THE BOTTOM LINE:
The S&P 500 (SPX) had achieved an upside 'breakout' above a symmetrical triangle which will be seen on my SPX daily chart further on. This pattern suggested that the market could work higher led by SPX and the Dow, provided SPX support at 1240 holds up. Other chart analysis suggests the market may again be topping out, making for a mixed bag technically.
We of course have earnings announcements coming up and this may reflect the 'indecision' pattern we're seeing in the major indexes as investors wait to see how the bottom line with key companies in Q4 has been.
Giving me pause here is the SPX hourly chart which was a highlight of the Trader's Corner article I also posted today. When I reviewed 2011 for this TC article which made use of the hourly chart, coupled with a 21-hour RSI, the pattern seen there suggested a possible double top; the RSI 'overbought' extremes have been fairly reliable during the year in assessing where the market has made tradable bottoms or tops. So, once again, it's a mixed bag in terms of assessing the trend.
Since the daily SPX chart still suggests some potential for some further upside, I'm reluctant to suggest buying puts on the major indexes. However, if I was absolutely forced (gun to my head) to choose a directional trade I would play the short side of the market and buy index puts over hanging on to index calls.
If I look only at the Dow chart, it looks like there's still some potential for INDU to lead the market higher given its breakout to above its well-defined line of resistance at 12200. However, the past 5 trading days have seen INDU stall in the 12290 area. If they can't take em up, they could next take em down!
Meanwhile the Nasdaq lags the main stream economy stocks as reflected in the S&P. The Nasdaq 100 (NDX) is especially struggling as Apple (AAPL) continues to find resistance at $410.
I'll hibernate rather than take on much in the way of new positions and exit any index calls I've been hanging on to. I hope early-2012 provides me reason to get more active due to a clearer trend picture. But I do lean bearish here. One pattern that has been pretty consistent in this market is that when several days pass without further upside or downside progress and tops (or lows) keep hitting the same price area, look for the prior trend to reverse.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart and indicator pattern is mixed. The recent advance above the highlighted down trendline was bullish. However, once again SPX has stalled at resistance, in this case in the 1267 area. The pattern of the last couple of months has been that 'stalling' out at prior resistance has led to a sell off and this market has been pretty consistent; if stocks can't gain traction around prior index highs, selling drives prices lower again.
1243-1240 is key support. A close under 1240 is bearish. Next support comes in around 1208, extending to 1200.
Near resistance is at 1267, extending to 1275, then finally in the area of the prior intraday high at 1292; the prior Closing highs were in the 1285 area. A close above 1290-1300 would be bullish although I'd want further gains to 'confirm' this.
The 13-day RSI is showing the same stalled momentum and a double top. My sentiment indicator shot up on the last day of the year which is a minor bearish note given poor price performance.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) is showing a mixed pattern like its big brother/big sister SPX index. OEX has stalled out at prior highs at 574; next resistance comes in around 580. S&P and Dow bellwether monster cap GE is stalled in the $18 area, where there appears to be a large supply overhang. A sustained close above 18 would be bullish for OEX, as would a move above 580 in OEX itself.
I've highlighted near support in the 563 area, then at 550. A close under 550 would be bearish, although we would need to see what happens the day following such a weak close.
If the market/index pattern continues to be like it's been in the past two months, stalling out is a 'signal' to at least exit call and other bullish positions if not to buy puts also, such as out to February.
We will soon have earnings announcements to trade off from and uncertainty about them may reflect the 'indecision' pattern we're seeing in the big cap S&P as investors wait to see how the bottom line with key companies in Q4 has been.
DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU), which looked to have further bullish potential when INDU achieved its upside penetration of 12200 resistance, but which was called into question given the subsequent stall at prior highs in the 12290-12300 area.
12200 is a key near support, with next support at 12200, then back down in the 11800 area.
Except for HD, KFT, MCD, MRK, PFE, T, VZ and WMT, reflecting 'consumer defensive' stocks (aka consumer 'staples'), big pharm and telecoms, there's not others of the 30 INDU stocks that look like they can take the Dow average to decisive new highs.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) is turning bearish in its pattern in that COMP has been unable to achieve a decisive upside penetration of its down trendline. The index is hanging by a thread so to speak in terms of another dip below its 21-day moving average. Near-term momentum is down.
Key near support is at 2600 and next at the intersection of the up trendline in the 2536 area; support then extends to the 2518 area of the prior downswing low.
Above the recent Closing high at 2625, resistance is seen in the 2674 area and next at 2700.
The sideways move in RSI shows the slowing upside momentum and, given the lack of upside progress, the most recent daily sentiment numbers are somewhat bearish in a contrary opinion sense.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart is bearish in that the index has stalled (again) at its down trendline as highlighted on the daily chart. Near resistance comes in at 2300, then at 2335. There's an upside 'progression' of resistance points implied by the declining rally highs.
Near support comes in around 2250, extending to 2225 with the 2150 area as the next lower support.
More often than not I've found the pattern of a symmetrical triangle will resolve itself with a breakout to the upside if the prior trend was higher; this, as prices narrow in to the apex or end point of the triangle. However, the general rule of thumb is to follow whichever move occurs; i.e., to above OR below the two converging trendlines. It could be that an upside breakout occurs during the upcoming earnings (announcement) season but we'll need to stay tuned on that.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) reflects the same 'indecision' pattern as the underlying index of course. Only the support/resistance numbers are different.
Near resistance is at 56.2; I've then pegged a next key resistance at the prior (up) swing high at 57.6; or at the prior Closing high at 57.2
Near support is in the 55-55.1 area, with next lower support around 54.1-54.0
This last rally in the Q's was on very low volume and that didn't bode well for any substantial upside progress. It may take some better than expected big cap tech Q4 earnings to create further buying interest. Right now tech is in the doldrums.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart is bearish in that the most recent rally in RUT created a minor double top in the 753, which become the key resistance; next resistance is at the prior rally high at 769 on an intraday basis, 765 in terms of its prior closing high.
Near support looks to be in the 728 area, extending to 720; support below 720 comes in around 708, extending to 700. I don't see RUT moving higher anytime soon until there's either some better than expected news out of Europe or better than expected earnings for the small to mid cap stock group of the Russell index.
GOOD TRADING SUCCESS & HAVE A HAPPY NEW YEAR!