THE BOTTOM LINE:
Price action in the major indices is unfolding bullishly about as I would expect with an initial deflection at down trendlines and the 50-day moving average, followed by a rebound to above these resistances at least in the S&P and Dow. Nasdaq remains more volatile but looks like it will hold trendline support and also go higher over time.
Of course its all "fiscal cliff" this and that but the Market seems to be discounting this situation and is holding up fairly well in line with the slowly growing US economy. The betting by the savvier professional trader types seems to be that there will be a deal even if that deal is done in early 2013. At that point we'd be looking at tax CUTS to restore any prior 2012 tax levels. And of course, tax cuts seem to be the only way to garner broad Congressional support these days.
MY BULLISH/BEARISH 'SENTIMENT' READINGS
My sentiment indicator numbers got restored by me from their missing place on my S&P 500 (SPX) and Nasdaq Composite (COMP) daily charts. Trader sentiment doesn't lean to overly bullish or bearish at this point, which isn't surprising given the wait and see attitude held by many.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart action remains bullish as the index has a consolidation or minor pullback after the initial strong initial up leg. Two bullish chart/indicator aspects are seen in the end of week rally that puts the Friday Close both above the down trendline and SPX's 50-day moving average.
I am again this week highlighting expected technical resistance at 1430-1440. Fairly major resistance begins at and above 1460.
Near support is at 1400, extending to 1380. A daily Close below 1400 that wasn't reversed (back to the upside) in the following day(s) would turn the chart to a more mixed, less bullish, near-term picture. Presently I anticipate higher levels ahead, especially as we get closer to the seasonal pattern of a 'Santa Claus' or year-end rally.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart has the same bullish chart features as the S&P 500. This is seen with OEX's initial deflection from the down trendline and the 50-day moving average, followed by another rally above the down trendline. Yet to follow is a decisive upside penetration of the 50-day moving average.
Initial resistance is seen at the 50-day average, currently intersecting at 650. Further resistance then comes in at 655-660.
Near support is in the 640 area, extending to 635. A daily Close below 640-635, that wasn't followed by a rebound back above this area in the following day(s), would suggest that OEX might drift lower again. I don't expect to see the Index take another sharp downturn however. I'm more inclined to buy dips and anticipate the market will continue to climb a 'wall of worry' into year end.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) Average is bullish in its most recent action with INDU's upside penetration of its down trendline and the Friday Close just over its 50-day moving average. The Average is only a hair's breath above this key average but it's enough to make me somewhat more confident in holding calls; certainly more confident than to be betting on another sizable decline.
The typical rally pattern for an 'oversold' rebound from such a relatively steep retracement (of a sizable prior advance) is for an initial strong 'oversold' rally that was, in turn, followed by some price consolidation. After prices chop around in this kind of situation, this period is often followed by another advance. Stay tuned on this unfolding!
Near resistance begins around 13200 and then is especially chart-evident at 13300, with resistance extending to 13400.
Near support again back at the pivotal 13000 level, extending to 12875. I'm not currently looking for a dip below 12800, at least not for long. It would turn the chart from overall bullish to mixed on any prolonged slide below 12800 in the Dow.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) chart remands within a bullish rebound. COMP saw an initial bullish breakout above its down trendline, only to be followed by a minor pullback and with the Index falling back from key resistance at 3000 and from its 50-day moving average. If however, support holds up at 2950-2940 especially on a Closing basis, COMP will likely work still higher in a second up leg.
The pivotal COMP resistance to key in on is at 3000, extending to 3030-3050. Next resistance comes in around 3100.
Near support is at 2940, where there was a prior cluster of recent intraday lows and is the level of the current 21-day moving average. 2900 is next support. A Close below 2900 turns the chart mixed again, although COMP would remain within an overall long-term uptrend.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) Index is in a bullish recovery mode. NDX pierced its down trendline and then retreated but only back to a new technical 'support' implied by its previously broken down trendline. I anticipate further advances over December on balance but am also watching for the ability for NDX to clear resistance implied by RUT's 50-day moving average.
Interestingly, (or 'tellingly'), lows so far on the recent minor pullback have occurred above support implied by the prior upside price gap. Upside price gaps that form in stocks and indexes often turn out to be areas of technical support on subsequent pullbacks.
I've noted support in the aforementioned 'gap' area at 2614-2605, with next support at 2560-2550.
Near resistance is at 2700, then at 2750. Fairly major resistance begins in the 2800-2850 zone.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) remains in a bullish recovery
mode as the pullback from resistance in the 66 area appears to have support back at the trendline; resistance, including resistance trendlines, once penetrated tends to 'become' support on a subsequent pullback(s).
Key near support comes in the low-64 area, with pivotal lower support at 62.5.
Near resistance is at 66, with fairly major resistance beginning in the 68 area.
RUT appeared to have a 'classic' (high) volume selling climax at its mid-November low, suggesting sizable liquidation of long positions, setting the stage for a strong rebound.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart is bullish. RUT broke out above its September to mid-November down trendline with a decisively jump in prices that created an upside price gap that has yet to be 'filled in'. Upside price gaps that resist a retreat either back to or to below the gap area is evidence of technical support and that still higher levels will be seen ahead.
It looks like the very minor consolidation between 816 and 825 over the last several day period in RUT can lead to another advance. Strong rallies, followed by only a minor pullback such as seen with the Russell, is typically part of a bullish recovery.
Very near support is at 818-815, with pivotal support then coming in the low-800 area. I'd expect 800 to be defining support so to speak. The double bottom low that formed in the 765 area in RUT was indicative of a significant upside reversal.
Overhead resistance is apparent in the 830 area, extending to 842-846.
GOOD TRADING SUCCESS!