6:52:15 PM EDT |
The longer the sideways move went on the more doubt increased in me that maybe this was NOT a bullish consolidation but instead perhaps a top was forming. I can be a harbinger sometimes of when it's time to act on my original premise by the level of doubt that creeps in the longer the market doesn't do what I expect.
3:52:35 PM EDT |
A Mixed Picture
The longer this sideways move goes on the more it seems like the S&P and Dow at least, are building a top, although to be sure we have to wait for a confirming break below the low end of the 5 week old trading range. Meanwhile, the Nasdaq made a new weekly high and looks poised to breakout to the upside, so go figure.
5:43:04 PM EDT |
Sideway moves tell us something
No doubt the continued lateral trend seems like more of the same and is not telegraphing a next price swing or direction, but this pattern is telling us something. The longer the current sideways move goes on, the more upside, or downside, potential should lie ahead.
4:45:37 PM EDT |
With the current sideways trend, it's hard to say whether the major indexes are building an interim top or consolidating prior to another up leg. Upside progress has slowed but all but the Russell 2000 did manage to make new weekly highs.
7:21:57 PM EDT |
Backing Off From Resistance
As anticipated, once the S&P and Dow hit the technical resistance areas highlighted last week, the resulting pullback was predictable. When the market is ready to correct there is an 'outside' triggering event, but the true 'cause' owes more to market internals.
4:54:01 PM EDT |
There are different ways of measuring potential price 'resistance' in an advance and one good one is seen when a major down trendline is reached. When coupled with completion of a key retracement level, the result is often then a pullback or at least a pause in the trend.
3:23:38 PM EDT |
Some Struggle at Prior Highs
The big cap S&P 100 (OEX) and Nasdaq 100 (NDX), as well as the Dow 30 (INDU) all cleared their prior mid-October highs but the broader indexes are struggling some in the area of prior highs, reflecting a still somewhat overbought situation. This may result in only a limited further up leg in OEX, NDX and INDU and/or a choppy sideways trend ahead that 'throws off' an overbought condition.
6:07:59 PM EDT |
S&P rebound led by Dow; double bottom in NDX
The S&P and Dow have continued their bullish pattern of achieving higher pullback lows on corrections. Not so in the Nasdaq, but the Nas 100 (NDX) formed a bullish double bottom relative to its last downswing and the Composite rebounded from the low end of it's broad uptrend channel.
9:19:26 PM EDT |
Volatility and downside surprises
I suggested last week that the technical tea leaves suggested that a deeper pullback could be next. By Friday this was apparent even to the died-in-the wool bulls (wouldn't they be sheep?) and that was part of the problem.
6:37:14 PM EDT |
A Mixed Picture
This past week's sideways move looks most like a bullish consolidation of the prior uptrend in the S&P and Dow while the prior upside Nasdaq momentum appears to be slipping. A mixed picture on balance and I'm not making new bets yet on which way the market goes from here.
8:42:11 PM EDT |
Dow 10,000 but double tops elsewhere
While it could be anticipated that the Dow would get to 10,000 and make a new high for it's move, the Nasdaq and the related Russell 2000 have formed double tops to date. Unexpectedly, this makes last week's prediction for Dow 10000 AND a warning of a possible double top both true!
8:05:54 PM EDT |
Can't keep the Bull down
Just when it seemed like the market might finally have a more extensive retracement of its last major up leg, traders and investors threw more money into stocks this past week. Once again bullish sentiment was way up and the major indexes are nearing their prior highs so be alert for a possible double top.
6:08:56 PM EDT |
Anatomy of a Trend
The peak of option trader bullishness on a 5-day moving average basis (per my sentiment indicator) on 9/18 coincided quite closely with the recent top. There was one slightly higher Close in the S&P two days later but it was downhill after that.
9:35:38 PM EDT |
Bullishness reigns supreme
Traders are buying lots of calls and throwing caution to the wind, as they did in late-August. Is this so much bullishness that that the market is due for a pause like the minor pullback seen after the prior such extreme?
7:17:08 PM EDT |
Bull Market Rolls On
The Nasdaq has reasserted its leadership as the Composite and Nas 100 achieved decisive upside penetrations of their prior highs. It's worth noting that technical considerations also point to increasing risk of a correction but that's nothing really new.
7:55:53 PM EDT |
Resilient Market: uptrend Intact
The technical/chart definition for at least an interim reversal of an uptrend is when the prior downswing low is pierced on a closing basis; this should be more than a 1-day affair also. On that basis the current bullish chart patterns for the S&P and Nasdaq are intact.
7:42:26 PM EDT |
S&P Taking the 'Leadership' Reins?
It would be typical for when the economy is seen as at or near recovery that the cyclical stocks that predominate more in the S&P and Dow, would assume some leadership. That is seen in the charts as the S&P is holding to a bullish pattern and the Nasdaq looks to be struggling to hold recent gains.
7:53:48 PM EDT |
Up into Expiration and High Bullishness
You would think this was a 'bubble' the way prices snap back and in the assumption that all is clear sailing ahead for stocks. Tech stocks have slowed their upside momentum some and I don't think they've repealed the laws of gravity; what goes up can come down.
7:06:56 PM EDT |
Won't go up, won't go down
The question regarding this recent sideways trend is whether prices will fall much from current levels and have a 'normal' pullback. The probabilities for a next move tends to favor a downside correction rather than another upside breakout or a continued lateral move.
7:35:39 PM EDT |
The Bulls maintain control
A correction looked due to me last week, now it looks OVERDUE, but the bulls have the bit in their teeth (pardon the horse metaphor). Corrections to overheated markets usually come later rather than sooner however.
7:35:48 PM EDT |
Correction odds increase
There's a time to hold them and a time to fold em and this looks like a time to take a least half or most of index call profits and stand aside. I'm not bearish in any major way, but upside momentum has recently slowed in the leading Nasdaq, all the major indexes are at overbought extremes and the substantial increase in bullishness has rounded out my cautionary stance.
11:37:57 AM EDT |
Market up, bullishness down
While there is a significant risk of a correction or pullback near-term given an overbought market, trader bullishness as I measure it has been declining. This situation is most of time ideal conditions for a continued advance, even with speed bumps along the way.
12:02:54 AM EDT |
Leigh's Index Wrap will be posted to the website on Sunday.
6:48:36 PM EDT |
The market whips down; the market whips back up, still in a trading range in the S&P and in a minor breakout to new highs in the Nasdaq. For shorter-term traders and sellers of premium a delight, but tough for those waiting for the next big leg up or the bears wait for a collapse (good luck).<
5:00:40 PM EDT |
Continued drift lower
Mostly the current technical/chart patterns suggest prices will continue to drift lower, although the S&P (not the Dow) is hanging in so far at the low end of a well-defined trading range. The Nasdaq 100 appears to have some potential support around 1350-1330.
9:20:14 PM EDT |
This past week ended up as a bust for any hopes that the leading Nasdaq indexes would overcome their prior highs. Instead, COMP and NDX reversed after repeatedly hitting resistance at their 'kiss of death' trendlines; i.e., resistance implied by a return to previously broken up trendlines.
8:42:44 PM EDT |
The breakout came to the downside and I anticipate further selling pressures ahead. While the most common breakout after a sideways move in an uptrend is to the upside, the odds for this drops significantly when the major indexes are also registering overbought readings.