THE BOTTOM LINE:
The Nasdaq Composite (COMP) had previously rallied strongly above what had looked to be tough resistance at the pivotal 4000 level, then barely got back to that area before rebounding strongly. The tech bellwether SOX semiconductor index also led the way higher.
I wrote last week about the pattern of the S&P, then the Composite, alternatively rallying then laying back in a 'rotational' type correction, common in strong bull moves.
The S&P 500 and 100 (OEX) came down to its 21-day moving average and rebounded strongly and in a major bull move that's often all the dip we get. There was one Close in SPX and OEX below the key 21-day trading average, but this activated my '1-day rule' so to speak, where there's often a single close only below technical support, but not two such Closes. This in a strong bull move like the one we are in. The Dow 30 (INDU) did close below its 21-day moving average but as I keep noting, this average (not a capitalization weighted index) is only 30 stocks and tends to have some wider price swings. It's still true, also as I pointed out last time, that there are approximately 2/3rds of the 30 Dow stocks in still strong major uptrends.
I noted last week my expectation to see early weakness (in the week) and I was thinking into, at most, Wednesday, but buying didn't come in strongly until after the non-farm employment numbers. When finally, 'good news' was in fact GOOD news as opposed to the view that bullish economic news is bad because the Fed might take the stimulus punchbowl away. However, a more realistic view seems to have taken root and there's expectation that 1.) the Fed is not going to be hasty in its actions and 2.) if the economy is in fact REALLY strengthening, it's inevitable that the Federal Reserve will not keep printing money to keep long rates as low as possible.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) chart traded above the key 1800 level into this past week. The dip below 1800 was over by week's end as SPX strong rebounded back above this key chart level on Friday on bullish employment bump. Technically, it was prefaces with SPX rebounding from the area of its 21-day moving average. I tend to 'define' the shorter term trend by whether prices are, for the most part, trading above or below this key average for the major indices.
It looks like SPX can pierce the prior intraday high in the 1813 area and then challenge what may be somewhat tougher resistance in the 1835 area at the current top end of SPX's uptrend price channel. A well-defined upper channel line like seen below is often an area where the advance will at least slow somewhat; e.g., prices continue to move gradually higher but 'hug' the upper line rather than break out into a new up leg. Still, stay tuned on that! Some common rules of thumb won't necessarily apply to a strong bull market going into the end of the year and end of the current quarter. 'Window' dressing isn't just for department store windows!
I wrote last week, as a strategy guide: "A couple of back to back closes below 1800 support would suggest declining momentum and a next key test would be an ability for SPX to mostly Close above its 21-day average at 1782, with support extending to 1775."
Support is again pegged at 1780-1775, with more major support in the 1750 area.
Bullish sentiment as seen above suggests traders are maintaining a very bullish outlook, with not much of a fear factor. Normally, I'm anxious when traders are not, but this indicator isn't of much use for 'timing' a next top or downside reversal. The current strong bull move will be over when it's over. We're likely going to have to rely on price action, such as in a reversal type pattern for trading guidance, rather than whether everyone and their brother is bullish.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) rebounded strongly from the key 800 area, keeping a bullish pattern going. Near resistance is implied by the prior intraday high at 810, with next 'resistance' implied by the upper end of OEX's broad and well-defined, uptrend channel.
I thought last week that OEX would 'test' 800 as it just such a common pattern; i.e., a big above a key big round number like this one, then a pullback that sets up a test of what buying interest is now to found in this same area. What was resistance, once penetrated, tends to 'become' subsequent support. One of my little trading 'mantras'!
Near support is suggested in the 795 area, extending to 790. More major support should be found next around 780.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) found support on its recent pullback exactly where it could be expected chart-wise, at 15800. Next support is seen in the 15600 area.
