THE BOTTOM LINE:
While the pundits and business media indicate telling facts like the Nasdaq Composite (COMP) hasn't been this high on a weekly closing basis since 2000 (mid-December 2000). Or, that the S&P 500 (SPX) has now hit weekly closing levels last seen prior to the 2008 financial crisis (at 1425) as SPX has now exceeded 1363, the 2011 weekly closing high, versus 1365 recently. By the way, SPX hasn't yet cleared 1370, its prior intraday high of last year and that's a number I continue to watch closely.
If we want to look at statistics, of greater interest to us technical trader types is how long prior rallies similar to the current one have gone on and WHEN they ENDED.
1. From the mid-March 2009 low into late-April of 2010, the Market was advancing on balance for 60 weeks.
2. From early-July 2010 lows into May of last year, 2011, the Market advanced for 44 weeks.
3. Closing lows in SPX were made in August but the current rally began late-Sept/early-Oct for an advance lasting now 20 weeks.
In the aforementioned prior rallies, stocks advanced in the early part of the year and ran out of steam by May. Assuming the current rally of 20 weeks duration went on until early-May only, it would tack on another 9-10 week advance. If this rally extended to around 30 weeks, it would still be well under the duration of the two earlier advances cited.
Another key facet of the current advance from a technical perspective is how the major indexes have traced out such well-defined uptrend channels on both an hourly and daily chart basis, as you'll see from the highlights in my daily index charts. When this pattern ends, increasing volatility may follow.
An aspect of 'the' key Nasdaq stock (as well as within SPX) of Apple computer (AAPL) and now the biggest corporation (surpassing XOM) by capitalization, is its current P/E of 11, versus an average of 13 within SPX. The market is 'saying' here that AAPL has reached the limits of size, where continuing the same growth rate means company sales have to be increasingly ENORMOUS to maintain its current earnings growth rate. However, with China especially as a huge market for Apple, who knows for sure if current sales growth rates can't continue for another 1-2 or more years. It may be that, as it used to be said about GM, as AAPL goes, so goes the market.
Bottom line, there's no current reason technically (or fundamentally) why the Market advance can't continue at least through April, into May. Rising oil and gas prices could derail this prospect but I see more of summer impact there.
I suggest bullish strategies on dips, while of course setting appropriate exit points in case of a sizable downside reversal. I would monitor up trendlines in case prices break below these technical supports and there's follow through selling of more than 2-3 days duration. Corrections may continue to be more sideways than sharply lower. Sideways moves will also 'relieve' the pressures of an overbought market; not as dramatically as a sharp 1-2 week sell off, but lateral moves tend to be a moderating factor as extreme overbought readings fall off.
Another underlying fact is that bullish sentiment hasn't been extreme; e.g., extremes in equity options' call to put daily volume ratios that start hitting levels where call activity is 2 times or more that of daily equities put volume. This kind of 'moderate' bullishness is characteristic of a market that has more upside potential, even when coming after prolonged advances.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) continues in its bullish advance. Most recently SPX bounced off its up trendline in the 1350 area and continued higher. The Index has paused at the prior 1370 intraday high from last May. A correction could ensue or not. The S&P 100, where Apple's rise has provided a greater boost to the smaller group of 100 stocks, has already moved well above its intraday highs of last year.
SPX is overbought by conventional measures on a 2-week or 2-month basis. However, this is the kind of market where overbought measures may not provide much help in knowing if a pullback sizable or otherwise is very close.
As far as indicators, what I rely on more in this kind of strong bull move as to ringing the bell at an interim top is when traders get extremely bullish for a prolonged period. I measure 'extremely' by the number of days that CBOE equities call volume is running two times or more over daily put volume. This is when I get most nervous about a reversal if long calls for example. When my CPRATIO 5-day average hits 2.0 and above, this becomes a strong alert for a top within 5 trading days.
Seasonally and in keeping with the pattern of recent years [read my initial 'bottom line' comments] for risk tolerant folks I'd buy calls on a good sized dip, but more so in OEX or NDX calls; alternatively buying the NDX tracking stock QQQ unleveraged.
Key near resistance is at 1370 and next around 1400-1405, at the top of SPX's uptrend channel. Near support is 1350-1343 or around the 21-day average; next support looks like 1335, with fairly major support in the low-1300 area.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart continues bullish and the index has been recently finding support/buying interest on dips to its up trendline. If this trendline continues to 'define' support, there should be another rebound coming up. If not and this trendline finally gets pierced, I look for support in the area of the 21-day moving average which currently intersects in the 607 area per my chart highlights below. Next support comes in at 592-590.
The weekly chart (not shown) continues to look quite bullish and resistance isn't seen on that chart until around 635. On the daily chart below, resistance could come in around 628-630, with tougher resistance projected in the 640 area at the top end of OEX's uptrend channel. Apple's (AAPL) share price on the current trajectory it's on could get up to 580 or to around 625 before selling pressures might tip it lower. If the stock continues to these targets, it would provide a substantial further boost for OEX (and the Nasdaq 100, NDX).
