostly at or above its long-term up trendline, this suggests that Dow 16000 may be an area for a Market bottom ahead.

Moreover, there's an another aspect to look at on this chart, which is the oversold extreme that's been reached in terms of the 13-week Relative Strength Index which 'measures' a quarter of a year. 'Extreme' lows in the (13-week) RSI have only been seen 3 previous times in this key momentum indicator which at those times preceded or accompanied prior bottoms as follows:

1.) A similar RSI extreme low occurred ahead of and at the 2009 bottom that kicked off the current major bull Market; note that this time period is unseen in my INDU chart dating from 2011.

2.) Ahead of, but close to the 'final' low of the August 2011 bottom (see chart) in the Dow.

3.) At the mid-November 2012 INDU lows as seen on the chart.

An oversold RSI extreme such as seen above is not an exact 'timing' vehicle for bullish trade entry but a major oversold extreme is seen at or not far before major upside trend reversals in a long-term BULL market; it's necessary to make the distinction that such RSI extreme lows are patterns in primary/major bull market bottoms. Perhaps as we get closer to October we may again see the same bottom dynamic 'signaled' by the current long-term oversold extreme in the RSI.

As anticipated, the major indices also appear to be establishing lows that are now at or above the 5 percent lower (moving average) envelope lines seen in the all but the Nasdaq charts, which after the initial 'crash', are now holding above 6 percent lower envelope lines; these percentages are relative to the 'centered' 21-day moving average. Such trading 'bands' give some idea(s) of where to look for possible buying interest.

Moreover, trader bearishness is quite pronounced which also tends to mark a turning point in major declines, although this dynamic can take some time to be realized, such as over days and a few weeks in some cases.

MAJOR STOCK INDEX TECHNICAL COMMENTARIES

S&P 500 (SPX) DAILY CHART:

[Note: For a general Market overview as to the current trend, also see my initial 'bottom line' commentary at top.]

The S&P 500 (SPX) is bearish in its pattern at the most recent lows, which are so far holding ABOVE the lower 5% 21-day moving average 'envelope' line which tends to suggest potential index 'support', except in extreme selloffs such as seen at the 3-day late-August cluster of lowest lows to date for the current move.

Support is highlighted at 1900, then around prior lows in the 1867-1870 area. The prior SPX bottom may get re-tested, but I also assess some likelihood that the lows for the current move may have been established there or close to it. Bullish sentiment was quite low, suggesting that SPX may be nearing a bottom but bearishness may go on for a while ahead of 'Fed Dread'!

Upside resistance begins around 1950 and extends to 1987 at the prior recent rebound highs. Next resistance and pivotal to any prolonged recovery comes in at 2050, representing the key 'breakdown' point.

S&P 100 (OEX) INDEX; DAILY CHART

[Note: For a general Market overview as to the current trend, also see my initial 'bottom line' commentary at top.]

The S&P 100 (OEX) is bearish in its pattern at the most recent lows, which as with SPX are so far holding ABOVE OEX's lower 5% 21-day moving average 'envelope' line which tends to suggest potential index 'support', except in extreme selloffs such as seen at the 3-day late-August cluster of lowest lows to date for the current move.

OEX support is highlighted at 840, then around prior lows in the 820 area. The prior OEX bottom may get re-tested, but I also assess some likelihood that the lows for the current move may have been established there or close to it. Bullish sentiment was quite low this past week.

Resistance is highlighted in the 875 area, then at 900 which was a prior pivotal 'breakdown' point when the Index was locked into a long-standing trading range.

Prior lows may get re-tested. Assuming further lows form in the same area as in the late-August panic selloff, that's evidence pointing to a 'final' bottom.

THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:

[Note: For a general Market overview as to the current trend, also see my initial 'bottom line' commentary at top.]

The Dow 30 (INDU) is bearish in its pattern like the S&P, but there may be major support that develops in the 16000 area. However, should 16000 get pierced next support looks to come in around 15800. If so and assuming support comes in again in the 15650-15800 zone I'd look for a 'final' bottom. Timing for any bottom is tricky as the Market has to navigate the Fed meeting results coming up later this month.

