THE BOTTOM LINE:
The trading range still lives in the S&P and dies in the Nasdaq as the Composite (COMP) and Nas 100 (NDX) broke out above their multimonth price range. The tech-heavy Nasdaq breakout hasn't yet carried a lot higher than its prior highs but there were two consecutive days above its prior top and with Closes at the intraday highs; so far so good for the bulls.
I keep forgetting to clue in newer subscribers to the fact that they are NEVER going to find my equities call TO put daily volume ration ("CPRATIO") on any other web site. This because keep this as a 'custom' indicator, which TradeStation software allows you to do, as long as you're willing to input the daily ratio by hand. I've been doing this for years. The reason being that the way I keep means that a LOW reading is 'oversold' and potentially bullish (like the other overbought/oversold oscillators. I like the consistency and I don't like dealing with fractions.
So, on the CBOE web site and on various data feeds look for the PUT-CALL indicator only. You are never going to find something called "CPRATIO". Sorry, but you can keep the daily number yourself the way I keep it.
You don't have to plot this number, just look for 1-day extremes; i.e., readings near 1 (puts equal call volume that day) OR up around 1.7 to 1.9 or higher, where equities call volume is running 1.7 to 1.9 (or more) times put volume. The COBE and others long ago got wise to keeping their ratio without the somewhat 'distorting' influence of INDEX call and put daily volumes; i.e., because of the portfolio hedging (and arbitrage) that goes on.
I finally have featured my call to put ratio on BOTH the S&P 500 (SPX) chart AND on the Nasdaq Composite daily chart. I want to make it cleared that there is not one 'sentiment' reading for the S&P and another for the Nasdaq. Of course, traders are for the most part more bullish on tech and less so on the S&P stocks, but we can only get an OVERALL read on the market and it should be viewed in that context.
I put a lot more notations (text) ON my charts this week, so if my verbiage/commentaries are a little light, there's a lot more to look at on my charts.
I'm a little bit pressed for time anyway this weekend as I just made a transition from my ocean side home on the Pacific to my main haunts on the rocky mountain shores near my sons in the Denver area. 'Cali' is getting a little depressing anyway as the conservatives and liberals seem determined to blow up government there. The state is the most physically beautiful and depressing politically. So, per Dickens, the best of times, the worst of times!
Last but not least, I find it interesting to keep a tab on long-term multiyear/multidecade charts, weekly and monthly and I feature the Nas 100 monthly chart to start out with.
A bullish week and it should continue but the S&P could still hold back a major new up leg in Nasdaq if it can't break out above ITS prior highs. It's summer and rallies often don't carry the way that fall advances can and do.
CHART OF THE WEEK:
There's not a lot to say about this first chart. The month still has some ways to go so it will be interesting to see how this chart ends up, but the strong advancing trend continues dating from the end of or what looks to be the end of the previous bear market. You see strong trends very simply by the steepness of the up or down trendlines.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
As I said last week, "the S&P 500 (SPX) chart can be viewed in a neutral to bullish light IF prices continue to hold at the low end of its multimonth trading range.". I didn't know of course how TRUE that would turn out to be, as buying that low end of the SPX range was a dandy do.
So much for the bearish take on the S&P with the 3-pronged high that looked precisely like the 'classic' Head & Shoulder's Top. To make the H&S pattern 'valid' so to speak, the lower neckline has to be broken or pierced and this didn't happen as you can see on the SPX chart below. Moreover, the breakout above the last high (not the all-time high for this move) tends to negate the extreme bearish possibilities on a technical chart basis. Sorry bears!
There is a sort of classic take on the MINIMUM upside move that breaks out above (or below) a well-defined trading range which is to ADD the distance between the price range to the 'breakout' point or the top end of the range. (Of course a break down BELOW the range is SUBTRACTED from the low end of the range.) I've noted a minimum upside target of to around 1020 if SPX sails above 950.
Very near support I did not note on the chart and it's missing a green up arrow at 905/906, which is the top end of the upside chart gap; upside gaps tending to define support/future buying interest on pullbacks to them.
Near resistance is back up in the 950 area, at the top of the rectangle pattern that is simply a way of marking a trading range that has 2-3 or more highs in the same area. Same with the low end of a price range like this. I project next higher resistance up around 978.
Looking at bullish sentiment on the SPX chart above you'll see that traders got heavily on the call/bull side this past week. I wouldnâ€™t call this a definite 'danger' signal, only a 'warning' that there might not be a big push through the top end of the prior trading range. Hard to tell, but I'm not loading up on S&P calls by any means. IF the Nasdaq is the harbinger of new leg up for the more stodgy S&P, then SPX will finally make its move above 950. It is likely a matter of when rather than IF it will do this.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) Index is still also confined to it's prior range until/unless OEX can achieve a decisive upside penetration above its prior high around 444. Stay tuned on that. There is strong upside momentum going for the Index. OEX is ALSO getting up toward overbought territory according to the 13-day RSI, so I'm not betting the ranch on a big new up leg straight away.
