THE BOTTOM LINE:
Nasdaq faltered some on Friday and looks a bit 'toppy', but the S&P was buoyed by higher oil stock prices based on speculative driven oil prices. Big money hedge funds and the like are buying Crude Oil futures as a speculative play as the tail wags the dog. Since Nasdaq led on the way up, itâ€™s the market to watch for how it performs from here.
The Friday non-farm payroll numbers weren't as high as expectations, but the market could also be in a 'who cares' mood. However, Q1 earnings reports lie ahead and that may present a different story.
Technically, the market still looks to be vulnerable for a correction but I'll hold back on predictions as to WHEN we'll see that. I haven't suggested playing the short side as near to intermediate-term pullbacks could be some weeks in coming, given our powerful major uptrend. And corrections could take the form of more of a sideways move than substantially down. Timing pullbacks in strong uptrends is a tough proposition.
Since I try to trade on a strictly 'risk to reward' basis, taking any new long positions didn't and still doesn't measure up with downside risk probably EQUAL to further upside potential. Many traders are taking a wait and see attitude relative to further piling on the bullish bandwagon but judging by call volume activity in individual stocks, many others are caught up in believing there's little downside risk. Upside momentum has slowed, but hey, corrections continue to be minor!
While daily charts and indicators are 'iffy' in terms of the suggesting potential for tacking on another substantial up leg without some corrective action (even if a sideways move) beforehand, I continue also to point out that all the major indexes are tracking higher within long-term bullish uptrend channels.
With my individual index commentaries, all references to 'major' resistance and 'major' support are currently based on the current intersection of the upper and lower trendlines comprising these broad uptrend price channels. I've highlighted the weekly chart uptrend channel of the S&P 500 (SPX) here as an example.
All the rest of the key indexes, including the Russell 2000 (RUT), have the same type weekly chart pattern as seen above on the SPX chart; that is, current index levels in all are more or less in the approximate mid-point between the lower and upper trendlines forming steep weekly uptrend price channels.
The indexes I comment on would all have to go significantly higher before reaching technical resistance implied by the upper end of these channels. I have no current reason to believe that the powerful long-term trends being traced out don't imply that substantially higher prices may lie ahead. There's also potential of course for pullbacks to the low end of these broad uptrend channels; levels I'll identify as major trendline support.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) had a key downside daily chart reversal in the week before last, but that formation didn't precede more than a mostly sideways move. We're still seeing near resistance in the 1180 area but no downside break has occurred. Stay tuned on that as more than the stock futures reacts to the first monthly jobs growth figures in the coming week.
The Relative Strength Index, besides being seen recently as suggesting an 'overbought' market, also shows slowing upside momentum. Usually a sideways price trend during which RSI slides is a bearish divergence suggesting a top is forming, even if temporary. In this market it's hard to predict that any 'usual' price/indicator pattern will go an expected way. Still, it is a warning flag.
Technical resistance above 1180 is in the 1200 area, with even more pivotal resistance suggested around 1240. Major technical resistance, implied by the upper end of the broad uptrend channel seen above with the weekly chart, intersects just over 1300 currently.
Near technical support is at 1160, then around 1125. Major trendline support comes in to play in the low-1100 area, also as seen with the weekly SPX chart above.
Another bullish sentiment extreme occurred on the last day of March (Wednesday) as seen above. The number of such daily extremes that have occurred recently, without corrective downside action following within a day or a few days, is unusual; well, except in the strongest bull trends. We did have a number of Nasdaq stocks pulling back from their Thursday intraday highs, whereas the S&P 500 stock index held its own.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) has continued to trend higher, but upside momentum has been basically sideways since the intraday peak (at 541) seen the week before last. Sideways consolidations tend toward bullish outcomes within strong uptrends; somewhat less so in overbought markets in terms of the RSI and high bullish sentiment.
Near technical support is suggested at 534, then down in the 520 area. Major trendline support around 511, as suggested by the weekly OEX chart (not shown) uptrend line, isn't far below 520.
Above near resistance at 540/541, a next technical resistance comes in around 550 currently. Resistance implied by a return to the longer term daily chart up trendline, is at 570. Major resistance, at the upper end of the weekly chart uptrend channel (not shown), comes in the 600 area.
DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow (INDU) Average also has been trading basically sideways since its last intraday high make week before last at 10955. The rally on Friday was helped by string daily advances in Chevron (CHV) and ExxonMobil (XOM), as crude oil price continued to advance. Thursday rallies in Alcoa (AA), Disney (DIS), and Johnson & Johnson (JNJ) helped fuel a new high weekly close also, although the higher weekly Close was not by much; i.e., 10927, versus 10850 the week before.
Many other Dow stocks are not doing much or are correcting. 11000 is the big kahuna resistance level currently; not only from it being a big fat round (1000) number that the media talking heads will be a-twitter about, but also in terms of potential trendline resistance as highlighted on my INDU daily chart below.
