Continuing a pattern of recent months where an up month is followed by a decline, September saw losses for month ranging from -.008% (8/100th of 1 percent) in the Nasdaq 100 (NDX; -.019% (19/100th of 1 percent) in the Nasdaq Composite (COMP); -.015% (15/100th of 1 percent) in both the Dow 30 (INDU) Average and the S&P 500 (SPX) Index.
This is a month over month 'correction' of minor proportions but you'd think it was a bear market if listening to some day to day comments on price action! Oh well, it makes for more exiting press to look at the ups and downs of trader/investor perceptions as they try to make sense of and make hay with what the Market is giving us in recent weeks.
I don't want to minimize one aspect of the monthly charts you'll see below in the sense that SPX and COMP are up against implied resistance of their broad upper trend channels. This is not the case in INDU and NDX, as they have more 'room' on the upside so to speak.
Even with SPX and COMP, the pattern you'll see only suggests that 1.) there might be a more significant decline that pulls these Indices further down toward the middle range of their uptrend channels; OR, 2.) it can also mean simply that the rate of upside gain will continue to be moderate as month to month highs continue to 'hug' the upper channel lines in the charts in question.
There's no way of knowing which of the foregoing two possibilities are most likely from a technical/chart standpoint. That leaves folks that want to, able to froth at the mouth about slowing European or Asian growth, how soon the Fed will raise rates, etc.
Now you can wonder with me why the heck I would bother to review MONTHLY charts at all! Well, because (here's # 1 & 2 reasons again!) 1.) the long-term monthly time frame best shows the primary trend of the Market as Charles Dow would call it and this sets the tone for whether we want to be buying calls on major pullbacks or buying puts after major rallies; # 2 reason): Charles Dow is a 'hero' of mine in that some of his work more than a 100+ years ago is still very relevant today even with all the changes and craziness in trading. And he only considered month to month gains/losses to be of significance from an investment standpoint anyway.
I doubt that my 'work' in technical analysis will last very many years at all although my book (Essential Technical Analysis) still gets bought occasionally! I digress, so let me move on...
THE S&P 500 (SPX) MONTHLY CHART REVIEW:
SPX was off 31 S&P points from the August Close. Month over month that's -.015 percent.
The pattern in recent month's has seen prices come near to, but not break out above SPX's upper channel line. Given the 8-month Relative Strength Index (RSI) being in its 'typical' overbought zone, this pattern may continue. For example, ctober sees a move up to, but not above or much above 2040, resistance implied by the upper trend channel line in October.
Major support begins in the 1800 area.
THE DOW 30 (INDU) SEPTEMBER CHART REVIEW:
INDU was off 27 Dow points, which is a -.015% (15 100th of 1%). The Dow 30 has of course lagged gains for long enough that ITS current prices are near the LOW end of its projected uptrend channel. INDU has nevertheless been advancing at and above its up trendline, it but its rate of price change or gain is less than the broad S&P 500.
If SPX is a big cap index, INDU is a monster cap index so to speak. These aren't companies that will typically grow their earnings as much as the combined 500 stocks of SPX. Moreover, the Dow is a price average of the 30 stocks and not capitalization weighted like SPX, OEX, COMP, and NDX, which makes for a different growth pattern. Sorry, you know this no doubt but I have to remind people of this fact sometimes as the biz media talking heads don't.
October support looks like it should come in around 16700 or a bit less, perhaps even back to 16350, but that's more of an outside shot according to the current chart pattern. The upside? To 17500 perhaps.
THE NASDAQ COMPOSITE (COMP) MONTHLY CHART REVIEW:
COMP was down 87 points from its August Close, which is off -.019% (19/100th of 1 percent).
The COMP chart presents the same type pattern as the SPX monthly chart in that, assuming the upper channel line still 'acts as' resistance, upside potential in October may be limited; e.g., to 4660, perhaps to near 4700. Major support begins in the 4000 area.
The view of price potential is consistent with the fact of some declining price momentum that's seen in the Relative Strength Index and the fact that the RSI indicator remains close to its 'typical' overbought zone.
THE NASDAQ 100 (NDX) SEPTEMBER CHART REVIEW:
The NDX monthly chart suggests that the big cap tech index may be the one to continue to bet on for more upside. That is IF the upside potential implied by a possible move toward the upper end of its broad uptrend channel remains a possibility between now and year end.
4000 is a key support in the coming month. Technical/chart resistance based on price channel considerations is not seen until above 4500. This isn't to say that this kind of move will happen; and, NDX is showing an overbought RSI, but this kind of (overbought) condition can go on for prolonged periods in strong bull trends before there's a sizable correction. Stay tuned!
GOOD TRADING SUCCESS!