As I noted with my earlier ('bottom line') comments, I could see the current 20 week advance extending another 10 weeks. There could of course be a heart-pounding sharp correction, but the bull has the floor here. Any good-sized pullback will be seen as a buying opportunity in stocks and I think that's right for a time, before maybe hitting those summertime whip-saws again.
DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) continues bullish in its pattern. The Average hasn't made it above the 13000 mark, a level both 'psychologically' important and in terms of INDU being at the low ('support') end of its uptrend channel. INDU should start to climb from the 13000 area if it's going to continue its prior pattern of rebounding from its up trendline.
To offset a couple of Dow stocks that got crushed this past week (WMT + HPQ) there are a number that are in bullish patterns and then some that are in very strong uptrends.
Looking to have moderate further upside potential are the Dow stocks CVX, DIS, GE, KO, MRK, PG, T, UTX and XOM.
Having very bullish weekly chart patterns are AXP, BA, CAT, CSCO, HD, IBM, INTC, KFT, MCD, MSFT and PFE. The aforementioned 9 plus these 11 and equaling 2/3rds of the Dow, suggest the Average is going still higher; perhaps next to the 13400-13500 zone. Resistance suggested by the high end of INDU's uptrend channel comes in around 13385-13400.
Near support is assumed at the 21-day moving average, currently at 12835. A decisive break below this key trading average that lasted more than 1-2 days, would suggest a possible target to the 12500 area, where I'd be considering risk on buying DJX calls. I think stocks have further upside potential in the next 6-8 weeks.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) chart is bullish and continued with mostly bullish price action above 2950 this past week. You can't really calculate particular resistances on the weekly chart now that COMP has so decisively cleared a cluster of prior weekly highs at 2860-2872.
In terms of the daily chart below, technical resistance is assumed at the top end of the COMP's uptrend channel, currently intersecting in the 3050 area. Sandwiched between here and there is likely resistance at 3000.
Tech is on a tear and if Apple (AAPL) gets to 580, perhaps 625 by my calculations, such a move would boost even the very broad based Composite.
Support is at 2900, extending to 2870 at COMP's up trendline and a pivotal point to keep COMP on its current bullish track.
In terms of the key indicators seen above COMP is at an overbought extreme, but as noted with SPX, this kind of strong advance keeps RSI high; not so much with my 'CPRATIO' sentiment model as its not hitting the 2.0 and above levels that get me more nervous as a bull.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) continues in its very strong move. It's not a common index pattern to track higher in such a well-defined uptrend channel. NDX has been tracing out a consistent pattern and I don't see why it won't continue technically; fundamentally too but I can't say I'm the expert.
Apple's (AAPL) share price on the current trajectory puts the stock at 580 or up to around 625 before selling pressures might tip it lower. If the stock continues to these targets, it would provide a substantial further boost for NDX (and OEX).
Resistance is anticipated at 2620, then around 2656-2660. Chart support is suggested at the up trendline, currently intersecting at 2570; next lower support and a key one for NDX is at the 21-day moving average.
I have some longer-term upside projections that suggest that NDX could get to the 3000 area before a significantly big correction sets in. Meanwhile NDX is quite 'overbought' according to the Relative Strength Index model on a 2-week basis, not yet so 'extreme' on a 13-week basis. This kind of run is fun. Just enjoy and if you've been a bull your pockets will be full. Or so they used to say in bull markets...just don't forget your exit strategy when the next bear bomb hits.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock has been a great performer, starting its run in 54 area. At 10 points higher on Friday, it makes for an 18% gain. How long can such a strong move go on? Some time longer by the lights of the current very strong upward trajectory QQQ is on.
Resistance/selling pressure may come in again if QQQ gets to the 65.5 area, at the upper end of QQQ's uptrend channel. Of course, like Apple did most recently, a new up leg can simply ratchet above 'normal' notions of resistance. Still, trendlines mostly 'work' although they may just project a RISING line of resistance versus a brick wall.
Near support comes in at the up trendline, currently intersecting at 63.2; next support is suggested at the moving average; at 62.3 at the start of the week. If QQQ falls below the 21-day average longer than 1-2 days it suggests a shift in the short-term trend to down. Just saying...
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) is bullish but also has been unable to clear resistance in the 831-832 area over the prior 3 weeks. A bad sign for the Nasdaq? Doubtful. To stay on its current bullish track would see RUT rally from the low end of its uptrend channel where it is currently, to the middle or upper end.
Resistance at the mid to upper end of RUT's uptrend price channel comes in around 848-850; in a more defined way, resistance around 865 is at the current intersection of the upper channel line.
Near support, as it was around Thursday's low, is at the 21-day moving average, currently 816. Pivotal support next comes in at 800. A break below 800 turns the short-term trend lower.
GOOD TRADING SUCCESS!