THE BOTTOM LINE:
The Dow 30 (INDU) was the worst performer, down 0.8% on the week and I noted last week that just 8 of 30 INDU stocks were still in strong uptrends. Less stocks advancing equals less potential for further gains!
I had also been commenting on how the broader indexes, the S&P 500 (SPX) and the Nasdaq Composite Index (COMP), were lagging the stronger big cap S&P 100 (OEX) and Nas 100 (NDX).
SPX went to new highs for the latest move and then dipped below its prior 'breakout' point (1985), which is bearish. Most bearish so far in its chart pattern is COMP, which has formed an initial double top at 4485.
The small cap Russell 2000 (RUT) was unable to hold above its 50-day moving average for more than a couple of days and its bearish trend continues.
Bullish sentiment among options traders continues to moderate which helps prepare the ground for a future rally.
It seems my advice to take profits (I assumed you had some!) on the last advance reflected the reality that this Market wasn't ready to launch into a next up leg, especially not in the mid-July to August slower seasonal period. I hope you did in fact "take the money and run!"
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) Index continues bearish to mixed in its short to intermediate-term chart pattern, as the Index has trended sideways over the past 4 weeks. The latest SPX advance occurring this past week took the Index to a slight new high, but then SPX slipped to Close below its prior 1984-1982 chart support.
Looked at from a bullish perspective, SPX hasn't yet dipped below its up trendline, currently suggesting support in the 1973 area, or to any Closes below support implied by its 21-day moving average. Next lower support is at 1960. Back to back Closes below 1960, at the last downswing low, would suggest that the intermediate trend had reversed to down.
Resistance is suggested at 1990-1991 and then is seen just over 2000, at 2005. The 13-RSI continues to be 'neutral' (not overbought, not oversold) in the 55-50 area. Bullish trader sentiment has been declining gradually, suggesting that traders have a more balanced view of future upside potential and aren't just assuming every pullback is a buying opportunity.
S&P 100 (OEX) INDEX; DAILY CHART
I wrote last week that the S&P 100 (OEX) "looks like it may be poised to break out above 880 but I'm watching from the sidelines currently." I went on to say that two or more consecutive Closes above 881 would be bullish. The 2-day 'rule of thumb', on closes above prior highs as suggesting a 'decisive' upside breakout, is an expected outcome that doesn't always pan out. A bullish chart is called into question by Friday's bearish downside price gap and Close below 880 support.
Technical support next comes in at 875 and the current intersection of OEX's up trendline; support then extends to 870.
While I highlighted potential resistance on the SPX daily chart below at 881, I'd also watch the top end of the aforementioned downside 'gap', at 883.5, to see if OEX can trade through and above this zone. Next projected resistance is then seen at 886.
Two back to back daily Closes above 880-881 could resume a bullish technical outlook, especially if the 880 area acted as support on subsequent pullbacks; prior resistance, once penetrated, often 'becomes' later support.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
The Dow 30 Average (INDU) had been drifting sideways and while INDU looked like it might break out to new highs above 17150 along with the S&P 100), but the Average didn't gain that traction. I noted last week that only about 8 of the 30 Dow stocks were in still-strong uptrends. And, that such a narrowly led rally wasn't typically associated with a sustained move higher.
The Dow rally coming into this past week was largely due as I noted last time to "... a major thrust higher in IBM, INTC and MSFT, as well as moderate strength in bank/broker stocks GS and JPM and with healthcare stock UNH.
This past week saw moderate to substantial weakness in AXP, BA, CAT, Dow bellwether GE, KO, MCD, TRV, and UTX. Versus the foregoing 8 weak INDU stocks, continued moderate strength, limited pullbacks and consolidations near prior highs in CVX, GS, IBM, INTC, JPM, MSFT, VZ and UNH (another 8, of the 30) have helped to hold the Dow's decline to support implied by INDU's up trendline, but isn't likely enough to pull INDU above its prior highs. Such a rally would need to broaden out to more stocks.
