THE BOTTOM LINE:
The S&P 500 (SPX) and Nasdaq Composite (COMP) had gotten to resistance implied by their weekly chart down trendlines in this past week and it was sharply downhill on Mon-Tues. Moreover, the slight 3-day rebound of Wednesday to Friday traced out a bear flag, so it looks quite possible that there there's another shot down coming; possibly down to a test of the longer-term up trendlines you'll see below. While I was seeing a daily chart with bullish potential last week in the 'lead' SPX index (it still exists), going back to the weekly chart confirmed the still present downtrend pattern seen on this longer-term basis. The up and down trendlines are narrowing in as in a triangle. Support and resistance are coming closer together.
A weekly (Friday) Close above 1260 in SPX suggests a bullish breakout, whereas a Friday Close below 1185 suggests a bearish breakdown. I would rate the weekly chart as mixed to bearish but hinging mostly on a move above or below the converging trendlines. A weekly Close above 1260 suggests a more bullish technical outlook, including a possible test of tough SPX resistance in the 1300 area. Conversely, a Friday close below 1185 suggests further weakness such as to the 1100 area again.
In the Nasdaq Composite (COMP), there is a similar triangular pattern apparent on its weekly chart although unlike the S&P the Composite didn't hit resistance implied by its weekly down trendline in the prior week. Still the pattern is the same and it gives a kind of 'benchmark' to the key resistance and key support points.
A weekly Close above 2685 is needed to get bullish again technically with the COMP index and the key tech stocks; as always, we'd have to see that this more buoyant trend continued into the week following. (This past week COMP only a third of the time above 2600 at all.) Conversely, a Friday close below 2540 in the coming week suggests a bearish pull to still lower levels.
Further comments on the individual indexes are seen below with the relevant charts.
INDUSTRY GROUP INDEXES:
Relevant as a bellwether for the tech heavy Nasdaq, the Philly Semiconductor Index (SOX) hasn't yet broken its key support either at a pivotal up trendline; although the 'break down' point so to speak is close at 345; SOX finished the week at 352. The Gold & Silver stocks index (XAU) continued its downward trend and would break some key support at 173; XAU finished the week at 183.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart has turned mixed with its fall to below the low end of its prior price range. A 'problem' technically for making a bullish case was the inability for SPX to break out above resistance implied by its down trendline. However, the consolidation after the last strong rally was tight and it looked like the index could bust out higher.
The Tuesday decline to a weak close AT the 21-day moving average was a warning of further weakness to come; in a still strong rally phase, expect a BOUNCE from from the Average. The little rebound (bear flag) pattern of Wed to Friday looks like more of short-covering rally that has petered out already and suggests further weakness ahead.
A strong bearish influence for occurs usually on an index break below the 21-day moving average. While SPX has struggled back to close in on the average at 1220, it's a still-bearish pattern.
Key support is at the lower up trendline, currently intersecting at 1190; pivotal next support in the 1160-1150 area. Key resistance is at the down trendline at 1250; next resistance 1280 to 1290.
Bullish sentiment as seen above has fallen substantially this past week. The most recent daily readings fell enough to get the 5-day moving average almost to bullish territory in a 'contrary opinion' sense. The theory of contrary opinion can't be 'proven' but its pretty much always true in my years of tracking this, that tradable lows come in a way that can often be measured with certain call/put trade volume ratio extremes.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart failed to achieve the bullish upside breakout that I thought was possible. The Tuesday break to well under the down trendline and then to under the 21-day average was demonstrating weakness. Showing greater relative strength than SPX, OEX has gotten back above this key moving average. Good by itself, but the recent rebound pattern looks like a bear flag so I'm anticipating another shot down.
A daily close back above 560 would be a bullish plus, but the key upside test comes in again at the down trendline, currently intersecting at 567; resistance then extends to 570. Only a close above 570 would suggest a move to resistance at 580 to 590.
Key support comes in at the trendline and moving average and I've pegged support a bit lower at 550. A close below this past week's Closing low at 550.3 would suggest another down leg was happening; next support comes in at 540-538. A move to the 520 area would suggest an oversold extreme; good place to exit puts.
Last week I was "anticipating a move higher" and this week I'm anticipating a move lower. Flip-flopping around anyone!? This has been a very difficult period for traders and forecasters. At times like these I can almost believe the 'random walk' crowd as regards the unpredictability of stock prices. I said 'almost' since I've made money and have especially stayed out of some serious trouble over the years using technical analysis.
DOW 30 (INDU) AVERAGE; DAILY CHART:
With the retreat from the 12200 area yet again, the Dow 30 (INDU) has again established the high end of a well-defined trading range. I look for support in the 11800 area; key support. A break of 11800 would suggest that 11600 will be tested. 11400 begins major support.
Near resistance is at 12000, then at 12200 of course. 12400 is where likely major resistance begins.
The chart turns definitely bearish with a fall under 11800 level. You could make the case that a rally back above 12000 is possible and an eventual move above 12200, but not anytime soon the way the pattern has unfolded especially with the break below 12000 of this past week.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Tuesday rally failure was the key to seeing that the downward pull on stocks was stronger than money flows in could take the tech-heavy COMP higher. A strong bearish influence for me tends to be always on an index break below the 21-day moving average and look to exit bullish positions.
Note how Friday resistance came on the rebound to the 21-day average; what was support had become resistance. The 21-day average is always my 'centered' moving average for my upper and lower envelope lines.
Key support at the trendline is at 2500 currently. Next support is 2450; fairly strong support comes in around 2400.
Bullish sentiment fell significantly lower this past week and my 'CPRATIO' model is almost in bullish territory on a 5-day moving average basis; see the CPRATIO indicator portion of the COMP chart below. If this sentiment trend continues and it looks likely if there's a move to the 2450 area, or possibly, 2400; this kind of extreme should mark a tradable bottom.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart which was "marginally bullish" in my comments of last week, has turned bearish period given the sharp retreat from its down trendline; when the index suddenly broke well under what had been a tight and limited consolidation after the powerful move from 2200 to above 2300 and when we had the pattern of lower daily highs for long enough, finally came the news that broke the bulls back. The 'set up' to it was showing on the chart.
2300 remains a key resistance. Prices look headed lower first as 2000 looks like a next potential target.
Below 2200 NDX suggests further downside potential to 2150, perhaps back to the 2100 area. Conversely, a move lasting more than a day back above the down trendline (currently intersecting at 2308) suggests upside to 2350 or higher; major resistance begins in the 2400 area.
A move in Apple (AAPL) to above 390 and climbing would do wonders for NDX; absent that its likely to continue to struggle.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) chart turned bearish and it looks like the next move is DOWN. A further decisive downside break would be to below the up trendline at 55; at that point downside potential is suggested to 54 or 53 again. 52 would be an 'extreme' low and more likely than not a buy for a bounce.
Key resistance is at 55.5 currently, extending to 56. A couple of closes above 56 would be mildly bullish; more so it there was a decisive upside penetration of the down trendline, currently intersecting at 56.6. Above 57 resistance is apparent at and above 58; major resistance is seen around 59.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) actually looks like it is in recovery mode after a bounce from support at the trendline. Can RUT buck the downward pressures suggested by the S&P and Nasdaq indices? Seem doubtful. We have to see how it goes.
Above 700 RUT has bullish potential, whereas below 700, 680 looks like a next objective and maybe lower from there. Conversely, above 740 RUT looks to have some further upside such as to test the 750-752 area; major resistance begins around 770.
GOOD TRADING SUCCESS!