THE BOTTOM LINE:
Real Estate is location, location, location whereas the Market is the Fed, the Fed, the Fed! More numbers games: watch 17000 resistance in the Dow 30 (INDU) and 3800 in the Nasdaq Composite (COMP) to see if pierced. This past week of course all the major indexes went to new highs; well, the Dow 30 (INDU) only by a hair's breath and INDU then retreated suggesting a possible double top. Surprises have been coming on the upside so far. Stay tuned on that!
I haven't 'trusted' this last rally although price wise it was all upside after the S&P 500 (SPX) rebounded from its up trendline; this, after SPX got 'fully' oversold on the 13-day Relative Strength Index (RSI). Those two technical aspects should have been enough to adopt a bullish strategy but one of my key indicators didn't compute and seemed to have gone a bit haywire. This is the indicator (CPRATIO) which I use to measure bullish/bearish sentiment. In 3 decades, I've not seen bullishness (as I measure it), jump sharply and continue to rise at or near a tradable bottom. 'Extreme' bullishness is always, until now, seen at or near tops. Well, there IS a first time for everything!
The foregoing could be the subject of my next Trader's Corner column as chart/price action is "first among equals", as they say about the British Prime Minister, relative to the other Ministers. Price action is to be trusted above any technically derived indicator. Still, my bullish/bearish sentiment indicator, when at a bullish extreme (above 2) does tend to forecast a tradable top within the NEXT 1-5 trading days. IF the recent 9/18-9/19 intraday top is in fact at least an interim top, it came within 6 days of a peak reading in my 'CPRATIO' indicator. The visuals of all this can be seen in my first chart (SPX) below.
Speculation aside, unwinding of options/futures positions was clearly down. The recent rally had a feeling of being at least somewhat driven by a short squeeze. Especially punishing to those who got short thinking the Market would be more spooked by a possible government shut down. Which goes to show what I've observed over and over through the years, that the Market rarely reacts to political events or speculation. Not so with speculation about the Fed and the (next) Fed head!
Where do we go from here? Besides being aware of resistance at 17000 in INDU and its possible double top as well as 3800 resistance in COMP, there's another S&P level to tune into. Prior resistance around 1709 'should' now have 'become' support, assuming that this recent bull move didn't just die. A Close below 1700 in SPX, not reversed the next day, could be showing that this Market is in a corrective phase again. Support and resistance levels are projected on the various charts to follow.
STOCK CHANGES IN THE DOW 30 INDUSTRIAL AVERAGE:
As of Monday (9/23), AA, HPQ and BAC are OUT of the Dow Average (INDU) and Goldman Sachs (GS), Visa (V) and Nike (NKE) are IN. Not surprisingly, the three new additions to INDU had strong gains in the past two weeks.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart continued in a bullish pattern this past week as the Index overcame significant prior resistance suggested by the early to mid-August top. The chart has been bullish in an overall sense since SPX held and then rebounded from its multimonth up trendline; this occurred at the time RSI registered an oversold extreme.
I thought this past week that if SPX went through its prior 1709 intraday high it could next hit 1740. Not quite as it got to 1730 then retreated back to its prior high. Prior highs, once pierced, often 'become' subsequent technical support. It could happen here but there could also be a further retreat, such as back to support around 1680. 1650 is where the trendline intersects currently and that makes this area a pivotal chart support.
Above 1730, I project a next resistance area coming in around 1765-1766.
Given the recent overbought RSI reading and the still-high bullish 'sentiment' indicator seen above, I see more likelihood of a sideways to lower move versus a renewed spurt higher. But, as I said in my initial 'bottom line' comments, news and rumors have been coming in bullish.
I personally wonder if the Market is going to start to notice the trouble in River City if the US Government gets shut down. That's not so 'bad' economically if relatively short lived but not raising the debt ceiling can cause a lot of trouble in the capital markets. But, maybe I should stick to the charts!