A key next big resistance comes in around 11500 currently, as implied by a return to previously broken long-term daily chart up trendline. Well above this area, major resistance at 11900 is suggested at the upper end of the broad weekly chart uptrend channel (not shown). INDU tacking on a big new up leg, without a sideways to lower correction first that 'throws off' its overbought condition (both in terms of the daily and weekly charts), is probably only a slim possibility.
Near technical support comes in around 10700/10690, then at 10500. Major support implied by INDU's weekly up trendline (not shown) intersects currently around 10375.
NASDAQ COMPOSITE (COMP) INDEX, DAILY CHART:
The Nasdaq Composite (COMP) has been pulling back from a key line of resistance suggested by a return to the prior long-term up trendline on the daily chart. Of course, one outcome of a return to such a key prior line of support is that prices continue higher but just 'hug' this line so to speak. However, upside momentum definitely tends to slow down in these situations; unlike the rally from the LOWER end of the daily chart uptrend channel I've highlighted below.
Big price moves from an oversold condition as seen in early-February accompanied by neutral (or bullish) sentiment numbers are the sweet part of a trend to get into for me (in long calls), as opposed to this water torture drip drip drip higher we've seen since mid-March. A limited move, within a successfully predicted range-bound market employing other option strategies works ok for others. The beauty of options is the number of things you can do with them.
Near technical resistance is at 2450 per my daily chart highlight below. Implied resistance at the upper trend channel boundary on the weekly COMP chart (not shown) doesn't intersect before 2658 currently; how far away is that! There are some prior upswing highs that might get challenged again: a weekly swing high at 2473 from August 2008 and another COMP weekly high at 2550 seen in May of '08.
Near support is in the 2350 area, with lower trendline support intersecting around 2270 currently.
NASDAQ 100 (NDX) DAILY CHART:
The Nasdaq 100 (NDX) at 1976 touched resistance at its previously penetrated up trendline at the weekly high made prior to this past week. The high of this past week was in this same area, specifically at 1979 and NDX retreated from there, almost equaling the (1942) low for the week, but rebounding to close at 1959. Not a hugely impressive performance for the bulls but we also had this unusual situation of course of the good Friday Market holiday coming on the same day as the important employment numbers were to be released.
[It may seem unusual that Good Friday, certainly no national holiday, IS one for the stock exchanges. That is unless you know how many key Irish and Italian market players were involved in trading on the New York Stock Exchange, which was THE key stock exchange historically. This is reflected in the name of my prior Wall Street employer, Cantor Fitzgerald, with the Fitzgerald's probably interested in a long Easter weekend.]
2000 is a key near resistance implied by the highlighted trendline seen with the daily chart below. The 1973 area, around where we've seen recent NDX highs was also the August '08 weekly high, a rally peak seen on the way down basically from a May top of that year ('08) at 2056. The upper end of the weekly chart uptrend channel (not shown) currently suggests major technical resistance around 2130.
Key support is in the 1900 area, extending to 1860. Major support implied by the low end of the aforementioned weekly uptrend channel intersects in the 1830 area currently.
NASDAQ 100 TRACKING STOCK (QQQQ); DAILY CHART:
Near resistance is the Nasdaq 100 (NDX) tracking stock (QQQQ) has been seen in the prior two weeks in the 48.6-48.7 area. Next resistance to be overcome if the Q's are going to keep this rally going is just over 49, or around 49.15 currently as highlighted at what appears to have 'become' resistance at the prior up trendline.
Near technical support is at 47.0, at the up trendline traced out since the early-February low, with next chart support in the 45.8 area.
The On Balance Volume or OBV line has flattened out suggesting an indecision pattern ahead of the key jobs report. Now that the market can trade on this news on Monday, it may be a non-event as far as fueling any further upside progress. QQQQ could test potential resistance at 49.0-49.15, but the odds of a breakout above this area looks low to me. However, if the stock achieves a decisive upside penetration of 49, a next target is 50, an important 'milestone' level.
Major support and resistance implied by the two parallel up trendlines making up the weekly chart uptrend price channel intersect currently at 45.3 and 52.7 respectively.
RUSSELL 2000 (RUT) DAILY CHART:
The Russell 2000 (RUT) has seen recent resistance/selling interest come in at 690-693. The chart has turned neutral to slightly bearish in its pattern. A decisive upside penetration of 690, coupled by the ability of RUT to continue trading (on balance) above 690, would put the Index back in its prior uptrend channel. Potential for a move back up to 720, at the upper end of this uptrend channel, then becomes a possibility.
RUT looks like it may have traced out a Head & Shoulders top, which is most apparent if you look at the HOURLY chart. I'm thinking most about where support lies at the moment as RUT looks like a corrective pullback lies ahead. Near support is at 670-668, then down in the 652 area, where a prior upside chart gap would get 'filled in'.
If looking at the major uptrend channel of the weekly chart (not shown) I'd have to say that major support looks like it would be found around 626 currently and major resistance would comes in around 750-754.
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.