THE BOTTOM LINE:
In terms of the S&P and the Nasdaq, the recent stall and sideways move occurred at the technically important 66% retracement resistance. The Dow and the in favor big cap Nasdaq 100 (NDX) are exceptions, in that both indexes have closed in on their April tops, especially NDX.
The question now is whether there will be more of a pullback instead of merely a sideways 'time' correction. In either case, more sideways or a further dip, it makes sense to come out of index calls. Of course, this wouldn't keep you in if there's more upside in the near-term. It's not easy to predict where the trend goes from here, but the probability of a strong breakout move looks to be less than either more of a lateral trend or a pullback.
There are some bearish technical divergences in that prices are going sideways on 'less' relative strength; i.e., the 13-day RSI is drifting lower while prices go sideways.
A bearish divergence I haven't seen in some time with the Nasdaq 100 QQQQ tracking stock has been occurring with the On Balance Volume (OBV) indicator, which has been declining (since 9/21). Prices may be going sideways, but OBV has been falling as you'll see with its chart at bottom. Volume is a secondary indicator relative to price action, but it is important. A falling OBV here may suggest that some traders, and they may be some of the more savvy ones, are exiting the stock, taking advantage of exiting while prices are holding steady.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) is mixed in its pattern. It's bullish in that SPX has cleared its prior highs. A cautionary note is suggested by the fact that the recent rally is stalled at the 66% retracement level. A 2/3rds retracement of a prior decline is a moment of truth so to speak. Rallies of this amount tend to either stall and prices pull back, or the index or stock goes on to challenge the prior high around 1220; i.e., the 100% retracement level. It's a very key retracement. SPX could of course correct with a further dip and then go on later to challenge its highs, but with options positions I have to be more concerned with the next couple of weeks rather than the next month or two.
I mentioned in my initial 'bottom line' comments that the RSI indicator is declining as prices go sideways. This isn't a technically 'strong' position for the bulls.
Bullish sentiment hasn't been extreme this past week, but there were some 'extreme', cautionary readings, before that. I'd rate this indicator mostly as neutral.
I've noted resistance on my daily SPX chart at 1148, then at 1173, extending to what may be a major 'supply' overhang beginning around 1182. Near support is still seen at 1120, with next key technical support around 1100-1105.
S&P 100 (OEX) INDEX; DAILY CHART
This in not always the case but I see the chart of the S&P 100 (OEX) chart in the same mixed manner as its big brother S&P 500.
The S&P 100 (OEX) is also mixed in its pattern. It's bullish in that OEX has cleared its June and August highs. A cautionary note is suggested by the fact that the recent rally is stalled at the 66% retracement level. A 2/3rds retracement of a prior decline tends to be a 'moment of truth'. Rallies of this amount tend to either stall and prices pull back, or the index or stock goes on to challenge the prior high at 553; i.e., the 100% retracement level. It's a very key retracement point. OEX could correct with a further dip and then go on later to challenge its highs, but with options positions I have to be more concerned with the next couple of weeks rather than the next 4-6 weeks.
As noted in my initial 'bottom line' comments, the RSI indicator is declining, as prices go sideways and not a technically 'strong' position for the bulls.
Immediate overhead resistance is at 522, the 66% retracement level, then at 532, extending to 537. Near support is unchanged from last week in my view, as the 508 area, with next support at 500.
DOW 30 (INDU) AVERAGE; DAILY CHART:
Not surprisingly, the Dow (INDU) stalled this past week as previously strong component stocks AA, CAT, DD, HD, KFT, KO, PFE and UTX started slipping or stalled. Holding INDU up was some upside in BA, CHV, IBM. Sell offs were seen in HPQ, MRK, and TRV. Telecom stocks T and VZ continued sideways. A mixed bag in the 30 stocks, reflecting a somewhat mixed chart recently.
I didn't make a point of it on the chart, but the Dow hasn't yet been able to penetrate 10920, the (up) swing high of mid-May. I did note resistance in the 11000 area, extending to 11070, at the approximate upper end of INDU's uptrend channel.
