THE BOTTOM LINE:
The media picks up on continued new highs in the Dow, etc. even though only minor gains, without also noting recently slowing upside momentum. But then they'd have to KNOW something about the Market, other than the Dow went to (yet) another new high. Boring!
A point that I'd make here is that prices may drift mostly sideways ahead, perhaps dipping a bit in the process. I've learned not to make predictions that low volume in a holiday shortened week simply MEANS not much further near-term upside. Still that does seem more likely than not. But even scant new highs will keep all those non-investors wondering if they should join in the party!
Bullish sentiment spiked higher in the two more 'normal' volume days at the beginning of this past week. However, this Market is not 'overbought' in the way I normally define it, using both 13-day and 8-week Relative Strength Index (RSI) indicators respectively, on daily and weekly charts.
There's more room on the upside over time but near-term the major indices may pause. By the way, in case you didn't notice, the big cap Nasdaq 100 (NDX) hasn't yet gone to a new Closing high. When big cap tech lags I'm more watchful of where the S&P goes next. And, the Dow is hitting some technical resistance just over 18000.
Stocks appear to have priced in continued strength in earnings already. Q4 earnings come up next and a 'pause' or slow down in further gains may well be a result with a wait for how actual reports come in January.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P has broken out above a line of prior resistance in the 2075 area and resumed its uptrend. The last low formed a classic 'V'-bottom and a move to new highs was the result. The holiday shortened week, as noted in my initial 'bottom line' commentary, saw reduced upside momentum compared to the oversold rebound that preceded it.
A minor pullback to prior resistance would not be surprising. I've noted support at the prior line of resistance, with technical/chart support extending to the 2050 area. Overhead resistance is seen at 2100, extending to 2120.
Over time SPX may see a substantial new up leg. My only cautionary note is that in that case, SPX would need to break out above resistance implied by the top end of its long-term uptrend price channel on a weekly and monthly chart basis.
Bullish sentiment has hit a recent high and this factor, on a contrarian opinion basis, may also limit near-term upside potential.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) has reversed back to the upside after reaching a low that represented a move to 3.3% below its 21-day moving average. The S&P 100 and 500 tend to trade on balance at plus or minus 3 percent or so above/below a 21-day moving average.
The snap-back rally was impressive, but where to now?
I anticipate OEX can move higher over time, such as to the 950 area, but near-term OEX may see a slowing of upside momentum compared to what came before. Currently, the big cap S&P stocks are likely seen as 'fairly' valued, at least not under-valued in the 920-925 area, pending Q4 earnings coming up in January.
I've highlighted next resistance in the 932 area, with a further upside target and potential resistance coming in around 943. Looking out over the coming weeks OEX could make it to the 950 area if it achieved a 'measured move' objective which assumes a next up leg equal to the last.
Key near support is seen at the 21-day moving average currently intersecting in the 910 area. Support then extends to 900.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) Average has made it above resistance at 18000 and resumed its uptrend, which is often the case with a strong move back above the key 21-day moving average. In my view however, there are only about 6 Dow stocks in clear cut continued strong weekly uptrends; namely CSCO, DD, DIS, HD, PG, and V. There are fewer Dow stocks than there were to fuel a decisive new up leg and therefore am just cautiously bullish.
Moreover, INDU is hitting some technical resistance just over 18000 implied by the upper end of the Dow's broad uptrend channels on both weekly and monthly charts (not shown here). I was quite bullish at Dow 16000 and again on the pullback to near 17000. Above 18000 now, not so much!
On a daily chart basis as seen below, I've highlighted potential next targets/resistance at 18100 and then to the 18300 area. Near support comes in around 17800, extending to 17600.
Trading wise, I'd point out that one technical 'trigger' to take on bullish strategies was getting in when the 13-day Relative Strength Index was at a bearish oversold RSI reading; see my chart note regarding the last such low RSI reading. If you achieve a 900-1000 point gain, take the money and run!
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) is bullish in its pattern with the recent strong move back above 4700. However, I don't know that a next 100 point gain to 4900 or a 200-point run to 5000 is going to be quick and relatively straight-forward. Bullish sentiment seems overly bullish to get to 5000 in January. Long-term a target is suggested that's to the 5000 area.
I've noted next resistance coming in around 4880, with a next target/resistance at 4950. Gaining another 80-100 points would look more doable to me if COMP establishes a base of support in the 4800 area, with dips to 4750 or to 4735 as possible. I note support at the 21-day moving average, currently intersecting at 4735, with next lower support in the 4650 area.
Bullish 'sentiment' is fairly high and January may be frustrating to the bulls if they assume that the next 200 points higher will be as seemingly 'easy' to achieve as the last 200-point gain.
NASDAQ 100 (NDX); DAILY CHART:
The NDX 100 (NDX) chart is bullish in its pattern but unlike the broad Nasdaq Composite, the big cap Nas 100 Index has not made a new Closing high. Key next resistance comes in around 4330-4337, extending to 4345-4350. Next pivotal resistance then is suggested in the 4400 area.
Look for near support in the area of the 21-day moving average, currently intersecting at 4265, with next lower support at 4200, extending to 4175. 4100 is fairly major support.
An ultimate objective for NDX is to the 4500 area based on long-term chart calculations but such a target may be a few weeks off, assuming this level is achieved. Stocks appear to have priced in continued strength in profits already. Q4 earnings come up next and a 'pause' here probably would have much to do with the wait for actual reporting in January.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The QQQ chart is bullish with the move back above the 21-day moving average or to above 104. The Q's got back to 105 but pivotal prior high and implied resistance is still ahead, at prior closing and intraday highs at 106-106.25. Next key resistance then comes in at 107.
Near support is at 104 and it's important for a bullish chart outlook for QQQ to hold this area. Next key support is at the LOW end of the prior upside price gap higher at 102-102.1
Volume was low on the last spurt higher but the On Balance Volume (OBV) line is pointing slightly higher which is the direction needed. A longer-term upside target is to the 109-110 area but if this kind of objective is achieved it may be further out than January. I could see 107 being hit in the month ahead, with a pullback into February before another strong upswing developed.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) broke out above its 1190-1140 trading range finally and achieved new highs above 1200. I've estimated next resistances at 1220, then 1240.
IF the Russell resumed its prior strong upside trajectory from late-2012 into March of this year, the Index could reach 1400 and higher longer-term. That's a pretty big if but the longer that RUT consolidates at and above 1200, such a target isn't out of the question. There's a seasonally bullish tendency for the Russell in the early months of the year. Over time, the small to medium cap sector(s) may be seen as less fully 'exploited' than the S&P, Dow and the big cap Nasdaq stocks.
Pivotal near support is at 1200-1190, extending to 1180. Technical support came in previously at the recent low, in the area of the 50-day moving average; this average has now advanced to 1160.
GOOD TRADING SUCCESS!