THE BOTTOM LINE:
Last week I discussed key downside targets that were reached and this past week's price action may have 'confirmed' a bottom. In the S&P, bottoms occurred after a retracement of 62-66% of the prior advance; in the Nasdaq rebounds were from some prior lows and a from a bit less than a 100% 'round-turn' retracement.
One long-term chart aspect was also quite telling in suggesting technical support had been reached. Rebounds occurred from long-term weekly chart up trendlines in the Nasdaq 100 (NDX) AND the Dow 30 (INDU). Last week I featured the weekly NDX chart. It's instructive to see where the trendline rebound occurred in terms of both the NDX and INDU weekly charts as highlighted next. In addition to the trendline aspect, the 8-week Relative Strength Index (RSI) was at an infrequent oversold extreme.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart action appears to have re-affirmed a longer-term uptrend in that a strong rebound occurred after a Fibonacci retracement of 62% of the last major SPX advance from June into September. We could also say that there was a triple 'signal' in my key indicators of simultaneous action in price, RSI and (trader) sentiment:
1.) Price action was bullish in the SPX V-bottom pattern (after completing a key retracement).
2.) The 13-day, as well as the 8-week (seen above), Relative Strength Index/RSI had hit oversold 'extremes'.
3.) Trader 'sentiment' (CPRATIO) got to what I consider to be an 'oversold' type bearish extreme on at least 1-2 days.
The aforementioned 'big-3' of my key chart and technical indicators are highlighted below, along with support and resistance levels per my green up (support) and red down (resistance) arrows.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart has realized what looks to be a bullish turnaround after completion of a bit more than a 62% retracement. A 'bit' more than 62% often turns out to be an amount that makes the retracement of the prior move equal to 66% or a 2/3rds retracement. (Once retracements go beyond 66%, there's the possibility that there'll be a round-turn 100% retracement back to the prior low or close to it as seen in the Nasdaq indexes.)
I mentioned last time also that OEX had also reached an oversold 13-day RSI extreme under 30 and that OEX bellwethers IBM and GE got to likely support; to the $20 area in GE and to $185 in IBM. I also noted last week not to bet on much further downside, which suggested taking profits on bullish options positions.
I've highlighted support levels at 630, then at 620 in the S&P 100 and resistance levels at 645, extending to 654-655.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) Average appears to have completed a bullish turnaround and has traced out the most common bottom pattern in the major indexes, a V-bottom. Most 'common' that is, WITHIN an overall long-term uptrend or bull market, which I have continued to define as the primary trend.
Once INDU went beyond a 66% retracement, it's a matter of looking at prior support(s), and what looked most obvious as a next support was to 12500. The intraday low turned out to be 12471. It wasn't surprising to see the Dow retrace somewhat more of the June-September advance than the S&P given that it had tended to outperform in the summer advance. However, as seen in my first chart above (as part of my initial 'bottom line' commentary), INDU rebounded from its weekly long-term internal up trendline; i.e., the trendline connecting the MOST number of lows.
Near support now looks like 12800, with next support at 12600. While not highlighted on my daily Dow chart, very near resistance could come in at 13030-13050. Pivotal resistance is anticipated at 13200-13250, then at 13400.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
I wrote last week that the Nasdaq Composite (COMP), while seeming to be in "free fall" has also reached potential technical support in the low-2800 area. The low for the current move was 2810 and quite close to a late-June intraday low highlighted on the lower left of my COMP chart.
There was the possibility that the Composite would retreat to the early-June lows in the 2750 area but that wasn't much lower than the 2810 low to date.
Suggesting that COMP could have been at or near a bottom was that, as I wrote last week, COMP was quite oversold and that bullish sentiment had also fallen to the kind of high-bearishness/low-bullishness low that so often accompanies bottoms in the major indexes. Check and double check!
Support is apparent at 2900, then at 2860. Potential resistance is seen at 3000, extending to 3030-3040.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) Index has experienced a bullish turnaround from chart support in the 2500 area. NDX bellwethers AAPL and GOOG also rebounded from technical support areas: the low-$500 area in Apple and to around $650 in Google.
My first chart seen above highlights the rebound that occurred in NDX from its weekly long-term up trendline. The longer-term weekly Relative Strength Index (RSI) also seen with this chart indicated how oversold NDX got on an 8-week basis. Not shown is the 13-week RSI which showed/shows a similar oversold condition. As noted already, WITHIN a primary bull market at least, these indicators don't fall much further than to 30 or a bit under ahead of a bottom.
I suggested profit taking last week on "NDX puts and with other bearish positions", noting my trading philosophy "to not 'fight' it out for the last bit of downside as (index) lows often tend to be made all of a sudden; this versus highs (and a top) that tend to build over a longer time span."
Support in NDX is highlighted below at 2600, then in the 2550 area.
Resistance is apparent at 2700, extending to the 50-day moving average just overhead, currently at 2718.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock's (QQQ) chart reversed from the some bearish 'free fall' pattern as NDX and now looks to have completed its major downside correction or retracement of its June to September advance.
The pattern of above-average volume days looks now to be a so-called "volume 'climax'". The volume pattern in the Q's almost always is above-average HIGH volume at lows, as traders jump out of fear and not from buying at perceived lows. Very FEW traders are buying when the crowd is selling, except for (mostly) the most gutsy (and often, most successful) group of professionals.
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.
Chart support is suggested at the low end of the last upside chart gap at 64, with next technical support suggested in the 62.5 area.
Resistance looks like 66 even, extending to 66.7, at the current 50-day moving average.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart, which had a bearish pattern coming into this past week, nevertheless looked like it "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."
My take last week on RUT turned out to be the case or it seems to be so far, as the Index has seen a strong rebound from the minor double bottom low of late-July/early-August in the 764-765 area.
Near support is back up at 800, with next support at 780. Near resistance is at 810, extending to the 825 area.
As with the other major indexes, RUT had fallen to an oversold extreme below 30 in the 13-day RSI. The pattern of the 13-day Relative Strength Index falling to such lows has been a strong indicator of RUT bottoms in the past 3-4 years.
GOOD TRADING SUCCESS!