Near support highlighted at 10625, at the 21-day average, extending to 10600. Next support and a pivotal one, is in the 10400 area.
NASDAQ COMPOSITE (COMP) INDEX, DAILY CHART:
As with the S&P 500 and 100, the Nasdaq Composite (COMP) Index is stalled in the area representing ITS 66% retracement level. COMP has been a bit over the exact level, but hasn't achieved a decisive upside breakout above this implied/assumed resistance.
While the chart is overall mixed at its stalled, temporarily or not, at the key (66%) retracement level, the chart is bullish in that the index decisively cleared its prior highs of June and early-August.
As with the other major indexes, COMP is going sideways, which the RSI indicator also doing the same. The S&P picture is more of a declining RSI.
Bullish sentiment hasn't been extreme this past week as you can see on that portion of the chart below, but there were some 'extreme', cautionary readings, before that. As with the S&P, I'd rate my sentiment indicator as mostly neutral.
Technical resistance is at 2400, extending to 2425. A substantial supply 'overhang' or simply supply is seen at 2470 and this is a further key resistance. A first support is noted (at the green up arrow) in the 2300 area, with next support estimated at 2250.
NASDAQ 100 (NDX) DAILY CHART:
The Nasdaq 100 (NDX) is bullish as it is more or less holding the pivotal 2000 level. Unlike the S&P and the Nas Composite, NDX has retraced nearly its entire prior decline. The index is close enough to suggest it could at least retest its prior highs in the 2056-2059 area, although currently NDX is stalled and going sideways.
The RSI, a key indicator of momentum is declining which diverges from the lateral move of the past week; a pattern which suggests that a pullback may be in the offing. A pullback could carry back to 1950 support implied by its 21-day moving average. Conversely, NDX is close enough certainly to retest its 2056 and 2059 weekly highs seen in June of 2008 and April of this year. I would be surprised to see NDX clear these prior tops without some kind of further correction, either more of a sideways time correction, or a dip. Either type of correction would tend to 'throw off' its recent overbought condition.
I've noted 2042 as potential next resistance, at a rising trendline connecting and intersecting the area of numerous prior highs and of course at the 4/26 intraday high at 2059, the prior 2010 top.
Near support is highlighted at 1950 and the current NDX 21-day moving average, with next support noted at 1900.
NASDAQ 100 TRACKING STOCK (QQQQ); DAILY CHART:
There's nothing much more to say about the Nasdaq 100 (QQQQ) tracking stock chart except to note its pivotal prior highs coming in around 50.5. The 50.5 area would be the key test of the prior top. Whether the Q's can get there without a pullback is the big question. On a more recent note, resistance has surfaced in the 47.75 area.
Repeating what I already noted in my initial bottom line comments: A bearish divergence I haven't seen in some time, has been occurring with the On Balance Volume (OBV) indicator, which has been falling for awhile (since 9/21). Prices may be going sideways, but OBV is falling off. Volume is a secondary indicator relative to price action, but it is important. A falling OBV here may suggest that some traders, and they may be some of the more savvy ones, are exiting the stock, taking advantage of exiting while prices are holding steady.
Near support: 48.0
Next support: 47.0
Near resistance: 47.75.
Next resistance: 50.5 - 50.65
RUSSELL 2000 (RUT) DAILY CHART:
The Russell 2000 (RUT) chart is somewhat mixed technically although the index has cleared it prior June-July highs which is bullish. What makes the technical picture still somewhat 'mixed' is that RUT has yet to clear the key 685-693 resistance zone, representing the 62 and 66% retracements of its April to early-July decline. Decisive penetration of these retracements is what would suggest that RUT's 12-month highs in the 742-745 area could get retested.
Immediate support is at 670, than in the 650 area, at the 200-day RUT moving average; next support extends to 637.
Near resistance is at 685, extending to 693; next resistance is seen in the 720 area.
GOOD TRADING SUCCESS!