THE BOTTOM LINE:
The S&P 500 (SPX) and the Nasdaq Composite's rebound from technical support led to an up leg that this past week not only achieved new highs for this move but to a milestone move in SPX. With the April Close SPX achieved a decisive upside breakout above its major 2000-2007 double top when it sailed above prior highs in the 1535-1570 zone.
You may wonder what a monthly chart pattern has to do with trading and a usual focus on shorter-term charts. I wrote about a new high monthly Close in the Dow at the end of February as a sign of all clear sailing on the upside. That was at 14000 and INDU has tacked on another 1000 points since then.
A strong move in Apple Computer (AAPL) helped fuel the big rallies in the Nasdaq Composite, Nas 100 (NDX) AND SPX. AAPL alone comprises 14% of the S&P 500 Technology Index (SPDR ETF: XLK). These highlights on my weekly AAPL chart, before the recent rally, is seen in my 4/23/13 Trader's Corner.
More on the 'wedge' pattern is found there.
Before this past week's breakout move, the long-term pattern traced out by AAPL was suggesting a strong bullish turnaround ahead. A sort of culmination came when Apple's price got closer and closer to the narrow end point of the downward sloping pie-shaped wedge pattern as highlighted below. This is a case where a longer-term chart pattern could be used for shorter-term timing of a bullish strategy such as buying the May or June AAPL calls before they shot up.
The other technical/chart aspect to keep in mind as you scan my major index charts is the S&P, COMP and the Nas 100 (NDX) are near or at (NDX) the top/resistance end of their broad uptrend channels. Once a major index hits that upper channel line, a couple of possible outcomes follow: 1.) there's potential for a pullback back to the middle of the channel OR 2.) prices will continue to work higher but along the upper channel line as the advance slows considerably.
The third possibility, one not seen as much, is that prices break out above the upper end of a prior (and well-defined) rising price channel. This third possibility is one seen infrequently, especially when the market is overbought already; the probability of an accelerating rally is on the low side.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) is maintaining a strong bullish pattern, most recently seen in SPX's strong move above resistance around 1600. The Index looks headed still higher, although minor resistance implied by the upper end of SPX's bull channel is coming up fast; the upper channel line currently intersects in the 1630 area which is the only area I can point to as potential resistance.
There's not a lot to go on when at new highs and trying to project 'resistance' or a next target before another consolidation or resting point in the current bull market. Channel lines do work well for suggesting a temporary topping point or a slowing advance.
So, resistance only suggested to me along that rising up trendline. Support is better established at 1580, extending to 1560 and finally to key support in the 1540 area at the last downswing low.
I suggested last week that SPX would move higher but would prefer to add to bullish positions on larger dip such as back to the 1560 area. Dream on Stevens as the bull bites deeper.
In terms of bullish/bearish sentiment traders were showing a more bullish bias this past week but this is not yet the bullish EXTREME that I would anticipate seeing at the top of the current intermediate upswing. Traders aren't SO bullish that I start anticipating another tradable top.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) finally has touched its October '07 weekly closing high at 727. Minor near resistance looks like 727-730.
On longer-term weekly charts (not shown) the upper resistance end of the OEX's uptrend channel projects to the 770 area. In case I'm being too short-term focused!
The fact the S&P 500 has had a clear cut move through and above its prior major highs (from 2000 and 2007) suggests that the big cap OEX will clear its prior peak also. If OEX struggles in 727-730 area and so close to its upper channel line, risk on a reaction is back to the 715-710 area.
The chart lines show a steep OEX advance off the November lows of a 100 points or around 16%. This is a caveat about loading the boat here on the bullish side. Most of the good news on continued U.S. economic growth seems pretty well priced in. Slow down reports from Europe and or China can cause continued volatility if the market now assumes all is about a steady growth path for the U.S. Too bad, because we're in a global economy also.
