THE BOTTOM LINE:
The S&P stocks, which lack the potential to grow their earnings in an elastic plastic man fashion, continue to see more of sideways move, which has the benefit to the bulls of continuing to 'throw off' its overbought condition.
The Nasdaq bulls find it easier to believe that key tech stock earnings will grow exponentially and they consequently keep forging to new highs. The Nasdaq Composite (COMP) rate of price increase has slowed some from the strong advance of Oct-Dec. I don't see what is going to keep tech stocks from continuing to advance further; after what may be some near-term selling pressure spilling over from Friday. We could get some earnings disappointments al la Intel (INTC) but that's sort of 'old'-tech so to speak.
Meanwhile the sideways move in the S&P and Dow Industrials is likely to set the stage for another rally ahead. If they can't take em down, they'll take em back up. January is typically a seasonally strong month, as is November-December. February and March are not always so kind to the Market until around April.
In the Dow 30 (INDU), upside momentum has slowed in the Average (hey, it's still early in the year!) although MRK and V saw spurts higher this past week. Weakness occurred in previously super strong NKE.
The Russell 2000 (RUT) is hitting possible resistance implied by the top end of its very broad weekly chart uptrend price channel (shown below after the RUT daily chart). A high at the upper end of RUT's multiyear uptrend channel comes only after the very prolonged advance made by the Index since its low make back in November 2012 at 763; RUT closed the week at 1168.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
The S&P 500 (SPX) is still trending sideways after making a minor double top in the 1850 area. The near-term trend is neutral to bearish, while the longer-term trend remains bullish.
It doesn't look like SPX will reach longer-range resistance at 1880-1900 anytime soon. We're in earnings season and Q4 2013 earnings are coming in as a mixed bag. There's more news ahead so I'm watching the line of resistance at 1850 for any sign of an upside breakout.
A Close below 1820 would turn SPX's short-term trend lower. Next support comes in around 1800. A Close below the 50-day moving average could mean a weak February-March period for stocks as is often the case in a 'normal' market year, unlike the barn-burner rally of this past 14 months. I DON'T expect another year of 30% gains! Could happen, but two such back to back years are unusual to rare.
As prices trend sideways the prior 'overbought' condition is 'throw off' so to speak as suggested by the declining Relative Strength Index line seen above. This kind of action can set up a next rally as sure as a pullback can.
Meanwhile, traders are quite bullish still and we've had weeks of that as can be seen in my CPRATIO 'sentiment' indicator above hovering at or above the higher extreme (historically) for this indicator. You have to allow for super bull trends causing high bullish sentiment for EXTENDED periods, sometimes very extended periods and many make money on calls. But because too many traders would make 'too much' money if this went on TOO long, the Market will tend to humble the consensus view to some extent at some point. Stay tuned on that!
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) remains in its sideways trend as it has traded between 807 and 824 but mostly between 824 and 813 in the past couple of week. No breakout move occurred last week in the rally attempt.
The most bullish technical aspect is that OEX has held at its 21-day moving average but the Index could be headed back to at least test near support again in the 810 area. Next pivotal support is suggested at 805 and the 50-day moving average, with support extending to 800. Fairly major support is suggested by prior downswing lows around 790.
Near resistance is suggested at prior recent intraday highs made in the 824 area. Next resistance is at and just over 830. OEX's upper channel line intersects in the 832 area currently.
Neutral chart action suggests to me a stand aside 'neutral' trading stance.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow (INDU) is in a near-term downtrend as reflected many of the 30 stocks in the Average now in pause of correction mode.
Upside momentum has slowed in INDU, the spurt higher in MRK and V this past week notwithstanding. Weakness occurred in previously super strong NKE. It's a mixed bag overall and that's reflected in INDU.
Technical support has shown up in the 16400 area recently, but stronger support is suggested closer to 16200. 16000 is fairly major support.
