THE BOTTOM LINE:
There's some lower technical targets that were met this past week and bearish sentiment jumped. The Market may have fallen enough to discount fear of higher taxes, especially on dividends as high yield stocks got whacked.
The S&P 500 and 100 have now retraced into the next lower Fibonacci retracement zone at a 62-66% give back of the last major leg up, the June to September advance.
The Nasdaq Composite Index (COMP) almost got to 2800 support and not yet to its June intraday low in the low-2700 area. The Nasdaq 100 Index (NDX) got to 2500 chart support; not quite low enough to test its June intraday lows around 2450. Big cap tech bellwether Apple Computer (AAPL) at $505 almost hit a long-held target I've had for a pullback to 500. Google (GOOG), reached technical support in the $650 area and looks like it may be attractive for big funds and the like.
Speaking of NDX, its weekly Close was ON potential support implied by its long-standing up trendline dating from its March '09 low, basis its Close-only line chart. NDX is also now at an 'oversold' Relative Strength Index (RSI) extreme on an 8 and 13-week basis.
The relevant NDX weekly price and RSI plots are seen in my first chart. Further on, with the SPX and COMP charts you'll see the low registered to date on my CPRATIO market 'sentiment' indicator. I noted recently in both my last (Saturday) Index Wrap and my Wednesday Trader's Corner, that I thought a bearish outlook (i.e., 'sentiment') would have to get more extreme in terms of bearishness with trader types before we'd see even an interim bottom. See more of my take on things with my regular weekly Index commentaries.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart remains bearish in its pattern. While SPX fell well under my 50% retracement target at 1370 this past week, it has also reached my next lower technical objective in terms of price, an oversold extreme in the RSI and in terms of bearish sentiment. My next lower retracement target was to the 62 to 66% give back area relative to June-September advance.
In terms of the Relative Strength Index on a 13-day basis the RSI dipped under the 30 level, which is about as low as this indicator gets and to still be within bull market parameters; and I consider (to date) the market to be correcting WITHIN its longer-term up trend. (A Close below the June lows that persisted would give us a different picture as far as the dominant trend.)
Lastly, in terms of trader 'sentiment' and the outlook among options traders, my CPRATIO indicator has finally registered an 'oversold' extreme bearish reading in recent days, which tends to precede an interim if not 'final' low for corrections.
Support is seen in the 1340 area, with fairly major support at 1310-1300.
Resistance is at 1370, then in the 1390-1400 price zone.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart also remains bearish but interestingly did bounce from the 2/3rds/66% retracement level as highlighted on the daily chart. Often, when a major index like OEX gives back more than half of a prior major advance (June to September), it will drop to the 62 to 66% retracement levels; in this case it was 66%, something that has often marked a low.
Not that OEX couldn't still fall to support at 600 or even back to the June intraday low in the 580 area. I just don't see another such down leg without an attempt to rally or by a sideway move and some 'basing' action. Stay tuned on this outcome!
OEX also got quite oversold here recently as OEX bellwethers like IBM and GE got hit. GE is at some support at $20 and IBM is near technical/chart support in the low $180 area.
All in all, I wouldn't bet on a lot of further downside, at least not before there's some attempt for the Index to stabilize and at least go sideways in a possible basing pattern. One thing to remember is that there are levels where the major market indexes at least initially 'discount' the current bearish expectation; e.g., that congress and the President won't reach some accommodation with the eyes of all on them (even if its AFTER the lame ducks go quacking home).
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) Average remains bearish in its pattern but
Has also fallen to an area of possible support in the 12500 area where that was a minor rebound. Even if short-covering, there's always a floor of support at some level found in the monster cap stocks comprising the Dow.
Next lower technical support looks like 12400 and then at the June lows near 12000. INDU is certainly now 'oversold' enough for a bounce or some base-building by buying interest coming in on dips to the 12500 area or a bit under.
AA, AXP, BA, CAT, CSCO, DIS, HD, KFT, INTC, JNJ, KO, PFE, T, TRV, and VZ (15 Dow stocks) are all capable of at least minor rallies either from recent lows or from levels not too far below their recent lows.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) chart seems to be in free fall but has also reached potential support implied by the low end of its steep downtrend price channel , which is also an area of support suggested by a cluster of COMP lows from late-June. Yet to be tested is 2800 support, which looks even more significant, although June saw a final dip to the low-2700 area before starting a multimonth rally. I don't anticipate a big rally anytime soon based on the current political climate as investors focus on a possible 'self-inflicted' recession by our fearless (ha!) political class.
What we can anticipate is that there's a level where COMP has discounted a significant muddling through. I think we're at or near that level based more on the big-cap Nas 100 Index and the possibilities of long-term weekly chart
Support is noted in the 2800 area, then at 2750-2725. Resistance is highlighted at 2950, with fairly major resistance in the 3000 area.
COMP is quite oversold and bullish sentiment has fallen low enough (high bearishness) to suggest at least a bounce in prices OR in the Index drifting sideways at least, such as by trading within the 2800-2900 zone.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) Index remains bearish in its pattern but the NDX weekly chart is showing the possibility that the Index has reached and may bounce from, its long-term up trendline. The relevant NDX weekly chart is seen in my initial bottom line commentary above. Moreover, it's apparent also how 'oversold' NDX is on an 8-week and 13-week basis, according to the RSI indicator; again, see my first chart of the weekly NDX with its highlight of its weekly up trendline dating from March 2009.
As to another way of measuring the RSI, the 13-day Relative Strength Index seen below is nearly at the extreme low reading of the June low.
Anyone holding NDX puts and having other bearish positions on should consider taking at least partial profits. It's my trading stance in these circumstances to not 'fight' it out for the last bit of downside as lows often tend to be made all of a sudden; this versus highs that tend to build over a longer time span. I'm not a 'trend follower'. There are more trading philosophies and styles than mine of course. I like to anticipate rather than REACT, which tends to go with a 'technical' approach.
Support is seen at 2500, then is suggested at the June lows in the 2450-2444 area. Resistance is at 2600-2625, extending to 2650 with fairly major resistance at 2700.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock's (QQQ) chart is in the same bearish 'free fall' pattern as the underlying NDX of course and there not more to say about its PATTERN, just potential support and resistance; as well as possible comments on volume.
Near support could be found in the 61 area, then at the June lows at 60. Initial resistance is at 64, then at 64.5-65. Fairly major resistance begins in the 66.0 area.
Daily trading volume as been well above normal in the recent continued sharp decline and at some point enough holders of the QQQ tracking stock will have exited to set the stage for a rebound. I think this is coming sooner rather than later.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart remains bearish but RUT could be at or near at least an interim bottom based on how oversold it is and based on the idea that it may not retreat ALL the way to a retest of its June lows.
Near support is at recent lows at 763-765, then at 760, with fairly major support in the 735-730 area.
Key near resistance is seen at 800, extending to the 21-day moving average, currently intersecting at 808. Fairly major resistance begins in the 830 area, extending to 840-843.
As with the other major indexes, RUT has reached an oversold extreme basis its 13-day RSI.
GOOD TRADING SUCCESS!