THE BOTTOM LINE:
While the tech-heavy Nasdaq seriously lags, it has already exceeded prior 10-year highs, whereas the S&P is nearing this milestone. Good-timing award: with the S&P 500 up 125% from '09 lows, individual investors are buying again. My first chart below of the monthly SPX chart tells the story. I don't think individual investors are stupid, just ignorant of the Market and the truth of buying when stocks are out of favor and taking caution when it's a party topic.
By the way, if the Dow 30 (INDU) closes at 13900 on Thursday, Jan. 31st (Friday Close: 13895), this would constitute a Dow Theory 'confirmation' of a primary up trend in the market. Not that this is a point to go into stocks for the first time but it suggests that investors who bought back when were buying at an appropriate time.
Certain Market bellwethers here tell the story as to why Nasdaq is lagging and the Dow (and S&P) are surging. The relative influence of Apple Computer (AAPL) and Dow stock IBM demonstrates the relative bearishness of AAPL as it pierced its long-standing up trendline and IBM rallied strongly from the low end of its (long-standing) up trendline.
All other comments are contained within my individual stock commentaries. Of GENERAL interest is that this market is at an overbought extreme in general, especially with the S&P stock indices and the Dow. This doesn't mean that these stocks can't and won't go higher but it does suggest that there is a greater risk of a downside correction. Even if there's no sharp pullbacks ahead, for options traders, a sideways ('time') correction will work against some strategies (while helping others).
The fact of Nasdaq lagging here doesn't mean as much as the pattern of such a well-defined line of resistance that looks like a lid on this important Market segment and suggest a possible interim top. At some point such a pattern suggests that the S&P and Dow will also experience a pause and/or an interim top.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P chart continues in a maximum bullish fashion as SPX climbs higher, albeit along the top end of the Index's uptrend channel. This pattern of hugging the top end of its channel is a visual demonstration of slowing or just-moderate upside momentum. I'm cautious about a reaction ahead of the really tough resistance suggested in the 1550-1560 area.
On the other hand, I don't think SPX is going to form a massive triple top. Double tops are far more common and we've already seen that given the 2000-2007 double top. Ahead, especially with individual investors coming back into equities mutual funds, I anticipate a move above the prior highs.
In terms of a pullback, it would be quite common to see SPX pull back to the low end of the aforementioned uptrend channel and/or back to the 21-day moving average.
Note the 'overbought' extreme seen above with the Relative Strength Index, which suggests that the odds of a correction ahead is when rather than if.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart is bullish in the same pattern as seen with the S&P 500.
A pullback to the lower end of its channel wouldn't be surprising and the odds of another sharp upswing is less than the potential for a sideways to lower correction by the end of the coming week. OEX has support at 660, extending to the 650 area.
Resistance is suggested at 677, extending to 685 at week's end, assuming that the upper channel line will continue to limit more than a gradual further advance. Major resistance is expected in the 727 area.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) is bullish and INDU, powered especially by IBM, CSCO, DIS, HD, JNJ, JPM, MMM, PFE, PG, TRV, and UTX has the potential to go substantially higher. Odds favor INDU at least challenging the 14000-14020 area and above such as to the prior weekly closing high at 14093. Whether the Dow will make it to near 15000 without at least a minor correction first is hard to say.
Near resistance is suggested at 13945, extending to 14020. Near support is highlighted at 13800, then in the 13600-13575 area.
A pullback to the 21-day moving average wouldn't be surprising either but this average is rapidly rising also. INDU is at an overbought extreme and as high as we'll typically see before there's at least a pause in such a powerful advance. The Market as we know tends to go from extreme to extreme and INDU is at the high extreme as measured by the Relative Strength Index.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite is bullish as it continued to advance but is of course lagging the S&P recently. The tech heavy Nasdaq hasn't lagged on a long-term basis since it already exceeded its prior highs that SPX is only approaching now.
The risk of a near-term correction is growing and it's a question as to whether the other major segment of the Market, the NYSE listed stocks, will continue to soar without Nasdaq in gear. Stay tuned on this outcome. The relative position of COMP is keeping I think a lid on bullish trader sentiment.
Very near resistance is in the 3150 area, then at the upper channel line around 3200, extending to 3215.
Near support is at 3100, then at the current intersection of the low end of COMP's uptrend channel at 3060.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) is mixed in its pattern as it drifts sideways tracing out a well-defined line of resistance at 2750, the day range above this level notwithstanding.
The sideways move does have a benefit to the bulls in that this pattern 'throws off' an 'overbought' extreme such as seen with the S&P and Dow.
I've noted near resistance at 2750-2770, then well above this area, at the upper channel line currently intersecting in the 2815 area and extending over time to 2850. The correction at the prior highs above 2850 is a good example of how RSI extremes tend to precede substantial (downside) corrections.
My worst case scenario for NDX is currently for a pullback to support in the low-2700 area, extending to around 2680 currently. Fairly major support beings at 2650, then 2600 even.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) is mixed in the same way as the underlying NDX of course. The sideways movement suggests that's there's at least a temporary cap on the market.
A decisive upside penetration of 67.30-67.7 is needed to suggest that QQQ could be seeing another up leg such as a move to the upper end o of its uptrend channel, currently intersecting at 68.8, extending to 69. Major resistance begins at 70-70.5.
Near support is in the 66.2-66 area extending to implied support at QQQ's up trendline, currently intersecting at 65.3.
Volume as been mostly lackluster as the Q's trade sideways, something quite unexciting to the bulls who jump more heavily (on the buy side) after other buyers propel the Index higher. Daily volume figures and On Balance Volume (OBV) are neutral. A break below recent lows should send volume up sharply. Otherwise QQQ is a yawn, although owning the stock versus its calls loses nothing; unlike call option premiums.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) Index continues to lead or at least do as well as the S&P and Dow. There is a definite seasonal tendency for the small to mid-cap stocks of the Russell to move higher in January.
RUT is at an all-time high. 'Resistance' can only be estimated or guessed at from the upper line of RUT's uptrend channel, currently intersecting in the 915 area, extending to 925.
Near support is at 883 to 875. Major support begins in the 850 area, extending to 830-820. 800 is 'must-hold' support for the bulls.
As with the other strong moving indexes, RUT is at an overbought 'extreme' by the lights of the 13-day Relative Strength Index or RSI and is at as high a reading as the last time that RUT had a substantial pullback. Just saying!
GOOD TRADING SUCCESS!