THE BOTTOM LINE:
The major indexes were down on the week as prices worked sideways to lower. The pullback hasn't been big as stocks 'throw off' their prior overbought extremes.
The outlook for the Market turned mixed as many buyers stepped to the sidelines as Q2 earnings started coming out. Technically, a correction was 'due' given the overbought extremes that were reached prior to this past week. And, all it takes is a more or less sideways move to cause the Relative Strength Index (RSI) 'overbought' readings to decline down to more neutral territory.
I suggested taking profits on bullish positions last week and am not pining to get back in given the way the charts are looking currently in pause mode. It looks like a good course of action is to stand aside as the long-term uptrend pauses. As to adopting bearish strategies I don't see the percentages in that either as the dominant trend remains up.
Unlike the S&P 500 (SPX), the big cap S&P 100 (OEX) and the Dow 30 (INDU) have yet to Close below their up trendlines. The previously strong Nasdaq 100 (NDX) has also not made a decisive downside penetration of its up trendline in that Closing levels have maintained the Index above its bullish/up trendline.
The Russell 2000 (RUT) is the weakest of the indexes. When RUT got back the area of prior intraday highs, it fell sharply after that; well, at least from a line of resistance at 1209 to Friday's Close in RUT at 1159.
It looks like we're now in the summer doldrums and the recent sideways to lower correction may go on for a while. A good time to take a break from assuming any large bets on further upside and letting the current correction play itself out as S&P and Nasdaq volatility indexes have rebounded some from very LOW recent levels.
It's another matter if prior highs are clearly exceeded but it's not what I forecast near-term at least.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) Index is bullish on an intermediate to long-term basis and bearish to 'mixed' on a short-term one. SPX fell below its previous up trendline. Not surprisingly in that the prior up trendline, dating from the mid-May low, was a steep one. I have no trading suggestions except to stand aside from taking on new positions.
The risk of another down leg is large enough that, taking on bullish positions doesn't have a favorable risk to reward outlook in my opinion.
Resistance is seen in the 1985 area, extending to 2000. Technical/chart support is highlighted in the 1950 to 1940 price zone; I'd also note that very short-term support is suggested by the 21-day moving average and if SPX started falling below this key trading average, this could set the stage for a test of lower support area.
Back to back closes above 1985 would suggest that 2000 could get tested; the same thing for closes below 1940, as suggesting further weakness. Bullishness is still quite high. If it was lower and my 'CPRATIO' indicator line came down some more, this could help set the stage for a next rally.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) advance has stalled a bit but Closes have held above OEX's up trendline dating from mid-May. The 21-day moving average, as is the case with SPX, is important in gauging short-term price momentum; trade above this average suggests that prices are maintaining an uptrend and below this line as suggesting prices may be headed lower still.
Key resistance in the area of prior highs comes in around 878. Next resistance is at 885.
Near support is suggested at 866, tracking the aforementioned 21-day average. Support then extends to 860. Fairly major support comes in the area of OEX's up trendline and its 50-day moving average; i.e., at 852-853.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 Average (INDU) has lost short-term momentum as intraday lows fell back to INDU's up trendline; to below this line on Thursday and Friday intraday, but not on a Closing basis and the all-important 'moment of truth' so to speak.
Updating the bullish list of the 30 individual Dow stocks there are 8 (down from around 18) that have not faltered in their bullish weekly chart patterns: CAT, CSCO, DIS, INTC, JNJ, MSFT, TRV and UNH. This 'bottoms up' analysis suggests that INDU may be headed lower.
Near resistance is at 17000, extending to 17075. Near support is seen at 16800, with next technical/chart support suggested in the 16720-16700 area.
I'm neutral on the near-term outlook. INDU could go up, could go down. Yes, I know, not a profound statement but that's the way things look, especially when you flip through the 30 Dow component charts. It's a coin toss to a degree but short-term momentum is down and the trend uncertain in the near-term.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
"The Nasdaq Composite Index (COMP) has fallen under its admittedly steep up trendline dating from mid-May and suggests we may see further downside. I'll also be watching the 21-day moving average as a harbinger of future direction as trade above it suggests the trend is up, trade below this key average suggests potential for another down leg.
Technical support, beside that implied by the 21-day average, is highlighted at 4350, extending to 4300.
Near resistance is obviously suggested by the recent intraday COMP high at 4485. Next key resistance comes in at 4550, extending to 4600.
The 13-day Relative Strength Index (RSI) has pulled back to a more or less 'neutral' reading. My sentiment indicator (CPRATIO) saw a mid-week reading that was also a neutral mid-range reading but bullish sentiment still predominates. I lean to the view that we'll have some more days when bullishness falls off before we see another sustained rally in the Composite.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart is maintaining bullish Closes above its up trendline so I continue to rate the chart as bullish; especially so, as the lowest low of the week (Thursday) rebounded from NDX's 21-day moving average. 3850 is a key must hold support for the bulls. Back to back Closes below 3850 suggests potential for another dip such as to 3800 or a bit lower, such as to 3750.
Near resistance is implied by NDX's prior intraday highs at 3923. A close above this prior high that continued to provide support in subsequent days would suggest upside potential to the pivotal 4000 level. We'd then have pundits speculating if NDX might not eventually challenge its 2000 monthly tops in the 4200-4300 area, to a peak around 4800.
My outlook is more or less neutral on NDX. Individual key tech stocks within the Index are still going up strongly; others are in correction mode or marking time. A mixed chart here and I don't want to suggest staying in bullish positions after what was a heck of run up. I like that part, not the part where we speculate on whether the index in question might go up somewhat more but its no longer clear sailing higher.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) is bullish in holding 94 support and the stock (or 'ETF' properly) looks capable of re-testing prior highs at 95.7. A close above 95.7, that didn't reverse lower the following day(s), would suggest potential to the upper end of QQQ's uptrend price channel, currently intersecting at 96.7
Key near support is at 94-93.6, extending to 92.7.
The On Balance Volume line (OBV) is trending sideways to lower and Friday's spurt higher was on very low volume. Recent volume activity doesn't lend much bullish support to the price chart.
Overall, as with NDX, I'm neutral and lack conviction for the prospects of a renewed push higher. I've suggested in the past week taking profits on bullish positions.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart is bearish in its pattern but RUT has paused after appearing to find support in the area of its 50-day moving average. This, after RUT retraced approximately half of its prior advance.
Near support is suggested by the 50-day moving average, currently at 1150. Next lower chart/technical support comes in around 1120.
Near resistance is highlighted at 1170; next resistance is in the 1185 area (not noted on my chart) and then at the line of prior highs at 1209.
RUT tends to be a buy when it gets oversold but can hit such levels more than once. I suggest, besides keeping an eye on price action for signs of bottoming, to follow the 13-day Relative Strength Index (RSI) when readings are below 40 and especially when RSI gets to around 35.
GOOD TRADING SUCCESS!