THE BOTTOM LINE:
The key downside reversal I highlighted last week that was traced out with the S&P led to a large further drop. It looks like the S&P 500 (SPX) could reach the 1800 area or a bit lower such as to 1775.
The Nasdaq 100 (NDX), which I thought might retrace around 2/3rds of its prior advance and find support in the low-3500 area (WRONG!) ended up at 3446 on the week and could be headed to a 100 percent 'round-turn' retracement relative to its 3419 intraday low of early-February. Hell hath no selling fury like money managers deciding that BIG speculative bets on high-tech flyers have maybe too much RISK!
On an unrelated subject but dealing with fairness in stock trading, we're seeing more brokers indicating that you can direct orders to the Investors Exchange (IEX) that has set up a fair trading electronic arena where the flash traders can't 'front-run' big orders or any orders for that matter. See Michael Lewis' latest book called Flash Boys.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX); DAILY CHART:
As I wrote last week re the S&P 500 (SPX): "moving to a decisive new high for the recent rally, followed by a Close below its prior 3-days' Lows qualifies as what can be called a 'key' downside reversal. It's usually pretty significant for at least an interim top." YES indeed!
SPX remains within its broad and long-standing uptrend channel but the downside to date has been significant. The Index could be headed next to a test of potential support in the 1800 area, at the SPX's up trendline and which would put the current pullback retracement in the 62-66% area. SPX has gotten close enough now to the widely watched 200-day moving average, which is a big deal to the Street. 1740 would be a 'round-trip' 100 percent retracement of the last upswing.
I've noted support at 1800, extending to 1775. A decisive downside penetration of 1740 would turn the intermediate-trend DOWN.
Resistance is seen at 1840, then in the 1870-1872 area. SPX is not yet 'fully' oversold according to the Relative Strength Index but is nearing that zone. My CPRATIO sentiment indicator isn't yet down to an 'oversold' extreme of bearishness but is also getting closer to that.
The VIX index (not shown here) ended the week at 17 and can 'signal' upside reversals in the 20-21 area. Likely more key is the very high VXN Nasdaq 100 volatility indicator (seen with the NDX chart further on) which is now quite high, ending the week at 22.6
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart, like the broader S&P 500, traced out a key downside reversal prior to this past week. Heavy selling in the big cap Nasdaq stocks of course did "spill over" to the big cap S&P.
I suggested last week that OEX could easily fall to support in the 810 area and could hold there. Not quite as the Index sliced through this level but so far has not taken out support in the low-800 area, at 805 specifically. OEX has now retraced 50 percent of its last major upswing. If the Index retraced a deeper 62-66% it would also fall its up trendline in the 795 area. Stay tuned!
I've noted support in the 800-795 area, with expected major support at prior lows from early-February in the 771 area. I should note also expected buying interest if OEX falls to its 200-day moving average at 783.
Near resistance is now down to 815, with next resistance around 828. OEX is also getting down toward a 'fully' oversold reading in terms of the 13-day Relative Strength Index (RSI).
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 (INDU) daily chart is short-term bearish, within a longer-term uptrend. INDU did have a key downside reversal along with the S&P prior to last week. I pointed out last time that fewer of the 30 Dow stocks remained in very strong uptrends; down to around 8 coming into the past week. The still-strong Dow advancer has been declining since the Dow hit a top near 16600.
Not that its not obvious but I pointed out last week that many of the Dow stocks have seen very substantial gains over the 12 months coming into January. It's not just Nasdaq stocks that were ripe for profit taking!
I also wrote last time that "INDU would likely have strong buying support on any decline to the 16200 area." Well, temporarily ONLY! Next technical support may come in around 16000, extending to the 15900 area. Potential up trendline support intersects in the 15760 area, which also would represent support implied by a 2/3rds/66% retracement of the early-February to early-March advance. Stay tuned on that!
Resistance is now pegged at the recent 'break-down' point at 16200; what was resistance 'becoming' subsequent support when it was sliced through. Next resistance comes in around 16400.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite Index (COMP) fell below its long-standing up trendline and it was downhill after that. The significance of the prior up trendline was seen on COMP's rally back to this prior line of support, as the Index's rebound was stopped cold in this area; what was (a line of) support 'becoming' subsequent resistance.
COMP is now getting close to the 3968 area which would represent a 'round-trip' 100% retracement of its last advance. I've noted potential support at this prior intraday low. The 3900 area looks like next chart support, although this is a bit under support implied by COMP's 200-day moving average at 3933.
I've highlighted initial overhead resistance at 4050, then at 4185.
The Composite is now into its oversold zone and my call-put 'sentiment' indicator is nearing another type of oversold extreme, which is a CPRATIO low reading that suggests traders are getting 'extremely' bearishness. In a contrary opinion sense, such times are a point to look for any confirming price action of an upside reversal.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart of course has had the same continuing bearish pattern as the broad based Composite Index as NDX also fell under its long-standing up trendline. Nevertheless, I thought that NDX might find some buying interest near 3500 but that was sliced through on Friday as selling kept coming.
It's now looking quite likely that NDX will re-test support implied by its prior Closing low at 3440 or at its intraday lo0w at 3419, which would represent a 100% 'round trip' retracement of the last major run up. Potential support/buying interest then extends to 3400 or a bit lower, especially to NDX's 200-day moving average in the 3369 area.
Near resistance now is seen at the most recent 'break-down' point at 3500. Next pivotal resistance is highlighted at 3600.
A note on VXN, the Nasdaq 100 volatility index:
There has been a tendency in recent months for bottoms in NDX to form with elevated VXN readings in the 21.5-22.5 area. One more dip might 'set' that up, especially if a potential double bottom low formed in the 3440-3419 area.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) is bearish in the same way as the underlying NDX. QQQ pierced potential support in the 85 area and also appears headed to a re-test of ITS early-February low just under 84 even. Potential support below 84 doesn't appear to come until 82 is reached, although I'd also note support implied by the Q's 200-day moving average at 82.4, which should be watched for signs of an upside reversal assuming a decisive downside penetration of 84-83.7 occurs.
I didn't note potential close-by resistance in the 85 area on the QQQ daily chart below but highlighted technical resistance at 87.8, then in the 89 area.
A cluster of sharp spikes in daily trading volume tend to occur in the area of QQQ bottoms, but this is an ancillary indicator. The On Balance Volume (OBV) line continues to be in a downtrend.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) continues bearish in its pattern and the Russell has now fallen under its long-standing up trendline and where I've noted initial technical resistance at 1130. Next resistance is suggested around 1160.
Near support now looks like 1105-1100, with next potential support implied by the prior intraday low at 1083 although the prior Closing low was a bit higher at 1093.
RUT is oversold again on an intermediate-term basis, which has often been significant for a bottom but this sell off is extreme enough that we can't read a lot into this except to say that traders should be alert to an upside price reversal.
GOOD TRADING SUCCESS!