I assumed that slowing upside momentum meant a dip in prices which came in the holiday shortened week just ended. The pullbacks tested the 21-day averages in the S&P and Dow as support, with the Nasdaq 100 falling to near 4200 trendline
A rebound from any of the up trendlines seen on my charts below may suggest whether the current bout of price weakness will last much into January and volatility part of an overall consolidation of the current bull market. January has cross currents and it's wise to anticipate some short-term price swings; e.g., 2-3 days duration.
Much knowledge of trend direction over a 2-3 week span can often be seen in whether the 21-day moving average in the major indexes 'acts as' technical support on pullbacks OR as resistance on rallies. One Close below the 21-day moving average puts me on notice of possible further downside. Two consecutive Closes below this key trading average is a stronger indication of continued weakness ahead; e.g., for or within a 2-3 week timeframe.
The other technical/chart aspect of importance is what happens at the up trendlines seen on the major index charts. I anticipate that we'll get a bounce from intraday pullbacks to any of the bullish trendlines highlighted on my charts.
Lastly, trader sentiment got 'too' bearish in my estimation to suggest a big new downside push. I anticipate a rebound this week but not a major push higher.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
SPX has turned short-term bearish but with expected technical support in the 2033-2020 area. In this area if available, risk to reward looks favorable to play a potential rebound back to the he 2100 area.
The major trend is bullish. A cautionary note is suggested by the current bull market, about to hit the 6-year mark, having gone into 'overtime' so to speak. Moreover, the S&P and Dow are up against some long-term resistance trendlines that at least suggest a continued advance will slow in terms of average percent gain; e.g., the last 3 years saw high average annual gains of 10% or more in the S&P 500.
Near support begins in the 2050 area and extends to 2033-2020. A Close below 2000 is bearish but more so with a Close or two BELOW the last downswing that carried to the 1970 area. Near resistance selling interest may come in at 2090-2110, with a next upside target (and potential next 'resistance') to 2138-2140.
The RSI has fallen back to a 'neutral' reading around 50, so the prior overbought condition is no more. Moreover, bearishness showing up in my bullish/bearish sentiment (CPRATIO) model suggests an SPX rebound, perhaps with a dip to test trendline support.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) has traced out more or less an 890-920 trading range over recent weeks. Further such two-sided price swings could be in the cards still for January although likely a pause before a next up leg.
Support/buying interest should be found on further weakness to 900-890. A Close below 875 continues a bearish short-term pattern especially if for more than a day.
Support points are suggested at the green up arrows; at 900, then 890. Resistance is seen at 920-924, with a decisive upside penetration of this area suggesting potential to around 940.
As with the other indices OEX's RSI reading is back into a more neutral 50 zone. I favor buying at 'proven' support points. Chart points seen as significant support get proven when there's a dip to expected support such as at a trendline, prior low, etc. AND then in that area a rebound develops.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) Average found Friday end of week support at the 21-day moving average, currently at 17750. The area of this important 'trading' average helps determine which way I want to strategize. Trade above the 21-day suggests continued upside momentum; trade below the average suggest continued more downside, than upside, potential.
Tracking the 21-day average is something I do habitually. I'd give the SPX the benefit of the doubt that support doesn't continue to develop at this average. With the Dow especially, good to check the level of the 50-day average (currently 17530). Potential support there suggests buying interest showing up next in the 17600 area. Potential trendline support comes in around 17400 currently and if that deep of a pullback were seen, I'd be evaluating playing potential upside from there.
Possible 'wishful thinking' about buying the Dow cheap at 17400 may be at work here with me, but with fund managers happy to add to their Dow portfolio in the 17600 support area. Upside resistance looks to start in the 18000-18100 area with next anticipated resistance coming in around 18300.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) is falling again from what looks to be strong selling interest in the 4800 area. A possible double top can't be ruled out with this pattern. A 'confirmation' of such a top however is a decline to a lower low than the last downswing. I doubt the Composite sees a lower low than 4600. I note potential trendline support in the 4680 area currently.
Key resistance starts in the 4800-4815 area. A decisive upside penetration of 4800 could be the start of a next up leg, possibly to 4900.
The way things a further dip to the 4700-4680 area should find buying interest/support. A Close below the up trendline suggests that 4600 might be seen however.
NASDAQ 100 (NDX); DAILY CHART:
The NDX 100 (NDX) chart has sold down below its 21-day moving average which is bearish until or unless prices recover to above the average. Absent that, look for potential for further price weakness, or at least a sideways trend, ahead.
Pivotal technical support is implied at the intersection of the trendline at 4200, with support extending to 4170. A Close below 4200 suggests that dips to 4100 might be seen. If so, bullish potential exists if a double bottom forms.
Closes back above the 21-day average (currently: 4257) or to above 4300 would keep the trend picture bullish or one suggesting more bullish potential than not.
I'm neutral on taking on any positions pending whether a short-term rally develops next, especially from the 4200 area. I'm not bearish but NDX is leading the way down which is a bit of a sea change so this development bears watching, no pun intended.
NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The QQQ chart/indicator pattern is mixed as prices fell sharply below the 21-day moving average but the Friday intraday low stopped at the projected October-December up trendline. Continued support at the up trendline is needed to suggest that the intermediate uptrend is continuing.
A sell off below 102.7-102 suggests potential for a retest of what is seen to be fairly major support in the 100 area.
A continued rebound from the up trendline, followed by a move back above 104 would suggest renewed bullish momentum and upside potential. 104 is the key resistance and 102 the key support. Moves of 2 points in either direction can occur on a decisive breakout above/below the 104-102 range.
The On Balance Volume (OBV) line is pointed lower so our secondary indicator of volume is bearish.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart has a bullish pattern if RUT stays above its up trendline, but which leans bearish below it.
Near support is highlighted at 1180. Pivotal support at RUT's up trendline then is seen around 1168; the 50-day moving average also intersects in this same area and implies potential technical support also.
Key overhead resistance comes in around 1220; a target on a next move above 1220 is to 1240.
If prices dip further, RUT has potential to rally from the 1180 area; more so from its up trendline per the chart highlight below. A break of the up trendline suggests potential for a retest of the 1140 low.
GOOD TRADING SUCCESS!