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart is bullish. The last hurtle to a bullish chart was overcome by the decisive upside penetration of prior resistance that started in the 755 area. I've highlighted the 755 area as an initial or first area of technical support. More major support comes in around 740.
770-772 in OEX is near resistance. Next resistance, or really a next upside price objective/'target', is projected for the 785 area.
This recent near-term downside reversal isn't a key downside reversal (unlike a decisive new high, followed by a Close on the day under the past 1-2 days' lows) but the chart should give pause to the bulls; i.e., a new high followed by a fairly immediate retreat and coming after the Relative Strength Index (RSI) hit a peak in the 70 area; this level in the 13-day RSI has been significant for tops, even if temporary.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) chart is bullish. Firstly, INDU got back into its long-standing uptrend channel. Secondly, the Average ran up to a new relative high, although not by much. This recent top could have formed an approximate double top even and bears watching as to INDU's ability to mount a sustained advance above 15660-15700.
The other technical factor with the Dow is what happens on a retreat back to its up trendline. Does support/buying interest come in around 15400 at the trendline? Stay tuned on that! Next support below the trendline comes in at 15300; fairly major support continues to be suggested at 15000.
A few Dow stocks turned higher in the recent rally and we need to include now GS, NKE and V in any look at the 30; out of the 30 stock mix now are laggards like AA and BAC and the bearish HPQ.
Bullish charts are especially seen with BA, DD, MMM, NKE, UTX and V. Actually, not many relative to the other 24 Dow stocks. Not enough bullish charts to suggest that INDU can turn around soon and develop into a new up leg.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) Index continues bullish and has gone on to a new high for the current move, which was not surprising. I was also not surprised to see COMP's rally stall in the 3800 area at resistance implied by the upper end of its uptrend channel. Whether this is just temporary resistance or not or possibly an interim top remains to be seen. If there's a breakout above 3800, I've projected a further upside target and possible next 'resistance' at 3900. Once again COMP has hit a 'fully' overbought extreme at recent peak levels.
If a correction develops and there's a better than even chance it may, COMP could retreat to highlighted support in the 3700 area; support then extends to 3650. Fairly major support is seen in the 3585 area.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart is bullish and the Index has gone on to a new high. And, like the Nas Composite, NDX has also stalled at potential resistance at the upper end of its uptrend channel. I've highlighted potential near resistance in the 3250 area at its upper channel line. A next target on NDX above 3250 is to 3300. Based on the longer-term weekly chart (not shown) a possible move to the 3400 area or higher is possible.
Near support is highlighted in the 3160 area, then at 3100.
NDX finally reached an overbought RSI extreme at its recent peak, when some selling pressure came in. Such (RSI) extremes have been correlated with at least interim tops.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 (QQQ) chart is bullish like the underlying NDX and like the actual Nas 100 index QQQ hit potential resistance implied by the upper end of its broad uptrend price channel in the 79.6 area. Next resistance is highlighted around 80.1.
Long-term resistance implied by the weekly chart comes around 83-84 currently. It's still a very strong uptrend pattern. The question is in my mind is whether we're due for a near to intermediate correction yet. Now that QQQ has reached its upper channel line, I think at least a short-term dip is a better than even possibility. Stay tuned on that!
Near support is suggested at 77.6, extending to 76 even.
Volume has been steady on the continued advance and as usual a big volume spike isn't likely unless there's a sharp dip and break of support. On Balance Volume (OBV) continues to trend higher on balance.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) broke out to the upside in a move to new high but may have hit some resistance in the 1080 area. If 1080 is pierced, resistance implied by RUT's upper channel line comes in around 1110 currently.
Near support is highlighted in the 1045 area, then at the current intersection of the up trendline at 1028.
A move to the upper end of its broad channel or to the lower end of the channel perhaps? My crystal ball is cloudy on what's next in that regard.
Long-term charts remain quite bullish and 1100-1140 (or higher) remains a possible longer range objective.
GOOD TRADING SUCCESS!