INDU can be a picture perfect technical/chart bellwether for either the overall market or more confined to the NYSE stocks predominating in the big cap S&P indexes. Thought I never met any of the group at Dow Jones, my old employer, who determine the Dow 30 make up and INDU changes made from time to time, they seem to know how to pick the 'right' stocks that best reflect the overall economy.
It's still true that approximately 2/3rds of the 30 Dow Industrial stocks are in strong uptrends. My bullish list still includes: AXP, BA, DD (pausing some), DIS, INDU bellwether GE, GS, HD, JNJ, JPM, MMM (maybe starting a correction however), MRK, MSFT, NKE, PFE, PG, TRV, UTX, V, and WMT. UNH has traced out a line of resistance at 75 but may still break out above this level. XOM looks like it could break out above resistance in the 95 area; stay tuned on that. This is a quite bullish picture given 2/3rds of the 30 Dow Stocks in strong advances.
Overhead resistance is highlighted at 16200-16175 and next around 16400.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) continues in a strong bullish pattern as COMP has gone on to a new closing high; not by a lot by a new high is a new high. Strong support is seen in the 4000 area, with fairly major support around 3900.
Resistance is seen in the 4100 area next, with next resistance 50 points higher at 4150.
I anticipate higher levels ahead. COMP is again nearing near-term overbought levels as seen below with the 13-day Relative Strength Index (RSI) and is quite 'overbought' on a longer-term weekly chart basis (not shown). An overbought condition means less in a very strong bull move and that's what we are. Know where you are, a higher-risk situation, and be wary of giving back big profits if there's a sharp downside reversal for some reason or event unanticipated now.
A couple of back to back closes below 4000 (more so on a weekly chart basis) would be bearish and arrest current upside momentum. Absent that COMP could be headed to the 4200 area by the end of the month.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart is strongly bullish given the recent break out above expected next resistance at 3500. Next resistance could come in around 3536, then at 3570, with NDX possible on the way to 3600 ahead.
Near support is suggested in the 3450 area, extending to 3400.
I don't want to be 'complacent' and caught up in a bullish bubble here but going by the strong uptrend, the chart pattern continues to point to higher levels ahead with the path or least 'resistance' still up.
NDX is in overbought territory again in terms of the daily chart, but this looks to mostly warn of the possibility of herd selling to 'take' profits at the same time based on some bearish development we don't see coming now.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 (QQQ) tracking stock is strongly bullish. Almost scary to me now is the volume JUMP on the recent rebound, which tends to be rare with QQQ. The On Balance Volume (OBV) line isn't pointing strongly up any longer so a cautionary stance is suggested on/in continuing to take on more bullish positions.
Possible next resistance or more like a next potential upside target is to 86.7, extending to around 88 even.
Near support is suggested at 84.8 but I've only noted pivotal chart support at 84, with major support beginning in the 82 area.
I have to go with the strong uptrend in terms of anticipating still higher levels but I don't see upside potential beyond 88 just yet. Maybe QQQ will reach 90 by month end. Stay tuned. I'm always tempted to take the money an run but I tend to buy when most are bearish and exit when most are strongly bullish.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart is bullish but RUT is lagging relative to the Nasdaq which is somewhat unusual in terms of how RUT has tracked tech higher for weeks. If RUT fails to pierce prior highs around 1147, this could be a harbinger for Nasdaq taking at least a pause if not a pullback.
If 1147-1150 is pierced potential next resistance is seen at the top end of RUT's broad uptrend price channel, currently intersecting in the 1170 area. If 1170 is seen, 1200 is a possible next target over the next 2-3 weeks.
Near support is suggested around 1116, with support extending to the 1100 area. Support implied by RUT's prior downswing low comes in at 1080.
'Going for' the bulls in a minor way is that RUT's last pullback to support implied by the 21-day average did 'throw off' the index's overbought condition. RUT seems to have a pattern of downside reversals once the Index gets into the overbought zone of 70-75 in terms of the 13-day RSI.
GOOD TRADING SUCCESS!