THE BOTTOM LINE:
I implied last week that traders might not be active in continuing to bid up stocks as part of the 'typical' summer slow down. Whereas, in retrospect, stocks had been going up on the expectation of a favorable increase in the employment numbers. The last spurt higher 'discounted' the even better than expected numbers released ahead of the 4th of July holiday weekend. As to resistance and upside targets, I noted last week (6/28) that:
"I'm watching the following key resistances, which if overcome, suggest further upside momentum to come:
S&P 500 (SPX) - resistance at 1964 intraday; 1968-1970, Closing.
S&P 100 (OEX) - resistance at 870, per long-term charts.
Dow 30 (INDU) - resistance at 16910, then 16970-17000.
Nasdaq Composite (COMP) - key resistance at 4415, then 4450.
Nasdaq 100 (NDX) - resistance, 3875-3900."
Whereas the aforementioned moves may suggest further upside to come, it's also true that the major market indexes have reached what I saw as 'reasonable' objectives on the S&P 500 (SPX) and the big cap S&P 100 (OEX). I didn't have a specific objective on the Dow but it did pierce key resistance suggested at 17000 highlighted last time. The Nasdaq also has exceeded my initial targets/resistances in COMP at 4450 and in NDX at 3900.
All of the major indexes may go higher as the current trend is strongly up. However, with volatility so low and overbought indicators (except for INDU) so high (as is bullish trader sentiment), I suggest its time to take profits on bullish strategies or at least partial profits.
By taking profits at pre-set objectives I've never lost more than some further potential unrealized gains. However, the statement that "no one goes broke taking a profit" is TOO simplistic by far, if it means taking profits as soon as your strategies START to work. Exiting too soon means missing what might be a sizable move in your favor; e.g., when NDX goes up 350+ points from where the Index was a relatively 'safe' buy (on a risk to reward basis) around 3550.
I've calculated further upside resistances for the major indices in my comments below. Just so you know my trading philosophy or style: I attempt and succeed often enough to get into significant price swings EARLY and then get out 'early' in the sense that I tend to exit when the indexes I'm following are calculated to be in the last part of a move (e.g., the last 10%); AND, where the risk of a counter-trend correction has grown significantly.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) Index has been in a solid uptrend, irrespective of the recent short-lived dip TO its relatively steep up trendline. This past week brought an acceleration of the Index's advance as SPX cleared 1980 resistance. My target on SPX in terms of a 'pre-set' objective was 1980-1985 and that's been reached. This is not to say that SPX isn't likely to go to say 2000-2010. It's hard to believe that SO close to a 2000 major milestone, buyers won't push the Index there.
Relative to having bought SPX calls at the time of bottoming action in the 1860 area, another 15 points to 2000 isn't a lot more upside relative to an existing 120 point gain in the Index from trade entry. An added 15-25 points relative to the ADDED risk is another story due to, for example, an increased risk of a shakeout that you don't get out of quickly enough.
Support is highlighted at 1970, extending to 1950. Resistance is suggested at the benchmark 2000 level, extending to 2010-2015.
An indicator of an overbought market is expressed with a high reading (75) in the 13-day Relative Strength Index (RSI) and with high bullish trader sentiment. If there is ANOTHER 'key downside reversal' or some such reversal type price action, this time it could well be a tip off to an interim top or a sideways leveling off trend. A recent 1-day ('key' downside) price reversal didn't predict more than a brief pause in SPX's continued higher advance.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) advance accelerated to the upside this past week once OEX pierced a line of resistance at 867. OEX has reached 864 and could be headed to 890-900, speaking of big even 'milestone' numbers (900).
I've been suggesting taking profits on bullish positions. There's considerable profit waiting to be taken if, for example, you bought into this move during the favorable risk to reward outlook seen in the late-April to late-May bottoming (sideways) chart action. Going out past June expiration was necessary but makes sense as July-August often see even strong uptrends flatten out although not in early-July so far!
I've highlighted near support at 865, extending to 860 per the green up arrows. Not noted on the OEX daily chart, but as suggested at the intersection of the lower up trendline, technical support should come in next in the 850 area; near to the important 50-day moving average also.
The only 'resistance' I can point to is suggested at the upper channel line currently intersecting at 890. 900 is a 'natural' target for the bulls to keep bidding up the big cap S&P stocks to take OEX to or above that big round number.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 Average (INDU) is bullish as the Dow has finally gone to a decisive new high above a line of its prior tops in the 16970 area. What was prior resistance in this area should now be a first 'support'. I've estimated a next Dow resistance for just over 17100, with a higher target and possible resistance coming in around 17260.
