THE BOTTOM LINE:
The Nasdaq Composite (COMP), after a brief mid-week dip, rallied strongly on the week and led the overall Market higher. My objective and what may prove to be resistance in COMP, is to 4000. I can project objectives to 1820-1850 in the S&P 500 (SPX); to the 805-810 area in the S&P 100 (OEX); to 15700 again in the Dow 30 (INDU); to 3500 in the Nas 100 (NDX) and to 1140-1145 in the Russell 2000 (RUT).
The CBOE Volatility Index (VIX) has sunk to 13 and I've noticed the tendency for interim tops when VIX gets down to 12 and under.
The Dow 30 (INDU) is lagging and of course has not cleared its prior peak. There was a strong to very strong week seen in AXP, BA, DD, DIS, and MSFT; VISA (V) continued to climb above 200 resistance. All well and good if your portfolio has just these 6 stocks, but isolated strength in the 30 is not enough to cause INDU to do anything but lag the other major indexes.
Why worry about tops, interim or otherwise, in such a strong market? Mainly, due to the 'overbought' long-term (high) extremes, especially, in the tech-heavy Nasdaq, as measured by the Relative Strength Index (RSI) over a year time-horizon. No top can be predicted on overbought considerations alone but this condition does point to a high-risk for a pullback as we go further into the 4th quarter and/or as the major indices get closer to the aforementioned objectives and possible resistances.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart continues bullish as SPX rallied further above its prior (late-Sept) top in the 1730 area. A next potential 'resistance' highlighted is at 1780, extending to 1800, the top end of my projected uptrend channel.
Support is seen at 1740 (extending to 1720), with next technical support likely around 1700.
Bullish sentiment has moderated some in the past week from the extremes of the end of the prior week (10/18). In terms of a short to intermediate time frame, SPX is in the 13-day RSI overbought zone. Overbought markets sometimes 'fall' after hitting excessive valuations but 'overbought' conditions can persist for longer than expected periods. Such extreme readings do warn of getting complacent in bullish strategies.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart continues in its bullish pattern as it appears to be climbing toward a next big 100 round number at 800, which is also at the top (resistance) end of OEX's broad uptrend price channel. I've highlighted possible resistance at 790 but 800 looks like it's the level to watch ahead; assuming OEX gets there. Sooner or later, 800 looks like a prime target.
On the downside, 770 is a significant pullback objective/support, with support then extending to the 760 area at the 21-day moving average.
As with big brother/big sister SPX, the big cap S&P 100 has reached an overbought extreme in terms of the daily chart. Such an extreme is not yet present on a weekly chart (not shown here) basis, as is also true of SPX, although such a overbought/high RSI extreme is getting closer.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) chart is bullish as the Average appears, albeit s l o w l y, to be advancing toward a test of its prior highs in the 15665-15710 zone. There are current a small number of the 30 INDU stocks in continued strong uptrends. I noted 6 (AXP, BA, DD, DIS, MSFT and V) in my initial 'bottom line' comments, as noticeably in strong uptrends this past week.
Currently more of the Dow 30 need to be in renewed advances to propel INDU into a sustained move to new high ground for the current move. It may also be that INDU has settled into a broad 15700-14800 trading range and won't climb above 15700 anytime soon.
I've highlighted a 15665 to 15710 resistance zone based on highs seen on the last major upswing into mid-September. However, longer-term weekly charts (not shown) suggest that major INDU resistance might not come into play before 1700. Stay tuned on such a target being hit!
Initial chart support looks to come in around 15370, with more pivotal support coming in the 15200 area.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) Index chart continues strongly bullish as was the case LAST week. Tech stocks are not quite in a 'bubble' but in the words of the old song are "too hot not to cool down"! Accelerating advances, after what was already previously a strong advance, are often, not always, a predecessor pattern before an interim top. I wouldn't predict any kind of final top to COMP but when a stock or index gets overbought for long 'enough' there's a pullback-reaction. Enjoy the ride just don't become a total believer in it. Been there, done that, through some prior tech boom/bust cycles.
On all chart time frames I measure, significant technical resistance looks to come in around 4000. Perhaps COMP gets to 4100. Beyond that my bullish crystal ball is cloudy. It can go anywhere that tons of money will propel it, but 4000, maybe 4100, is my current 'maximum' upside objective.
Near support is seen in the 3900-3890 area, with next support suggested in the 3820-3800 zone. Speaking of zones COMP isn't quite yet in my overbought 'zone' in terms of the RSI, but it's closing in on it. Bullish sentiment appears to have peaked for now with traders perhaps getting more realistic as to how far this puppy can go.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart also is strongly bullish and I wrote last week of my assessment of the prior upside (overnight) price gap as the type suggesting a strong further run; i.e., a runaway type gap that comes later in a move. An opposing downside gap ahead would cause me to take the money (profits on bullish strategies) and (exit) RUN. You could call it technical superstition!
Anyway, we've seen a powerful move in the big cap Nas 100. There's always a beginning, middle and end in any move and NDX may be slightly above the middle and headed toward a end point in the 3500 area. I've noted resistance from 3450 on but 3500 is the pivotal one that I'm seeing currently.
Near support at 3300, an easy call as strong buying interest often lies at the LOW end of an upside gap. Support in the 3300 area extends to 3250. Fairly major support begins at 3200 currently.
NDX has again been in or near an 'overbought' RSI extreme as was the case at the last rally peak. There was a subsequent pullback/correction but not by much and it was very short-lived as you can see.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 (QQQ) tracking ETF chart also shows a strong bullish pattern identical to of course the NDX Index that QQQ tracks. Only the support and resistance numbers/levels are different. That and we can easily track daily volume info.
My projection of next potential resistance (above 84) comes in around 84.6. Pivotal resistance is then seen at the upper end of QQQ's broadest daily chart uptrend channel in the 86 area. Near support is highlighted at 80.9 currently, extending to 79.7; fairly major support begins in the 78-77 area.
Volume didn't spike higher on QQQ's most recent upward price spurt, which unlike common stocks, is a 'typical' pattern for QQQ, where volume typically ONLY noticeably jumps when the stock breaks below perceived support(s). On Balance Volume (OBV) is bullishly trending higher; this indicator is my key volume measure for QQQ.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart remains in a bullish pattern. Some minor resistance/selling pressure has come in around 1120, but as long as RUT remains above key support at 1100, I anticipate the Index possibly testing, even besting, the upper end of its price trend channel, currently intersecting in the 1140-1145 area.
Resistance in the same 1140-1145 area is also suggested by RUT's longer-term weekly chart. 'Confirmation' in target levels is usually on more solid footing when the same objectives come up on both daily AND weekly charts.
Key near support comes in at 1100, extending to 1080. Pivotal technical support then is implied by RUT's up trendline, intersecting presently around 1060.
GOOD TRADING SUCCESS!