THE BOTTOM LINE:
It was a matter of WHEN not IF as to getting into bullish positions again for those many sitting this recent correction out. 'It's a bull market stupid' might apply as it is and corrections remain buying opportunities.
I was over-optimistic on buying Nasdaq 100 (NDX) calls in the 4000 area, as it did touch 3935 intraday and Closed at 3985 (Thursday) before rebounding.
There was no mistaking bottoming type action: V-shaped bottoms quite apparent in the S&P and Dow; retracements of 2/3rds/66% and one of my favorite buy 'signals' in the Dow and Nas 100; oversold RSI readings in the S&P 500 and the Nasdaq Composite and a fairly low Call to Put (CPRATIO) reading on Thursday at 1.28 versus a 'typical' 'oversold-bearish extreme' zone of 1.0-1.2.
As is usually if not often the case, technical/chart/indicator patterns 'FORECAST' the upside reversal that was seen as fundamentally 'justified' by the employment report on Friday.
I think options traders are a more savvy lot as they never got OVERLY bearish in terms of my sentiment indicator which uses daily equities call to put volume ratios to forecast bullish/bearish 'extremes' in sentiment.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
SPX looks to be back on a bullish track, having reversed in a V-bottom pattern, in the area of its long-term up trendline; in terms of the support trendline we have to 'discount' the intraday climax low of Thursday which was below this line. Not the Close however. This looks like this will be the low for this recent pullback.
Support is seen at 1945, at the current intersection of SPX's up trendline, with fall back support at the this past week's intraday low at 1925. Unless the lows of early-August in the low-1900 area are pierced decisively, the intermediate trend remains UP.
Resistance is three-fold: initial resistance at 1980, then pivotal resistance again in the 2000 area, extending to 2020.
The Relative Strength Index (RSI) got within a hair's breath of its 'typical' oversold zone on Wed/Thurs and trader bearishness showed a fairly extreme bearish outlook (on my CPRATIO 'sentiment' indicator) on Thursday when it looked like the sky was falling on the US Market from European recession talk.
S&P 100 (OEX) INDEX; DAILY CHART
OEX also reversed in the area of the low (support) end of its uptrend price channel on a Closing basis. It has a typical V-bottom pattern like SPX after reversing from an area above it prior downswing low of early-August.
Suggested near support is highlighted at the current intersection of the OEX's up trendline in the 870 area. Lower support is in the 860 area of the recent intraday low. 850 should offer fairly major support as it did in August.
Resistance is seen at 880, extending to 890 and finally at pivotal resistance around 900, a milestone level for OEX.
We can't rule out another dip to the 870 area or a bit under but it should be well supported again.
THE DOW 30 (INDU) AVERAGE; DAILY CHART:
INDU retraced 66% of its prior advance and is one of my favorite 'signals' to look for the end of a decline in a bull trend. Moreover, this retracement came in at support implied by the Dow's up trendline as seen on the chart.
Support is highlighted at the current intersection of the INDU's up trendline at 16695-16700. I've highlighted major support at 16400, but realistically I don't current anticipate more than a further dip to the 16550 area if that.
The Dow didn't get 'fully' oversold at the recent apparent upside reversal but its also true that INDU has lagged the S&P and didn't get as 'extreme' on the upside in terms of being overbought either.
Dow stocks DD, HD, GS, INTC, KO, JNJ, MRK, MSFT, NKE, TRV, and UNH all look capable of working higher.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
COMP also looks like it may have finished correcting as it fell to just above my re-drawn up trendline dating back to the mid-November lows of 2012.
Support implied by its support/up trendline comes in around 4355 currently and support implied by the line of the prior cluster of lows comes in at 4325.
Resistance is at 4500, extending to 4520, then back at the line of prior intraday highs in the 4600 area.
Adding an ancillary indicator pattern to the apparent upside price reversal was seen with the Relative Strength Index (RSI) having finally gotten 'fully' oversold this past week.
Moreover, at the same time trader sentiment got close to a level of bearishness that I associate with upside reversals; again, within the context of a bull market trend. In bear market trends, bearish sentiment gets more extreme as you might imagine.
NASDAQ 100 (NDX); DAILY CHART:
NDX appears to have had an upside reversal relative to its recent short-term down trend within the context of the still bullish intermediate-term uptrend. This was most strongly suggested to me by the fact of the Index having retraced 66% or 2/3rds of its prior advance. In strong bullish trends, we rarely see more than a 50 to 62-66 percent retracement.
Moreover, NDX rebounded this past week at just above its up trendline, the intersection of which currently implies near support at 3925 as highlighted on the daily chart below. Next support comes in at 3900-3880, extending to 3850 as highlighted (by the green up arrow) at the line of support seen at the prior (early-August) cluster of lows that ended the last downswing.
The RSI indicator was nearly at what I consider a fully oversold reading but in the area of the RSI low associated with the last upside reversal (early-August).
VXN, or implied NDX volatility, sometimes referred to as a 'fear index', had been rising toward the extremes we've seen before at Nasdaq 100 correction lows.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
QQQ remains within its broad uptrend price channel at recent lows and the apparent upside reversal from the 96 level. 96 was and is current support going into the coming week. Major support is seen at 94 even.
Resistance is highlighted in the 99 area, extending to 100, then 100.6 which represents the prior intraday high in the Q's.
Daily trading volume was mostly well above average this past week as fear gripped investor outlook related to even the high-tech/internet darlings. The On Balance Volume (OBV) line appears to have leveled off and looks to be ready to resume moving up again. Stay tuned.
RUSSELL 2000 (RUT); DAILY CHART:
Even a dog has its day and I was writing last time that when RUT gets to an oversold extreme in the 13-day Relative Strength Index or RSI, its time to look to come in bullish again.
RUT didn't rally from its early-August lows but did from its mid-May bottom in the low-1080 area.
The pattern in the Russell 2000 now looks like a broad double bottom.
Key technical support is highlighted in the 1080-1083 area. Resistance is suggested at 1120, then at and just over 1140 and finally at the resistance/down trendline.
GOOD TRADING SUCCESS!