Near resistance is at 16600. If there's a move to new highs above 16600, INDU's broad uptrend channel suggests potential resistance at the upper end, coming in around 16870-16900 in the coming 1-2 weeks. My 'minimum' upside target to 16600-16610 has been reached, so I'd be out of Dow Index calls by now. This isn't to say there's not more upside, but Q4 earnings announced last week weren't kind to some key Dow stocks and Q4 looks like it may be a pretty mixed quarter.
This recent sideways to lower pullback has pulled the 13-day RSI indicator into neutral 'mid-range' territory and it might get to close to an oversold level yet. February and March are often months where stocks mark time overall or see some dips, so once January is behind us, the Dow may work down toward the aforementioned support areas.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) chart is bullish but to date the most recent upside breakout hasn't seen much upside follow through and over the last 3 trading sessions there is a line of intraday highs at the same 4220 level. This could be something, maybe nothing over time but the weekly Close below 4200 didn't end the week on the strongest bullish note.
COMP has near resistance as noted already at 4220, extending not much higher before the Index hits resistance implied by the upper channel line at 4250.
Pivotal near support is at 4100, extending to 4050. January often gives way to a seasonal tendency for a less robust upside than the November-January period. February and March can tend to be flat to lower overall. Tech has had a heck of a run. If holding bullish positions in tech you may want to be thinking what is your possible further upside potential relative to downside risk for when a pullback finally arrives. Assuming there's MORE than another sideways marking-time trend.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart continues to be bullish, especially after NDX's upside breakout above its sideways trend of the past couple of weeks. That said, the Index didn't see strong upside follow through after the breakout above the sideways trend and the Index closed the week still under 3600.
On the RSI portion of the chart I've highlighted the fact that this momentum indicator has a downward sloping trend, which is contrary to the direction of the most recent price advance making for a minor price/RSI divergence. Another way to put this is that NDX has been rallying on LESS relative strength. This divergence doesn't say 'sell', but is a warning that upside momentum may be waning. After such a long advance, it's not uncommon to see a major index having trouble continuing to make new highs.
Near resistance is seen in the 3612 area, with next resistance suggested at the top end of the uptrend channel line, currently intersecting around 3660.
Key support is at 3500, extending to the 3450 area.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 (QQQ) tracking stock chart is bullish but the recent rally above 88 resistance hasn't seen upside follow through which suggests that we could have reached an interim top. 88 even is a key level, with further anticipated resistance then at 88.5, extending to the 90 area.
Technical support is suggested around 86 currently, with next support at 84.8, extending to near 84 even.
The last sizable jump in daily trading volume was on the dip to the 86 area. If there's a break of 86 on heavy volume that will act as a warning to possible further weakness. On Balance Volume (OBV), important relative to this ETF is trending more or less sideways in line with the price trend.
Note that we've seen a couple of Closes below the 21-day moving average but without downside follow through the next trading session. I'm continuing to keep an eye on this key average in case there's a decisive break of this key trading average.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) is bullish as RUT has gone on to make a nominal new high for the current uptrend after a sideways/lateral trend. However, not much progress has been made on RUT's recent apparent upside 'breakout' and I've highlighted near resistance in the 1173 area, with next resistance at 1185. The weekly chart seen below has its upper trendline coming in around 1180. 1180-1185 is key near resistance. 1200 is next resistance.
Support is suggested in the 1150 area, extending to 1142-1140. So far the Russell has held support implied by its 21-day moving average so I would watch this average for potential support; or not, as a sign of maintaining strength; or, slipping upside momentum.
RUSSELL 2000 (RUT); WEEKLY CHART:
Intersection of weekly chart channel lines don't always come in the exact same areas, but RUT's weekly chart uptrend channel line seen below shows potential resistance at 1180 in the coming week, pretty much the same as highlighted in the daily chart above. It looks to be even more definitive in the weekly chart. That's some run up in the Russell since the low of late-2012.
What I especially wanted to highlight with the weekly chart in terms of the 8-week Relative Strength Index or RSI is that prices have been going up as the RSI trendline is pointed slightly downward in a minor price/RSI bearish divergence. This could be something to watch for or may not mean more than RUT gets to say 1200 this month and then starts a sideways to downward drift. Stay tuned!
GOOD TRADING SUCCESS!