Immediate overhead resistance is at prior support at 17000. Highlighted as key resistance on my chart is 17152, extending to 17200.
Near support is suggested at INDU's up trendline, currently intersecting at 16950. Next support is suggested at 16847 and the Dow's 50-day moving average, extending to prior key support as highlighted at 16800.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite Index (COMP) has formed at least an interim double top at 4485, with the 21-day moving average as near support. 4400 is a key next lower trendline support; further support then comes in at 4350.
COMP presents a mixed picture for the near-term, with a still bullish intermediate to long-term chart. Near resistance is apparent at the prior highs in the 4485 area. I've projected a next resistance not much higher overhead at 4511. 4665 is suggested as current upper channel resistance on the long-term weekly chart (not shown here).
I don't see COMP having a sizable new up leg above the current minor double top in the short-term, nor do I see big potential for a sizable pullback. I don't want the risk in taking on bullish tech positions in a broad congestion or resistance zone in COMP and don't wish to trade against the dominant Nasdaq uptrend either as this market doesn't look to have exhausted buying interest, especially in the key tech favorites. Nothing sexier than technology stocks hitting occasional home runs out of the blue!
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart is bullish but mixed on a short-term basis as the rally to new highs above 3950 wasn't sustained. Friday's gap-lower day was a minor bearish aspect for the short-term trend. I wrote last week that: "It almost seems a 'likely' fate that NDX, having come near this big target, will test the 4000 level."
Test this key (4000) level it did. The immediate sell pressure that came in Thursday-Friday after 4000 was reached in NDX suggests taking a wait and see attitude regarding any near-term breakout above this key number. 4000 is obviously the next key chart resistance, with next higher resistance suggested by NDX's upper channel line, currently intersecting around 4050.
Near support suggested by NDX's up trendline comes in at 3918 currently. Next chart/technical support is in the 3850 area.
The 13-day Relative Strength Index (RSI) hasn't come down much from the extreme seen in early-July. Volatility as suggested by the VXN index, seen at the bottom of the price chart, popped up to 16 briefly, and subsequently subsided. Periods of low volatility can precede rallies but I haven't determined a definite correlation.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) is bullish but near-term mixed, in that the recent rally to new highs, above the 96.3 prior top, promptly lost ground. IF QQQ continues to find support in the 96.3 area, this bodes well for a renewed advance; i.e., prior resistance, once penetrated, often 'becomes' support on subsequent pullbacks. Stay tuned on this.
I've noted key near support at 96.3. Next support is seen in the 95.4 area and the 21-day moving average. Trendline support (but not noted on the chart) intersects at 94.3 currently.
Pivotal resistance is seen at the prior intraday top at 97.5 and extends to the upper trend channel line at 98.2.
The On Balance Volume or OBV line is trending sideways, so this key measure of trading volume is not providing ancillary support for a continued bullish outlook for the Nas 100 and its ETF tracking stock. Friday's gap lower was bearish. If the Q's rally to above 96.9 and the top end of this price gap in a minor bullish plus, the real key then is what happens if QQQ again challenges its prior (97.5) high.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart continues bearish, even though the retracement of the prior decline of a Fibonacci 62% at 1132, given lows at 1131, suggested that RUT might find some support above those lows going forward. While the technical retracement aspect plus the oversold RSI (when it hit 35) that suggested that RUT might stop declining, doesn't of course mean that RUT is ready to begin a sustained rebound.
It was a bullish plus that RUT gapped up this past week to Close above its 50-day moving average, but then the Index renewed it's bearish chart when it in turn gapped lower Friday below the 50-day average. It looks to me like the Russell, assuming it has found a bottom in the 1132-1131 area, has some 'base-building' to do at and above its present 1131 low (for the July decline) before it advances in any substantial way.
Near resistance is at 1156 and the current 50-day moving average, then at the highlighted (down) resistance arrows between 1162 and 1170. Near support is at 1131, extending to 1120.
GOOD TRADING SUCCESS!