THE BOTTOM LINE:
The S&P/Dow have retraced a bit over 50% of last advances, Nas Composite just 38% and Nas 100 exactly 50%; the Russell, per my posts of strength to come, is back above its 21-day average. Not succumbing to 'Fed dread' and looking for a next tradable bottom.
In forecasting the S&P 500 Volatility Index (VIX), I'm discovering that the VIX options can be, well, very VOLATILE! I don't myself go in much for very short-term trading (e.g., 2-3 day price swings) and use of the hourly VIX chart coming up shows the fits and starts in the recent rebound in S&P volatility.
Bullish trader sentiment continues to fall as does momentum indicators like the Relative Strength Index or RSI. However, in terms of how much of a percentage retracement I was anticipating given the current long-term up trend, recent lows are suggesting that the major indexes, especially the Nasdaq, could be at or near a bottom.
Also, in terms of 'resisting' recent weakness in stocks in general, the smaller cap Russell 2000 (RUT),like the broad Nasdaq Composite, has only retraced a 'minimal' (Fibonacci) 38 percent of its last run up and is back above its 21-day moving average. A bullish pattern for any of the major indexes when one crosses back above its 21-day average and sustains a move above this key trading average.
The S&P 500 Volatility Index (VIX):
VIX traded 315,000 contracts at week's end, just off a bit from the pace of last Friday. The Index closed the week at 16, up from 15.2 in the prior week. This, after VIX made a minor intraday double bottom low at 13 in late-February/early-March as seen on the hourly chart that follows the daily.
The daily chart seen first suggests a rising VIX trend off its recent bottom, with 17 as pivotal near resistance. If 17 is pierced, look for next resistance in the 18.5 area. I've been saying upside potential in VIX is to the 19 area or higher. Any sustained dip back below 15 is not encouraging for continued upside however.
The VIX DAILY chart:
The VIX HOURLY chart:
One reason to display the extended hourly VIX chart is to remind of the frequent choppy intraday movement in the VIX volatility index both on the way up and way down.
The strong continued advance in VIX into mid-week, as seen visually in the upside gap into Wednesday, was followed by a sharp break into Thursday on a downside hourly price gap as seen next on the hourly VIX chart.
VIX support is highlighted at 15 near-term, extending to 14, with resistance suggested in the 17 area, then at 18.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) chart is near-term bearish but the pattern of: 1.) multiple bottoms in the same area after retracing a bit over 50% of its last advance; 2.) hitting an oversold RSI extreme; and 3.) continuing falling bullishness together suggest that SPX may be at or near a bottom.
Support is highlighted at 2040, then in the 2027-2034 price zone, representing the Fibonacci 61.8 to 66 percent retracements. The 2020 area is the lowest downside target I have currently. A new down leg and bearish influence is suggested on an SPX Close below this level and especially for two days running.
Upside SPX resistance is suggested at (red down arrow) in the 2080 area, extending to the 21-day moving average, currently intersecting in the 2092 area. Resistance we could say is 2092 extending to 2100. A sustained move above 2100 would suggest renewed upside momentum.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart is also bearish on a short to possibly intermediate-term basis but I a bottom may be near given the same three (3) factors noted above for the S&P 500.
In a still long-term bull market trend, OEX reaching an oversold low in the 13-day Relative Strength Index (RSI) after multiple intraday lows in the same area and after a retracement of between 50 and 60 percent of the prior advance, makes for a set of factors suggesting a bottom could at or near at hand.
Near support is seen in at 896-895 and next in the low-890 area. 885 is my 'lowest' downside expectation for any further slide.
Upside resistance is at 910, extending up to the area of the 21-day moving average currently intersecting at 920. 920 is a pivotal level for OEX to regain and hold above.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
Dow 30 (INDU) Average has the same pattern as the SPX and OEX in terms of retracements and a bottom pattern that is compelling; enough for me to suggest a bottom may be near in INDU.
A near support for the Dow is suggested at recent lows in the 17635 area and next in the 17550-17510 price zone. While I lean bullish, INDU could dip briefly to this lower zone but I doubt we'd see the Dow Closing below 17400 any time soon.
Near resistance is suggested at 17900, with next resistance in the area of the 21-day moving average and currently intersecting at 18030. The chart resumes a bullish pattern with sustained trade above the 21-day.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) has seen a short-term correction but within its intermediate to long-term uptrend. A minimal Fibonacci 38% retracement has been seen but the longer that COMP holds at or above 4850, the more the likelihood that the Index will retest resistance. A dip to 4800 can't be ruled out, which is next key support.
Resistance is suggested currently in the 4930 to 4950 area, then at the milestone 5000 level, which was the key stopper recently. An eventual advance above 5000 is likely a matter of when, not if.
COMP, unlike the S&P did not reach a 'fully' oversold RSI extreme, but COMP has only rarely done so in its lengthily advance. Another indicator with a bullish cast is suggested by the decline in bullish sentiment over the past week.
Fed dread is loose in the land again. It doesn't matter how many years our central bank has had interest rates at ZERO, but a half-percent rise in rates is the END of the economic recovery! Give me a break but the high-speed traders say thank-you Market for whippy price action!!
NASDAQ 100 (NDX); DAILY CHART:
The big cap Nas 100 (NDX) has, in action similar to the S&P giving back a bit more than half of its last rise only with NDX retracing to date an EVEN 50 percent of its last rise and a making for a fairly normal (percent) correction within an overall bullish trend.
Assuming NDX weakness continues or accelerates below near support suggested at 4290-4287, the Index could dip toward the 4250-4241 area with 4240-4232 my lowest intraday downside target envisioned currently.
Near NDX resistance is at 4350, extending to the 4400-4407 area.
Note the recent decline coming off a period with the Nasdaq 100 Volatility Index (VXN) was at a low 14 reading for a time. I don't try to forecast Index declines based on low volatility but we shouldn't be surprised either at counter-trend pullbacks coming when the trend is smoothly up and some complacency (less 'fear'?) regarding much risk of a serious correction. Well, the popular image is of the VIX/VXN and the like as a fear index when it pops!
The NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The QQQ traders/investors seem to have 'woken' up to fear and loathing of a possible bear loose in the land so Friday brought a volume spike with trade very active as the Q's dipped below 105. I suppose this last dip to new lows for the recent decline was a partial trigger to heavier volume; that and the inability for QQQ to climb back above 106. The declining On Balance Volume (OBV) line ahead of Friday was a tip off of for falling prices and more downside however.
Further risk of a sustained move lower is relatively low in my estimation. Time will tell and the ability of this ETF to hold in support at 104.6, extending to 104. Next lower support is highlighted in the 103.4 area. I don't envision sizable further downside ahead but a QQQ Close below 103 would be more of a bearish development than I'm suggesting currently.
Resistance is seen at 106, then 107-107.2.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) has put in a possible 'island bottom' with the gaps lower, then higher, leaving that the two isolated days you can see that have lows near 1200.
Near support is suggested at 1220 but I marked near support at 1209; next support, implied at the 50% retracement level, is highlighted in the 1198 area. Friday's Close back above the 21-day moving average was a bullish development; assuming it continues or just that support is found on dips to the 1220 area which is potential support suggested at the high end of the aforementioned gap area.
Overhead resistance is at 1240-1243. Assuming a break out to new highs, which I also consider a matter of when not if, I project a next target and potential resistance in the 1260 area.
GOOD TRADING SUCCESS!