THE BOTTOM LINE:
I made a point last week that the S&P 500 had retraced 38 percent of its prior gains. That's all the Index gave back before regaining most of its prior gains, making for a bullish 'minimal' pullback so far.
In the sequence of the Fibonacci number series .38 or 38 percent is considered to be a 'minimal' retracement of a prior move; more common and considered 'normal' are percentage retracements of about half/50% of a prior move; sometimes, as much as 62-66% will be seen without the dominant trend reasserting itself. In looking at a stock or a major index and ALL you see is a 1/3 to 38% retracement of a prior move followed by a strong recovery, look for MORE to come.
Moreover, options traders, which had in the week coming into last increased their bearish (put buying) orientation were, as I suggested, looking WRONG on Market direction which was suggested as soon as this past week by the strong gains. Public and non-professional options and stock traders often stay bearish for some time after sharp dips and volatile periods as we've had since the mid-August break.
Suggesting new highs for this move to come as much as anything is that traders are not 'believing' in the rallies much, not yet, as can be seen in my CPRATIO indicator as seen on the SPX or COMP charts. These was NO single day this past week of anything especially close to a bullish sentiment extreme; e.g., daily call to put equities' options ratio (CPRATIO) at or above 1.9/2. A ratio like what I use (call volume divided BY put volume) is simply when CBOE equities' call volume registers TWICE (or greater) daily put volume; conversely said, put volume running half of call volume.
The big cap Nasdaq 100 (NDX) is again nearing or within striking distance of an important historical price milestone at 4816 (NDX Friday Close: 4686) which is the all-time peak in NDX dating from March 2000 if you can believe. I consider it unlikely that NDX gets this close and NOT go to a new all-time high.
[My usual chart highlights for resistance levels are red down arrows; my highlights for support areas are the green up arrows.]
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) chart is mixed to bullish. Bullish in the strength and then renewed strength in the recovery rally dating from the late-September low and double bottom. A 'mixed' picture in that there's no daily chart pattern suggesting a next up 'leg' above 2130, the top end of a multimonth trading range.
The weekly chart suggests potential for an up leg above 2200, nearing the high end of its bullish uptrend channel. The low 'support' end of SPX's long-term uptrend channel 'held' on dips to 1900-1880. The double bottom low was equally bullish as to future potential per the DAILY chart below.
Near resistance was highlighted last week as 2085-2100 and that's still the case, more so at 2100. Next assumed resistance is at 2135, the prior intraday high. Above 2135 is a guess as to next possible objective. Near support is this week is bumped up to 2050, with anticipated support extending to 2020.
I made a point last week of the bullish implications, in a contrary opinion sense of the dip in trader bullishness in the prior week; it alone almost put me into bullish expectations. The drop in the Relative Strength Index (RSI) to a more 'neutral' mid-range reading was a help in suggesting potential for a renewed advance. That and the relatively shallow pullback!
The S&P 100 (OEX) INDEX DAILY CHART
The big cap S&P 100 (OEX) chart has resumed its bullish advance and potential retest of its prior high at 947. 940 looks like immediate overhead resistance, then the prior top.
Above 940, then 947, if reached, a potential next objective might be to the 960 to 980 area over time, probably not as soon as the upcoming holiday-shortened week.
Near support is highlighted in the 920 area, extending to 912 and a possible emerging up trendline.
I look for a move to new highs in OEX.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) has had a recovery rally from its 'minimal' 38 percent Fibonacci approximately equal to the much broader based S&P 500. The fact that the Dow also has had a relatively 'shallow' correction is a bullish plus. Moreover, INDU rebounded relatively quickly to above its 200-day moving average. I assume that the Dow has regained long-term upside momentum by continuing to find a support 'floor' at and above its 200-day average.
On the 'mixed' side of technical/chart aspects, the sluggish Dow has further to go than the S&P to break out above ITS prior stair-step highs; starting at the 18350 top, then 18137 on down to 18000. The Dow can tread water above 18000 for a period but might not achieve a decisive upside penetration of 18200 anytime soon; at least not as soon as it might with SPX.
Near resistance is clear at 18000, then is highlighted at 18200, but more precise also to say resistance zone at 18137-18200.
Near support comes in around 17600, then at 17200.
I'd maintain bullish strategies on the S&P, I'm less enthused about the narrow price average INDU versus cap weighted and broader S&P. INDU stocks in strong rallies like GE, HD, MCD, MSFT, NKE, TRV and V are still few relative to the overall 30.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite's (COMP) recent pullback to 4900 resulted to a 'minimal' 38 percent retracement of its prior 600+ point upswing before bullish forces pulled the Index higher again. While volume and price momentum slowed by Friday, ahead of the upcoming shortened trading week, there's favorable potential ahead for a retest of the prior 5163 high, then perhaps on to challenge the brief 5232 top of July.
Historical note: There's yet to be a prolonged period that's taken COMP to above its 5132 high of March 2000. Stay tuned on 1-2 months above this target!
Pivotal near support is at 5000, then to the prior recent low at 4900. Near resistance as already noted, is highlighted at 5163, then at 5232.
Bullishness, in the face of a strong recovery rally and 'minimal' retracement has been low. When this changes to high and prolonged bullishness, I become more wary about how much higher prices can get. See my 'CPRATIO' sentiment indicator at bottom of the COMP chart. The recent CPRATIO low was a strong indicator for/of a bottom.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) pattern is bullish enough to suggest that this current upthrust could at least test the all-time (March, 2000) peak at 4816. Immediate resistance comes in at 4737 but I see that level being pierced and 4800-4816 being tested as the pivotal resistance.
Near support still seen at 4600, with especially key support that came in around 4500; this dip was important in that it 'showed' support at the low end of the big prior upside price gap.
Chart gaps often get 'filled in' later but the LOW end of gaps also often sees support/buying interest coming in there.
I see little to stop the big cap Nasdaq from clearing 4800 for a time but long-term chart resistance is seen around 4850 between now and year-end at least. On a 6-month outlook and a longer-term play of course, a move to 5000 is possible.
The NASDAQ 100 Tracking Stock (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) rebounded from the 110 area, support implied by the low end of an upside price gap formed when prices leaped from below 110 to a 112 low the following trading session. A common bullish pattern is a strong rebound after a prior upside (runaway) 'gap' is 'filled in'; i.e., prices retreat into the non-traded ('blank') price gap area to the point where prices took their leap so to speak.
Support is highlighted at 112, then at 110 where the most recent rally began, after a scant 38% retracement.
Resistance is highlighted at the prior recent 115 high which I think will be tested and possibly pierced. Next resistance is anticipated in the 117 area.
Daily trade volume has declined day over day whereas the On Balance Volume (OBV) line projects higher.
The RUSSELL 2000 (RUT); DAILY CHART:
I wrote last week that The Russell 2000 Index (RUT) "may have settled into a predictable 'trading' zone, fluctuating from 2.5% above, to 5% below its 21-day moving average." As RUT has crossed above key near technical support at the 21-day average, upside potential is suggested to the 1200 area again; perhaps to 1220. I don't anticipate upside fireworks for RUT above 1220.
Near support looks like 1160, extending to the recent bottom in the 1140 area.
Last week I thought there could be a downside penetration of 1140 and follow through selling to 1100 major support. I now see 1140 be solid chart support and 1200-1220, especially 1220 a key resistance area for the balance of November.