Near resistance is highlighted at 16650, with next resistance suggested at 17000 where downside momentum got into high (panic-induced) gear. The Dow weekly chart mentioned (seen at top) is 'fully' oversold on a 13-week basis.

The daily chart seen below saw late-August lows as a 'benchmark'. I anticipate some likelihood that prices and the RSI may dip again toward prior lows seen in panic selloff. Depending on the same, or higher, lows, this would suggest as noted a tradable bottom.



NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:

[Note: For a general Market overview as to the current trend, also see my initial 'bottom line' commentary at top.]

The Nasdaq Composite (COMP) is bearish like the S&P and Dow but not surprisingly for the most-favored tech sector, COMP is holding further above ITS prior (late-August) recent lows.

Key near COMP support is at 4600, then at 4505-4500. A successful re-test of those lows should set up a 'final' bottom in this oversold market. The RSI saw an extreme low late last month. Prices and this indicator with it may dip toward its prior lows. Assuming COMP holds above 4500-4600, I anticipate a subsequent upside trend reversal. Stay tuned on that!

Key near resistance is suggested at 4800, extending to 4875-4900. Bullish sentiment got quite low recently but I don't anticipate a sustained reversal of bearishness ahead of more evidence for or against a Fed hike in rates. The Market has always reacted and OVER-reacted to short-term interest rates. It seems like crazy excess but in the face of a slowing China which may or may not affect US corporate earnings, the Fed is dominant.

b>NASDAQ 100 (NDX); DAILY CHART:

[Note: For a general Market overview as to the current trend, also see my initial 'bottom line' commentary at top.]

The big cap Nasdaq 100 (NDX) has the same bearish pattern as the broad Composite. Ahead of any Fed actions, the chart/technical picture is one of watching for further NDX weakness in any re-test of 4140-4100 support, extending next to the 4050-4015 area. Assuming especially that 4050-4100 holds up as support, I anticipate a tradable bottom forming.

Technical considerations are tricky ahead of Fed action regarding a rate hike. Is this priced 'into' stocks? I don't know on this front but don't at least don't see danger in a new down leg below 4000.

On a risk to reward basis, I'd be happy owning NDX calls on another dip to 4000 but this seems a bit of stretch for the bears to accomplish. The bears and computer programs do best at hammering stocks when there's panic overseas or here! Traders and investors got spooked on China weakness but this may be mostly now 'priced' into stocks.

Key near resistance is noted in the 4330 area, extending to near 4400. A sustained move above 4500 is needed to reverse current sideways to lower NDX momentum.

The NASDAQ 100 ETF STOCK (QQQ); DAILY CHART:

[Note: For my general Market overview as to the current trend, also see my initial 'bottom line' commentary at top.]

The Nasdaq 100 tracking stock (QQQ) is bearish in its pattern. If QQQ holds above 101-100 support, 'par' (100) is a good area to test bullish waters. Next lower support is at 98.4-98 even.

Near resistance comes in at 105.6-106. Next resistance, not highlighted on the chart looks like 107, where a recent downside price gap would get 'filled in'. I've highlighted next resistance above 106, at 108.

RUSSELL 2000 (RUT); DAILY CHART:

[Note: For my Market overview as to the current trend, also see my initial 'bottom line' commentary at top.]

The Russell 2000 (RUT) is bearish in its pattern. Lows may continue to be seen however above the panic low near 1100 and which is above my lower 'envelope' line suggesting the low end of a projected price range. Assuming RUT doesn't Close below 1100 in any extended way, there's potential for a bottom being traced out at or above 1100 over the next couple of weeks.

I've highlighted near support at 1128, extending to 1120. Next support comes around 1105-1100.

I'd be evaluating bullish strategies on dips to 1120-1100 if seen. A successful re-test of recent lows would offer a favorable risk to reward outlook, assuming rebound potential back to 1200, at the recent 'breakdown' point and risk or exit at 1050.


GOOD TRADING SUCCESS!