Very near support is at 435, then down around 425-426, at the gap area and coinciding with the 50-day moving average; main support remains at 410-412.
Very near resistance is around 444 in OEX, then up at 460 according tot the way I project it.
DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) broke below what looked like a Head & Shoulder's 'neckline' support and looked like it was headed to 8000 and below. But it stopped where it stopped and strong buying returned. There's some life in the old girl! Of course INDU can muster better upside without some of the prior broken stocks like GM and Citi.
Near resistance at the prior 8878 high is now again all important. If INDU closes above it's prior high, don't break out the Champaign until it proves its ability to not fall apart on a second day.
Next key resistance above 8878 to 8900 is up at 9150 in my estimation. Near support is at 8600, then around 8350-8400, with major support in the 8087-8100 area.
The Dow is edging up toward an overbought reading but the Average can stay up in this area for awhile. There is nothing magically about these areas, just a statistical likelihood or historical tendency that warns against expecting a another big move equal to the big rally of this past week.
NASDAQ COMPOSITE (COMP) INDEX, DAILY CHART:
The Nasdaq Composite (COMP) now projects up to the 1955 area or so before I would see significant selling coming in again. It looks like the corrective 'a-b-c' decline has run its course with the 'c' leg down ending at the recent 1747 low in COMP.
Good support should be found on pullbacks to the 1800 area. If COMP is going to tack on another move higher, it ought to hold in the 1880 area on balance as prior resistance 'becomes' the new support.
Trader sentiment is recently turned quite bullish but we could see several spikes into the 'overbought'/overly bullish area in my sentiment indicator seen below (CPRATIO), before this market corrects much.
NASDAQ 100 (NDX) DAILY CHART:
The Nasdaq 100 (NDX) chart is bullish and the most bullish of the major indexes in fact. Love those big cap tech stocks! I project that resistance/selling interest might not be seen before a move to around 1570 or a bit higher; e.g., around 1600.
Near support is in the 1490-1500 area, with key technical support apparent or suggested down in the 1455 area. Major support is at 1400.
NASDAQ 100 TRACKING STOCK (QQQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQQ) projects higher as well, with a possible next target to around 38.6 or a bit higher.
The On Balance Volume (OBV) indicator turned up on 7/7 and kept moving consistently higher, turning out to be a good clue for the strength of the recent rally in QQQQ.
Near QQQQ resistance: 38.0
Next and key overhead resistance: 38.6
Near QQQQ support: 37.0-36.9
Next support: 36-35.9
First area of major support: 34.0-34.3
RUSSELL 2000 (RUT) DAILY CHART:
The Russell 2000 (RUT) chart is showing prices again tracking up toward resistance at the high end of its trading range. RUT will break through the top end of this range (at 530-532) only if the Nasdaq tacks on another strong move in the coming week or two. Next resistance above 532 is not a lot higher by my lights, at 545-550.
Near RUT support is at 500-490, with major support coming in around 470-475. Small cap lives on!
GOOD TRADING SUCCESS!
NOTES ON MY TRADING GUIDELINES AND SUGGESTIONS
1. Technical support or areas of likely buying interest and highlighted with green up arrows.
2. Resistance or areas of likely selling interest and notated by the use of red down arrows.
I WRITE ABOUT:
3. Index price areas where I have a bullish bias or interest in buying index calls, selling puts or other bullish strategies.
4. Price levels where I suggest buying index puts or adopting other bearish option strategies.
5. Bullish or Bearish trader sentiment and display the graph of a CBOE daily call to put volume ratio for equities only (CPRATIO) with the S&P 100 (OEX) chart. However, this indicator pertains to the market as a whole, not just OEX. I divide calls BY puts rather than the reverse (i.e., the put/call ratio). In my indicator a LOW reading is bullish and a HIGH reading bearish, consistent with other overbought/oversold indicators.
Trading suggestions are based on Index levels, not a specific option (month and strike price) and entry price for that option. My outlook often focuses on the intermediate-term trend (next few weeks) rather than the next several days of the short-term trend.
Having at least 3-4 weeks to expiration tends to be my guideline for trade entry choice. I attempt to pick only what I consider to be 'high-potential' trades; e.g., a defined risk point would equal in points only 1/3 or less of the index price target.
I tend to favor At The Money (ATM), In The Money (ITM) or only slightly Out of The Money (OTM) strike prices so that premium levels are not as cheap as would otherwise be the case, which helps in not overtrading an account. Exit or stop points, as well as projected profitable index price targets, are based on my technical analysis of the underlying indexes.