THE BOTTOM LINE:
In the 2009 to present bull market, the major indices have traded within price ranges that swing from 3-4% above to 3-4% below a 21-day 'centered' moving average. In occasionally more volatile periods these percentage trading 'bands' or moving average 'envelope' lines might expand into a 4-5% range above/below the 21-day averages; an expansion more likely in the Nasdaq.
No such expanded price range seen at COMP's most recent top and bottom, where the tech-heavy Index didn't Close above a value greater than 4% OVER its 21-day moving average; nor did either the Composite or the big cap Nas 100 fall to a Close greater than 3-3.5% UNDER its 21-day average.
I'm giving some background here on the use of (mostly) 3-4% moving average 'envelope' lines on my DAILY charts that follow my first chart, and where bottoms formed last week. My assumption is that the lows for our last decline are in.
Another key point is that declines often stop in the area of common lower trading 'bands' (i.e., moving average envelope lines) that 'float' 3-4% above/below a centered 21-day moving average and which tends to 'contain' declines. Declines to the lower envelope lines COUPLED with a 13-day oversold Relative Strength Index (RSI) has been a common key 'confirming' indication for a bottom.
Volatility Indexes have also sometimes been a key 'confirming' type indicator in suggesting a bottom has formed; e.g., VIX climbs above 22 and VXN above 21-22 as we saw last week.
The SHORT position I recommended in QQQ should have been covered or exited on the decline into the 102-101 zone per my (trade) objective noted last week.
Most 'oversold' declines in a bull market bottoms tend to be "V" bottoms. NOT a pattern seen at most tops in a bull market. So called V-bottom patterns or formations can be clearly seen on my first chart, that of the hourly S&P 500 (SPX).
I'd also make note of the 21-hour RSI seen above. This indicator was rising during the last part of SPX's hourly decline seen above; i.e., a 'classic' bullish price/indicator divergence.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
An upside reversal developed on the heels of the S&P 500 (SPX) falling to the area of my lower trading envelope 'band' (at 3.5% under the 'centered' 21-day moving average). This suggestion of an 'oversold' market, with prices at the lower band, went hand in hand with a dip to a traditionally oversold Relative Strength Index, RSI. Two days of holding the same intraday low was the tip off to act fast to buy into the lows as is typical of V-bottom lows in bull markets.
VIX, the S&P 500 Volatility Index, went from 11.8 on 12/5 to 24 on the day of the 12/16 low showing again the tendency for S&P bottoms when the VIX Index climbs above 22.
With SPX's rebound back above the 21-day moving average suggests potential to then clear the line of resistance in the 2075 area. Resistance extends to 2100, then to the 2130 area. Support is highlighted at the 21-day Average, currently intersecting at 2050. Next lower support, 2000.
Bullish sentiment jumped with the recent rebound but doesn't indicate any excess of bullishness. I look for the current rally to continue.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 has reversed back to the upside after declining to the lower 'envelope' line at a minus 3.3% BELOW its 21-day moving average. I look for downswings to tend to run their course in an area that's around 3% below OEX's 21-day average; in this case, the UPPER trading band was at 3.3% and there's a tendency for same values on the upper and lower bands to be seen over time.
The RSI reading was in the oversold zone at recent lows and, as seen above with my 'CPRATIO" sentiment indicator, there were spikes in bearishness before this last low.
I anticipated support in the 880 to 870 zone and that's where a 3-day bottom formed. 2-3 days to decide to get bullish is a fortunate long span of time to seize a bullish opportunity.
Near support is now seen at 900, extending to 890. Near resistance comes in around 920, with next resistance projected for the 932 area. 940 now looks doable as an upside objective for an up leg above prior highs.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 Industrial Average (INDU) snapped out of its losing streak conclusively after hovering at lows at the lower envelope 'line' seen on my SPX chart. This moving average envelope was set to float or reflect values equal to 3% under the 21-day 'centered' moving average.
The upper envelope line intersected at 4% above the 21-day average. In a bull market it's not surprising to see bottoms form in the S&P and Dow if the Indices dip to below the 3% envelope line; i.e. a daily value that's 3% below the 21-day moving average.
I wrote last time that "I see the end of this fall as setting up another buying opportunity, which is appropriate in a long-term bull move." I anticipated strong support/buying interest coming in at 17200-17175 and extending to the 17000 area. INDU fell to no lower than 17067 so pretty much as anticipated there. If you own calls and are otherwise in bullish strategies, hang in for higher prices.
18000 is resistance but not major resistance in the Dow. INDU could make it to 18200 on a next rally and move toward 18500 over time after that.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) has resumed its short-term bullish trend after dipping to 3% under its 21-day moving average. This way of measuring current price versus a key trading average was suggesting that the Index was 'oversold' in that price area. This is the pattern applicable to a pullback in a Bull Market. The low reading of the Relative Strength Index (RSI) was a related visual reminder of the oversold condition existing at the recent low.
I anticipate a next move can carry COMP over 4800 resistance with the Index then having potential to reach the 4900 area after that.
Near support levels: 4700, extending to 4650. Next support then seen in the 4550 area.
NASDAQ 100 (NDX); DAILY CHART:
The NDX 100 (NDX) has flipped from a short-term downtrend back to the upside with the Index's recent strong rebound from the 4100 area, which was anticipated as fairly major support. The short, intermediate and long-term trends are all again pointed higher. If you want to get chart savvy, it's also true that the key upside price gap from late-October was 'filled in'; the low end of price gaps BELOW the market tend to offer subsequent support.
Near support is seen in the 4200 area, with fairly major support back in at 4100. Near resistance is seen at 4300, extending to 4330, then on up to 4400. I can envision a move to the 4450 area over time.
The Nasdaq 100 Volatility Index (VXN) shot up from a reading of 14.3 on 12/5 up to 24 on the day of the 12/16 low - see the lowermost figure on the NDX chart. This reinforces the view that VXN readings above 21-22 may be associated with a bottom that's at hand of 'near'. The so-called 'fear index' can be highest at bottoms no doubt. Been there, done that!
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The QQQ chart has the same upside reversal pattern as the underlying NDX as the short-term trend is back to UP. Key support as I've been saying was found near 100. I suggested last time that my downside objective for a recommended QQQ short position was in the 102-101 zone; i.e. objective reached, exit the trade and you could have bought the dip below 101 even.
Near support is at 102, with fairly major support again anticipated in the low-100 area.
Overhanging resistance and a key one is at 106. I anticipate that QQQ could pierce this pivotal resistance in the 106 area and make a next move toward 108.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) at least has broken out a short way above a line of resistance around 1190-1192. Key near resistance is at 1200, extending to 1220. Next resistance then might come in at 1240. I anticipate that RUT could get to 1240-1250, assuming continued strength in the other major market sectors.
Support should be found on pullbacks to the 1180 area, then at 1160.
I repeat my expectation of RUT having more broad two-sided price swings. You can 'buy' oversold RSI readings more often than not.
GOOD TRADING SUCCESS!