THE BOTTOM LINE:
My outlook is toward more upside potential then not overall, with good potential for an upside breakout in the S&P and Dow but probably not before Nasdaq establishes a bottom and that seems to be in process. More in that section. I also show potential for RUT to be at or near a bottom.
My Index Wrap this week should be considered in tandem with what you'll seeing by going to my 5/8 Trader's Corner piece of two days ago.
If you go to the above LINK it will set the stage for my brief 'bottom line' commentary here. As we're in a rotational correction period, SPX, OEX and INDU are held back from breaking out above their respective lines of resistance. All it would appear to take for that to happen is for the Nasdaq to find some footing. That looks like its happening. See charts.
For a speculative play, the Russell 2000 (RUT) looks to be at or near a bottom. Check out the upside reversal history of RUT in prior instances when the Index the highlighted area of low extremes in the Relative Strength Index (RSI). See my last chart below.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The yellow box highlighting the potentially bullish rectangle in the S&P 500 (SPX) is from my Trader's Corner column of the other day. The point with rectangle patterns, which are sideways trading ranges that can persist of over weeks or longer is that there is a tendency for a strong move in EITHER direction assuming a move through the high end OR below the low end of the price range box that the index (or stock) as been in.
What we ASSUME with a sideways trend WITHIN a long-term up trend, is that this most likely represents a bullish consolidation. A potential next leg up is 'signaled' with a decisive upside penetration of 1897-1900 in the case here of SPX.
This chart could also be said to 'show' possible formation of a Head & Shoulder's Top, but I don't see it as SPX continues to consolidate just under the HIGH end of its range and (very important) ABOVE the 21 and 50-day moving averages.
Bullish sentiment is coming down and sets the stage I think for another rally ahead. If so, upside potential can be projected to the 1980-1985 area at least.
Near support and pivotal is at 1860; once proven strong support was seen in the 1825-1815 zone. Near resistance is seen at the upper end of its trading range when SPX last approached 1900. Above 1900, resistance is projected next for the 1930 area.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) is in what I consider to a bullish rectangle pattern which is fancy for a sideways trading range with multiple peaks and valleys that touch the same price area on the upside and with multiple prior lows on the downside.
Since the move back above its 50 and 21-day moving averages, OEX has traded above these averages which sustains some upside momentum. A dramatic pulling away from these averages is another story. I see modest upside potential above 840 but the Index has to clear this line of resistance. If so, a next advance in OEX could carry to the 852 level and higher over time; e.g., to 870.
Key near support is at 825, extending to 820, then 815. A Close below 805 would be bearish, especially if not reversed (back to the upside) the following trading day.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 Average (INDU) has the same potentially bullish pattern I'm seeing with the two S&P indices. The Average keeps re-bounding to the area of prior highs and has been trading above its key 50 and 21-day moving averages. In a long-term uptrend, which the Dow is still in, sideways moves, even prolonged ones, that travel in a lateral to curving higher line are bullish consolidations in about 7 of 10 instances.
If Nasdaq finds some base of support, it appears likely INDU could find the spark for a next move above its key near resistance at 16600-16630. If so, a next run to a next higher resistance could carry to the 16850.
Near support is at 16400-16350, extending then to 16200. 16000 should offer fairly major support/buying interest.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite Index (COMP) chart is bearish on a short term basis for sure. An intermediate trend reversal to down as well would occur if COMP were to start trading below the prior (down)swing low as shown below as a likely 'double bottom'.
The potential that we've seen a significant bottom form is not only because good buying interest/support was found in the area of the prior low, but because the Index also got fully oversold per the RSI. Moreover, COMP is holding above long range support implied by its 200-day moving average, so far at least.
I assess some likelihood that COMP will hold above 4000 week to week ahead. I've highlighted near support at 4020, but it might as well be 4000. Next support at the prior lows at 3969 but the most recent intraday low slid to the 3950 area. I don't see another big downside move coming in Nasdaq. Stay tuned on that!
Key overhead resistance is suggested by the down trendline intersecting currently at 4156. Key resistance starts at 4050 and extends 4156-4160.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) is potentially 'building' a bottom by its most recent pattern of higher intraday lows (off the mid-March bottom) and generally moving in an overall sideways trend. This after the early-February, mid-March bottoms formed in the same area. The longer that the NDX trades above this 'assumed' double bottom the more it can establish that all important base of support.
Since the cluster of lows made at 3450-3419 area, NDX price action is showing a tendency to rebound. The Nas 100 just hasn't been able to gain sustained UPSIDE traction and pierce that pesky downtrend line. The Nasdaq 100 VXN volatility index (last at 16.5) is lately declining a bit. All the more reason to think that the last low, at a VXN over 22, was a significant one.
Most of what I have to say about the way NDX may go ahead is noted on the chart. What I can add here is that 3550 is a somewhat pivotal level. More trade above 3550 and less back to the 3500 area keeps bullish NDX upside potential on my radar.
Near resistance at the trendline is 3590 just ahead and to 3650 as a next bullish target assuming NDX can trade above 3600 for a period of a couple or more sessions.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) shows of course the same pattern as the NDX chart above. I don't know why I feel compelled to say that but only the support/resistance levels are different. Same significant double bottom is suggested.
86 is key near support, followed by 85 even. Key resistance is at QQQ's down trendline, so first comes this at 87.6 in the Q's. If the tracking stock climbs above 87.6 and then 88, it could see a next advance to 89.5. Stay tuned on that.
Daily trading volume recently quite low and I wouldn't expect a panic 'spike' in volume unless 86 gives way in a waterfall type decline.
RUSSELL 2000 (RUT); DAILY CHART:
I'm not looking at the Russell 2000 (RUT) as being in a death spiral but only as finally oversold and looking like it has potentially formed its OWN double bottom like the big boy indexes. True that RUT has been trading lately BELOW the important longer range 200-day moving average. I look more at price patterns as more key than this (still short-lived) dip below the 200-day being a sign of a bear market in the small cap stocks of RUT.
I've highlighted resistance at 1123; call it 1120-1123 as the key area for the Index to overcome first. Next resistance is 1140, then 1160. RUT is sometimes a harbinger of an overall market move and sometimes just diverging. If RUT has hit bottom, the overall Market adds a secondary reason to work higher.
I think a bullish play, on a risk to reward basis, in the Russell is at or near at hand, with an exit on a close below 1080. The technical aspect that's important to me is RUT got fully oversold again with a bottom holding at the prior major downswing. A possible trade to like: in prior cases this kind of price/indicator patterns suggesting limited downside relative to even a modest rebound.
GOOD TRADING SUCCESS!