Last week I pointed to Dow stocks AXP, CAT, CVX (oil) DIS, GE, INTC, JNJ, KO, MMM, MSFT, TRV, UNH and XOM (the other big INDU oil stock) as all looking 'capable' relative to bullish charts, of higher prices. Added to the above 13 INDU stocks was good to strong price action in HD, IBM, MRK, T, and V, making for 18 stocks that collectively pushed the Dow higher; or, at least were not off any appreciable amount in the shortened week just ended.
Support in the Dow below 16970, is highlighted in the 16825 area, then next around 16720 and close above the 50-day moving average which ended the week at 16701.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
I wrote last week that:
"The Nasdaq Composite Index (COMP), after looking like it would top out for a time at or near the prior 4370 intraday high, went on to Close near 4400 at near-term technical resistance. To move into a clear cut bullish pattern COMP should close above 4415 at the previously broken up trendline. Next resistance is at 4450."
OK, check and double check as COMP soared to 4485. What next in terms of technical resistance?
I've highlighted the top end of COMP's uptrend channel as potential resistance at 4550. Assuming a decisive upside penetration above its current bullish price channel, a next COMP target and possible resistance, comes in around 4630. Near support is suggested initially at COMP's up trendline intersecting at 4415, with next support seen in the 4350 area.
A very HIGH and overbought RSI is a feature of my key indicators, as is substantial if not 'excessive' bullishness. What makes bullishness excessive is somewhat subjective but is mostly a comparison with the relevant call to put volume ratios of past months and years. My indicator is probably skewed a bit as such low volatility makes for 'cheaper' calls and probably drives some call volume to a degree. I base my model of 'sentiment' on equities-only daily call volume versus put volume.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart is bullish in its pattern and shows a continued strong rate of increase, visually seen in the steep up trendlines comprising NDX's uptrend price channel dating from the mid-May upside breakout above a line of prior resistance at 3615. A bullish outlook was actually warranted from the time when the Index made a second double bottom low on NDX's brief mid-April intraday dip to 3414. The Index has had a heck of move higher to its Thursday end-of-week Close at 3923!
Next (potential) technical 'resistance' is suggested at the upper channel line, currently intersecting at 3970. Next resistance above 3970 is estimated in the 4030 area.
Near support is highlighted at 3850, at NDX's up trendline, with support/buying interest coming in around 3800.
Fairly major support begins at 3700.
Like the Composite, the big cap Nasdaq 100 is at an overbought extreme according to the 13-day Relative Strength Index or RSI. At 84 it's as high as I've seen it in the current bull market, since an 83 RSI peak in mid-April 2010. At that time the market topped out over the next 12 trading sessions and had a substantial but brief 200 point dip after that. Past comparisons don't mean the same pattern will reoccur but looking back gives at least some idea of downside risk from prior Market cycles.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) is bullish in its chart pattern and the only difference suggested by the NDX and QQQ chart patterns is that QQQ just touched the upper end of ITS uptrend price channel, thereby implying potential resistance at Thursday's Close at 95.7.
On the long-term weekly chart (not shown) QQQ's upper channel, and implied resistance, line comes in at 97 currently. I've noted potential next QQQ resistance at 96 on the daily chart, extending to 97 over time.
Support is seen at what was prior resistance at 95 even. Chart support then extends to 94 and still a bit lower to 93.5.
Daily trading volume has been relatively low. I've observed this phenomena over years and still can't quite get used to the fact that uptrends in QQQ don't tend to drive big increases in volume (unlike 'regular' company stocks); only downside reversals below perceived support levels bring big spikes in daily QQQ volume. However, as long as the On Balance Volume (OBV) line is going up, in the SAME direction as prices, volume is 'confirming' an advancing price trend.
I favor taking (assumed!) profits on long positions in QQQ.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) has rebounded along with the Nasdaq, but the weaker RUT Index has of course NOT gone to a new high for the current move. Consequently, I've highlighted very close by resistance at 1209 as seen on the daily RUT chart below. Next resistance then looks like it comes in around 1226 currently.
RUT is 'overbought' in terms of the RSI, suggesting to be alert to a possible double top if the high reading in this indicator suggests trouble in the Russell breaking out to a new high.
I'd exit bullish positions on further strength or on a break below 1200 at this point. 1200 is immediate/near support, with next technical support at RUT's up trendline as highlighted at 1183, with support extending next to the 1170 area. I could have noted 1160 as a further next layer of support also but tend to stick to what I think we could see within a coming week.
GOOD TRADING SUCCESS!