THE BOTTOM LINE:
The uptrend continues but with some slowdown in upside momentum. It's almost like the market is 'stumbling' higher. A correction is due and overdue. This doesn't mean we'll get such a correction in the coming week or this month but beware if dazzled only by the further upside potential and not the possibility of a dip.
The market is an every changing kaleidoscope of different stories. Right now merger and buy out mania have come round again and that's usually a bullish driver. So, could go up, could go down (with a suitable accent), is where we are. Slowing upside momentum and a mildly bearish price/RSI divergence definitely suggests high risk in new long side bets while conversely, there's no definite forewarning of a break and the trend remains strongly up.
The Nasdaq Composite is stuck in a narrow range between a line of resistance at 3200-3205, support around 3180. A break out above or below this narrow band is likely to carry 20-25 points at a minimum. The big cap Nas 100 (NDX) has rallied to above a prior line of resistance at 2760; if NDX starts slipping back under 2760 it could drop 40 points. Stay tuned on that.
The S&P 500 (SPX) recently has seen a stalled advance in the 1525 area; it has support at 1500. The Dow 30 (INDU) has been trading and for some time, in a relatively narrow range from 13860 up to 14000. A breakout above or below this price range could yield another 250 points in the direction of the breakout.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P chart remains bullish. There's a recent stall in the 1525 area and this becomes a key near resistance; next resistance above 1525 is in the 1550 area, at the high end of SPX's uptrend channel. I also 'assume' potential resistance or bearish selling influences due to highs from 2007 as being in the 1550-1555 area.
While SPX made a new recent high, this hasn't been followed by the Relative Strength Index (RSI) also going to a new relative high; this pattern makes for a mildly bearish price/RSI divergence.
SPX has support in the 1500 area. A couple of Closes below 1500 would look bearish for the short-term trend. A Close below 1480 would suggest further selling pressures after that.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) index has continued to work gradually higher and is maintaining a trend that keeps OEX bobbing up along the upper end of its bullish uptrend channel. Resistance may show up next around 690, extending to 695-700.
I've highlighted support in the 673 area, extending to the low end of OEX's uptrend channel at 667 in the near-term. A Close below 660 would look to me like a bearish omen short-term. The S&P index trend is still strongly up but as noted with SPX above, the S&P 500 is also nearing prior key highs at 1550-1555 from the previous decade (2007). Prior highs attract sellers, computer and otherwise, for a bear raid.
I don't like the 'looks' of the price/RSI divergence as this kind of diverse pattern makes me nervous for trader friends hanging in for one more move higher. At 695-700 OEX hits a resistance milestone at the even-100 milepost. 2007 highs occurred in the 730 area (the 2000 Market peak saw OEX highs in the 830 area).
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) has been in a trading range sideways with highs and lows forming a relatively narrow price band. With this kind of pattern you can calculate that a breakout above OR below any prolonged sideways trend suggests potential for a NEXT move equal to the distance between the previous highs and lows. So, in this case we have the Dow trading in a 250 points range for a period long enough to notice.
Old trade adage is to be positioned in the same direction of the breakout; 250 points is the point spread between recent highs around 14010 and a line of prior lows at 13860. A 'minimum' upside or downside objective becomes adding on the prior range to an upside 'breakout' point; here, suggesting a next big resistance at 14250-14300.
Conversely, a decisive downside break of 13860 that wasn't reversed within a day would set up a downside target or 'minimum' downside objective to 13600 (13860 minus 250 Dow points).
There are still Dow stocks in powerful bull moves and this could get INDU over 14000 and on to 14300 or so. On the other hand a correction back to the 13600 area looks plausible if INDU starts falling under 13900-13860.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) chart is bullish. COMP is trading just over 3180 which is now looking like a key chart support; 'key' that is in that COMP falling below 3180 for any multiday period arrests current bullish (upside) momentum and would turn the daily chart bearish near-term at a minimum.
Key technical support is seen 3180; if pierced on a slicing move through 3180, next support comes in at 3130 extending to 3100.
Two consecutive closes above 3200 could be part of a launch of a move to/toward 3250-3280 resistance. New bullish positions taken here look to have downside risk to 3100 support. New bearish positions taken at current levels look to have risk up to the top end of COMP's channel in the 3280-3300 area.
Trader sentiment numbers seen above suggest that traders are mostly confident of the upward bias in the current Market but aren't throwing caution to winds either!
The high RSI also seen above for the past month and week is without extremes in the overbought/oversold zones. The sideways high, not extreme, daily RSI reflects this index being in an ongoing sideways to higher trend. Nothing dramatic, just a lengthily base building between 2720 and 2760, followed by decisive move above 2760. RSI never gets to a real 'overbought' extreme but doesn't come down much either. The RSI indicator is of limited use in this kind of cycle.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart is bullish. This past week's trade kept lows ABOVE the prior trading range which is bullish and suggests potential for a next move to test resistance around 2800 and from there possibly to the 2850 area again. The foregoing assumes that NDX can advance from its base of recent lows around 2760.
Some talk of the NDX big cap tech index seeming to struggle here to stay above the recent 2760 breakout point. It is a key support technically when a 'line' of prior highs becomes subsequent support (after a breakout above those prior highs). Basing action at such a line of prior highs, having now become support, precedes and sets up so to speak a next up leg.
Below 2760-2750 NDX takes on a bearish technical outlook short-term and points back to lower prior support in the 2720 area.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) is bullish in its pattern as it of course mirrors the underlying NDX.
Near QQQ resistance is apparent in the 68.1 area. Very near support (not highlighted on my chart) is at 67.5, extending down to the up trendline currently intersecting at 66.5.
Below 66.5-66.0 QQQ looks bearish and suggests the tracking stock having downside potential to 65.2; perhaps back to 64.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) Index continues bullish as the Russell moves STILL higher within its long-standing uptrend channel. I can't argue with the Russell as an occasional market bellwether as RUT got and stayed in a strong bullish trend before the rest of the market followed suit.
Assuming the most bullish case is to project potential for RUT to move again toward/to the upper end of its uptrend channel; here suggesting upside potential for RUT to the 940 to 950 area.
Support is anticipated at 915-912 extending down to 900, then to the 880 area.
RUT is showing a high/'overbought' RSI extreme at 70.5, but the 13-day Relative Strength Index is down from an even higher reading (78.5) when RUT was at a lower level (907). In other words, in this kind of market, one having a strong directional trend, overbought/oversold type indicators are of limited use as a trading input.
GOOD TRADING SUCCESS!