I've noted support in the 710 area, extending to around 700.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) continues bullish with some upside acceleration this past week as INDU cleared 14875-14900 resistance on its way to 15000 briefly. The Dow would need to work considerably higher before INDU touched resistance suggested by its upper channel line; currently 15250-15300.
From this vantage point, the Dow could go another 300-400 points higher to 15300-15400 before INDU reaching a possible next rally peak. If the S&P 500 next reaches resistance just a bit higher than its Friday Close I'm hard pressed to bet on the Dow moving 300 points higher before it would hit selling pressure again.
Last week I rated close to 2/3rds of the individual INDU charts as being in bullish to very bullish uptrend patterns. (AXP, BAC, BA, CVX, DD, DIS, HD, JNJ, JPM, KFT, MCD, MRK, MSFT, PFE, TRV, UTX, VZ, WMT). And, thought AA and INTC might add to some further Dow gains. GE, IBM, PG and T were faltering from prior strong uptrends. INTC held and IBM rebounded some, helping boost the Average; otherwise, it's the core strength in 18-20 stocks.
Near support is assumed at what was at a line of prior resistance, at 14875. Key trendline support is 14650.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) chart remains strongly bullish after the accelerating advance move of this past week. By my estimation however COMP now is at what may be a temporary peak, as implied by the upper end of the bull channel that has tracked the back and forth price swings within COMP's broad uptrend.
The Index is at a juncture where either its prior rate of advance will still take hold and slow down further upside OR there's a break out to a new higher 'track'. I don't think the later so look for resistance near-term at 3380-3400.
I don't have higher price targets than 3400 on a daily chart basis and near-term but weekly price considerations suggest COMP could go a lot higher over time; e.g., 3600. Technical/chart support is at 3300, with main support at 3200.
RSI is suspiciously high as its climbed to a level where COMP has tended to level off in its gains or worked lower.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) surged through prior highs in an accelerating advance this past week culminating in a gap move higher on Friday; i.e., a price gap exists between the high of Thursday and the low of Friday signaling a strong next day reaction in a very strong move. It's also not real common for a gap up event well along in a move like this. This type of pattern in fact is common with a so-called exhaustion gap where the bulls run out of cash or lose heart to chase stocks further.
Price gaps under the market tend to act as support, suggesting a watch on 2916 as key support and where the recent upside 'gap' would be filled in as they say. Support then extends to 2850; major support comes in at 2770-2750.
In a very short time, NDX is already up the upper end of its uptrend channel, suggesting that the Index could have reached a point where selling pressure could come in again what with profit taking and the like. Near resistance is projected in the 2950, area; further upside potential, if this super strong move continues a while longer, is to 3000 as a natural target for the bulls to aim for and the bears to short.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 (QQQ) tracking stock saw a sharp advance along with the underlying index since of course the ETF stock price never strays that far from the same percent changes as NDX due to arbitrage checks.
QQQ hits technical resistance at the top end of the broad uptrend channel highlighted below. The stock backed off this line a bit from intraday highs on Friday. Near resistance is at hand according to this trendline, at 72.3. Near support is suggested at 70, extending to 69.
A further spurt higher, above 72-72.3, could carry QQQ to a 74 next target. I think the stock may have already reached some interim resistance with the most recent sharp run up. Stay tuned on that.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) Index remains in the approximate mid-point of its broad bullish uptrend channel. This is also the 'point' where I assess further reward potential versus downside as being about equal. I prefer to buy at the low end of these channels and sell at the high end. The midpoint I don't like for initiating or adding to bullish or bearish positions.
RUT closed the week above a prior line of resistance which is a bullish plus. There's potential up to 980 and possible resistance there; the big kahuna is 1000, assuming another run to the upper end of the broad channel RUT has been in. The current rally should continue but expect support at 940 if this advance has still got juice.
Support is highlighted at 920-918. Pivotal support then comes in around 900.
GOOD TRADING SUCCESS!