Today's April Close sees the S&P 500 (SPX) up a tiny fraction from March, versus the Nasdaq Composite (COMP) which ended the month off 2 tenths of 1 percent (-0.2%).
The S&P appears on the move to a potential breakout to new multimonth highs. Nasdaq is seeing a period of establishing where support/buying interest is, and it looks like the lows for the recent correction have been seen. Now comes base building for a test of the down trendline in the 3600 area in the big cap Nasdaq 100 (NDX) as shown the NDX chart below.
The other aspect to note regarding Nasdaq is the NDX volatility index, VXN. The VXN history is also seen on the NDX chart and volatility remains high but no longer at an extreme; e.g., above 20-21. Premiums are relatively high because of still above average VXN. While selling NDX puts might seem like an attractive way to play the upside, Jim and others here don't advise this. I concur. We may not see NDX puts decline in value until closer to expiration.
What I see currently favors accumulating close to the money NDX calls on dips out to June. Volatility may go on for a while longer but NDX is so far only testing, not breaking, longer-term support as will be seen on the weekly COMP chart.
April was quite mixed as seen by the almost 'unchanged' April monthly close. Selling has been the story in the high flying tech stocks mostly in the top-tier NDX. In another way, the other big story is that the S&P and Dow look like they could break out of their multimonth trading ranges in the coming month.
First up in my month end review is the Nasdaq 100 Index and its current technical/chart outlook, which looks like NDX is finding support in the 3500 area, extending to 3450. If you can buy this area, with prices at or near 3500 or under by 50 pts, risk (of a new down leg) relative to upside reward looks attractive.
A key upside breakout (or, it 'becomes' a resistance-breakdown point) ahead is at the down trendline dating from the early-March peak; i.e., currently at 3600 in NDX.
As seen above, there's been a distinct tendency for significant lows to form after VXN gets in the 21-22 area and above. This tendency suggests NDX has made a key recent bottom, not only for this reason but the all-important low being made AT the prior downswing low making for 'likely' double bottom. Price action always is THE key determinant of the trend and upside or downside potential; or the lack of it.
If NDX goes into a trading range again, this favors some strategies of course involving selling premium on both calls and puts, but those taking an outright bullish bet may be frustrated and losing, although one-month out, after a period of establishing a base or a support zone (with strong buyers there), there should occur a play in June NDX calls.
As to support, Nasdaq on a weekly chart (seen next) basis, NDX is both showing bounces off a substantial up trendline and is now at an 'fully' oversold reading in terms of the 8-week Relative Strength Index.
The S&P 500 (SPX) ended April up a fraction. The story is not that it was 'only' up a tiny fraction, but the story is in the chart pattern seen next is about how SPX continues its recent strong rebound. This, after a 'common' (on pullbacks) one-half (50%) give back of SPX's prior key advance early-Feb to early-April.
A bullish pattern is seen as SPX continues to move to ever new highs for the move, heading to what looks like a re-test of the prior top made just under 1900. It's possible that selling around 1900 will again take SPX down and the Index remain locked in a slightly expanded trading range.
My view is that new highs for the current move above 1900 looks significantly more likely, than say, pivotal support around 1820 being pierced. The key test of a 'breakout' move is what happens AFTER prices pierce the prior high(s). What the bulls would want to see unfold then is that pullbacks back to the 1900 area attracts buying and this area 'becomes' a floor of support.
Lastly, how the April Dow 30 (INDU) Average ended April, relative to March (up slightly) isn't so significant but going to yet another new monthly closing High is; admittedly not by much, but April's higher Close keeps the Bull Market marching along.
More importantly, today's INDU Close is a new all-time monthly Closing high and Dow Theory sees this as a 'confirming' aspect in saying the major bull market trend continues. In Dow Theory, the TWO key Dow Averages are looked at in tandem as whether their joint action 'continues' to confirm a Primary Bull Market. It does!
It also looks positive for continued move higher if INDU continues to find monthly support around 16000. This then could be a springboard for a next advance of a 1000 points.
GOOD TRADING SUCCESS!