THE BOTTOM LINE:
I wrote last weekend that the "weekly charts remain bullish" and a study of them suggests where this recent power move came from. As seen below on the weekly S&P 500 (SPX) chart, the most recent spurt higher is simply a continuation of a very strong advance dating from the October lows. The weekly low seen on the S&P 500 chart at 1136 to above 1300; 15 weeks, + 16%!
A positive aspect of looking at longer-term charts here also comes from seeing that the 'overbought' extremes suggested on the daily charts are not so 'extreme' on a weekly chart basis. Tops are very hard to predict as to when is the 'final' peak to take on dream bear strategies. When I see a chart like the following the chance for exceeding prior highs looks good to me. A very strong second up leg, just as the first one was powerful.
Per the long-term SPX chart; I'm anticipating major resistance at 1350-1370 and strong support in the 1250 area.
The Nasdaq Composite (COMP) weekly chart gives a different feel for the up trendline of recent weeks. And, makes me wonder how I could have not been MORE steadfastly bullish on tech given strong weekly chart action since the last dip below 2500. (The perils of short-term trading and holding a position 3 weeks is a 'long' time!) The most recent upside acceleration with COMP was after its breakout move above the well-defined down trendline at 2670.
Bottom line is that SPX and COMP have 'confirmed' their dominant (up) trend by exceeding prior highs. Profits on calls have risen and so has the RISK of a shakeout. Not to say that prices won't go higher. I mostly find that bull market rallies go on far longer than is suggested by 'normal' overbought/oversold indications. I usually find that I've predicted the first 3 tops and its that third one that's often the killer!
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart 'confirmed' the major (bull) trend by its move to decisive new highs above 1285-1292 early this past week; SPX and COMP lagged OEX and the Dow in 'confirming' new highs such as you'll see on their charts. From its 1/17 Close (and the breakout point), SPX is up 1.7% in this afterburner rally.
Technically, downside corrections in a long-term bull trend, like the down drafts of November-December, are thought over when the index exceeds prior high(s); so, welcome back BULL MARKET! The long-term bull/up trend is re-confirmed so to speak. That leaves us with what to do next. Stay with the trend and bullish strategies. Buy calls on dips to 1300? My advice is to sell down to a sleeping level if concerned about hanging on to profits. If thinking of taking on NEW positions, lie down until the feeling passes. Wait until we see what corrections look like.
I didn't like the risk of staying with call positions last week given that SPX was churning around and making no headway in the prior week at 1293-1295. Change came shown by the decisive rally above 1295/1300 setting up a possible 1325 target, perhaps 1350.
Projecting a next peak isn't made easier by the 'overbought' condition suggested by the RSI and the bullish extremes in sentiment. These say, hey, high risk here and high climbing but not "where's the top?"! I'd rather buy a good sized dip than try to pick a top now that the market's cranking.
I see key near technical support at 1295-1290, with fairly major support suggested in the 1260-1265 area.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) has had a 2.7% gain if measured from the Close on the date of its last chart breakout (1/3/12) or move to new highs; this was significantly earlier than the larger SPX index's confirming move to new highs of just this past week. 580 OEX was the key resistance and is now key support; next support 570.
OEX looks headed still higher; if measured within a price channel rendered below, the index is more or less half way in a projected range or upward track. Key resistance is suggested in the 607-611 area; the OEX peak of last year (May) was at 611.
A close below the 21-day moving average is a suggested trigger to exit bullish plays or scale back. Closing below 580 very suspect for the bulls. The RSI is at a bearish overbought reading, so let it warn you to not over-trade; whipsaws occur in both directions at volatility extremes.
DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) this past week got immediately back in a bullish groove after week ago Friday's dip under INDU's up trendline; no slippage this past week, only up up and away in an accelerating advance. INDU is in a very steep climb as is seen visually so strongly given the steep slant in its up trendline. These kind of sharp moves give rise to equally sharp corrections so I always figured I was on borrowed time if I over-stayed a smooth exit in one of these steep run ups.
