THE BOTTOM LINE:
The Major Indexes are still trending higher and were up on the week. It appears that the expectation is a deal will be made but like most past hard-fought political battles involving critical decisions, it's two steps forward and one back and not just once or twice. Just as there are similar price patterns that repeat from time to time, past tough political negotiations have often unfolded in a similar way without agreements until an ultimate compromise comes in the midnight hour.
The Russell 2000 (RUT) once in a while is a Market bellwether and moves ahead of the pack. RUT looks to be on track to at least test if not exceed its mid-September high at 868; Friday's RUT Close was 826.
To date technical support levels have held on the way up and no prior downswing low of significance has been penetrated. I have not other grand generalities except to look at each index for specific outlooks.
Lastly, have a nice holiday and enjoy at least the one-day trading break. As to a break from political drama, the House of Representatives has no definite date to return until the Speaker calls his members back into session.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart continues to also take two steps forward and at least one back (like the political arena) but is churning gradually higher nevertheless. 1420 in key near support, with 1400 as a sort of must-hold support for the bulls; at least a Close below 1400 for more than a single session would represent a definite loss of upside momentum.
Resistance is apparent at the recent two-day high in the 1448 area and then even more key chart/technical resistance comes in at 1460, extending to 1470.
On a near to intermediate-term basis, SPX is moving toward a minor 'overbought' condition, assuming the Index continues to trend higher versus moving sideways. Given the still-bullish chart, a sideways move (which would also 'throw off' any overbought condition) while the politics get further defined, looks to be more likely than a plunge in prices, at least before the end of the year and the deadline ahead of the automatic tax hikes and spending cuts kicking in.
Bullish trader sentiment spiked at the beginning of this past week and it was too much too soon as traders got 'too' optimistic. A dangerous business with our politics currently!
S&P 100 (OEX) INDEX; DAILY CHART
As I noted last week, the S&P 100 (OEX) chart is in a bullish pattern above 640. A move above 655-657 would be a further bullish push. From 660 to 675-677 is the zone of resistance that needs to be overcome in order that OEX could test the prior top. Given some relief on the 'cliff' front, I look for the Index to at least test the cluster of prior highs made in Sept-early-Oct.
A key question would then be whether a double top forms or not. Long-term weekly charts suggest OEX could eventually get to the 700-725 area before hitting the top end of its long-term uptrend channel (not shown here).
Key near support is in the 640-637 area, extending to 632-630. A Close below 630 for more than a single day would suggest a possible test of the prior lows around 611-612. 600 begins fairly major support.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) Average has a bullish chart but is hitting resistance/selling pressure above 13300. I've noted specific near resistance at 13350. Resistance then extends to 13600, which begins a well-defined line of resistance as seen in cluster of prior intraday highs in that area. It's pretty clear.
Near support is highlighted at 13120, which also where the 21 and 50-day moving averages are converging. Support/buying interest should be found next in the 13050-13000 area. If there was a couple of back to back Closes in the Dow below 13000, the Average would look vulnerable for a pullback to the 12800 area again.
I'm not expecting it but the current bullish chart starts looking less so on a fall below 13000.
In terms of the 30 Dow stocks, AA is in a bullish-improving trend, as is BAC, CAT and DD. CVX and DIS are bullish, probably GE still although correcting off its highs; HD is still looking like it could continue to power higher. HPQ is at least having a 'dead cat' bounce. IBM is correcting some, but not given back much. JPM could continue higher; certainly KFT looks bullish still. JNJ looks to be in a strong bullish pattern and INTC looks to have bottomed. KO is going sideways but could work a bit higher. TRV and XOM are looking a little toppy but could also break out to new highs.
All in all, there are enough of the 30 stocks in INDU in bullishg patterns to power a move to, and probably above, 13600 in Q1. All the above assumes the US doesn't fall off the cliff beyond at least the new Congress coming in come January.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) chart is bullish. The Index this past week rallied above its 'external' down trendline, which is a trendline that's drawn down through the highest 2-3 or more intraday highs (as opposed to the GREATEST number of highs of an 'internal' down trendline). By Friday COMP dipped to below this same trendline but closed at its intraday high and held above the trendline, which keeps its bullish pattern intact.
Moreover, support was found at the 21-day moving average, which is often a key support; e.g., note COMP's gap higher to above this average in late-November (11/23) followed by a strong further advance.
Initial COMP resistance is now up a bit from last week, at 3060 (versus 3030), with a next key resistance in the 3100 area. Near support is at 3000, extending to the 2970-2950 price zone.
COMP was getting near to an overbought reading in terms of the 13-day RSI but the minor correction caused a dip in the Relative Strength Index. Another type 'extreme' was seen in another of my key technical indicators, that of trader sentiment which hit what I consider also to be a type of bullish 'overbought' extreme early on this past week. It wasn't surprising that the rally faltered after that. High CPRATIO numbers show traders collectively getting high bullish expectations versus what is/was realistic in terms of our (US) political impasse. Higher than normal levels of bullish sentiment often occur ahead of either stumbles in the market or, when PROLONGED, ahead of a significant top.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) Index looks to be in a sideways consolidation after an initial first leg higher, suggesting that another substantial and sustained advance will develop at some point. So far such a breakout move has been stymied by stubborn resistance/selling pressure in the 2700 area.
Near-term it's hard to gauge how long NDX will remain in what is essentially a trading range between support at 2605-2620 and resistance at 2700-2713, mostly at 2700. To suggest a bullish breakout, the Nas 100 needs to Close above 2700 for more than day, rally, and then (typically) find support back near 2700 on any subsequent pullbacks. 2750 is next resistance, extending to the 2775-2780 area.
I mentioned support at 2600-2605; next lower support is seen in the 2560-2550 area.
Repeating from my Index Wrap of last week I rate NDX as maintaining a bullish consolidation by holding at or above 2600.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) has the same mixed pattern as the underlying NDX Index. 'Mixed' in the sense that QQQ hasn't continued its bullish move after its initial advance. However, the past 3 weeks sideways movement between 66.3-66.7 on the upside and 64-64.1/64.2 on the downside looks most like a bullish 'consolidation' of the initial advance or rebound from lows in the 61.8-61.3 area. The ideal of a bullish consolidation suggests that there will be a second up leg, such as one that carries to the 67 area and higher, such as to 68-68.3 resistance.
If instead of the bullish scenario outlined there's a sustained decline to below 64.5, then and especially to below 64 even, the idea of a next up leg becomes more 'iffy' and a test of support at 63-62.5 may loom instead.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart remains bullish and is in fact the most bullish of the major index charts. There's been less of a pause or pullback and in fact the Russell appears to be IN a 2nd LEG higher. After only a relatively brief pause/consolidation in the 820 area, RUT then rallied strongly to recent intraday highs at 852. A further move higher is suggested, such as to a test of prior highs in the 860-868 zone.
The recent rally faltered some over 3 days with intraday highs at 852 after the RSI hit its 'typical' overbought in the 70-75 zone. RUT may now go into a sideways to lower trend as a necessity to 'throw off' its overbought condition. It's too much to fast so to speak in terms of RUT moving too far ahead of the rest of the market.
I've highlighted near support at 830, then at 820. A Close below 820 for more than a day would be a bearish development. Support below 820 is at 813, extending to 800 even.
GOOD TRADING SUCCESS!