The Dow, old trusty technical 'bellwether', rang up a 'breakout' alert on 12/23 as the Average popped well above the prior double top. There's the champ, as the Dow Industrials is up 3.4% dating from its 12/23/11 Close to Friday 1/20/12. DJX call holders who bought in or more just since this last 'breakout' upswing can thank the good timing of this year's 'Santa Claus rally'.
I noted last week that especially bullish would be a decisive upside penetration of 12480 and an advance to 12600; with what I called an "outside chance" for a rally carrying to the 12800 area. 12800 here we come! as this forecast seems like a tame prediction and 13000 looks like a reasonable objective. My weekly Dow chart suggests tough resistance at 13200.
DOW 30 (INDU) AVERAGE; WEEKLY CHART:
An interesting take on potential Dow resistance is suggested by a return to the previously broken long-term INDU UP trendline per the highlights on my WEEKLY DOW chart seen next. This chart suggests to me that 13200 is a key technical resistance; beyond the obvious of the prior intraday high at 12876 or the big fat round 13000 target.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) chart is bullish. With COMP's strong move of this past week above prior highs in the 2743-2752 area, the primary bull market trend is seen as being 'confirmed' by technical types like me and text book writers, et al. Wearing my trader hat, I've enjoyed the ride higher but is it time to bail?
The continued move higher makes the index look 'extended' by conventional overbought/oversold aspects of the Relative Strength Index or the RSI. A similar dynamic is suggested by the 'overbought extreme-bullishness' peak just seen in my CPRATIO. A period of twists and turns or thrills and chills are coming; sooner OR later. I'd still rather buy a good-sized dip than bet as to when and how a tradable correction sets up.
2800 is next likely resistance, extending to 2850. By some chart measurements I've shared previously, there are longer-term COMP objectives to the 3000 area. I can more reliably predict a sizable risk for a correction, if only back to COMP's up trendline at 2725; I've suggested next COMP support as 2650. The 2600 area is support implied by COMP's major up trendline.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) index is on a bit of tear and this has been the case since NDX's bullish breakout above a 'symmetrical triangle' pattern I've usually found to be bullish; once there's a breakout above the upper trendline, there's very strong potential for a strong further push in the same direction. I'd also note that Friday's 2437 NDX close was the highest since early-2001.
The primary trend (what Dow would call it) was confirmed as UP when NDX went to new highs above 2400. 2460 looks like a potential target and possible next resistance, but with 2500 a possible next objective also.
Confirmation of the major/primary trend may have only came last week but NDX has been in very strong intermediate move since its mid-December lows; big tech got an especially good 'santa claus rally' boost and it's still going strong here a month later.
I've highlighted support around 2410 or at the current NDX up trendline, with next lower support around 2350 or at the 21-day moving average.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) has a bullish pattern, with the latest successful bullish 'test' so to speak being the move to decisive new highs above 59. Near resistance is at 60, extending to 60.4; next QQQ resistance is at 61.
First line support is now assumed to come in at what was resistance in the 59-59.2 area, with next technical support in the 58 area at the current up trendline; support is also often seen at the 21-day moving average, currently at 57.3
The risk of a pullback in QQQ is high, as with the other indices, but shorting the stock is a less leveraged way to hedge or start to hedge bullish positions; or just to put on a lower risk 'trial' Market short.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) has gone with the bullish Nasdaq in its push to new highs. I've had an 800 target in RUT for a while and the Index is now within striking distance of it. The risk of a correction is probably higher than the odds of RUT continuing pretty much in a 'straight line' to 800. Still, the Index went to new highs and that's a strong (Up) trend confirmation.
Key support is seen at the up trendline, which happens to also correspond with expected support at the prior 769 high. The trendline suggests early-week support at 770-769. Next support is 760. The chart looks most bullish with dips finding support at 760. A decline to 740 still is in support; closes below 740 would be bearish.
GOOD TRADING SUCCESS!