THE BOTTOM LINE:
Index support areas have held repeatedly but rallies have yet to make new highs. With earnings season upon us are breakouts ahead? My crystal ball is cloudy on this answer. The Market could of course get 'locked' into a trading range again; OR, higher rally highs could develop with the most recent rally. Buying interest at prior support seemed solid. That we have seen.
I wrote LAST WEEK that: "Friday's reported drop in job creation might be construed as a longer-term bullish plus in that the Fed may hold off on raising rates." Exactamundo!
The recent rally 'looks' like it could continue but so did the rally before that one. Traders collectively have turned recently bullish in their outlook, although trading sentiment has also had wide swings between bullish and bearish.
Longer-term weekly and monthly charts show bullish uptrend price channels. Resistance implied by upper channel lines don't intersect until around 2170 in the S&P 500 (SPX), 18600 in the Dow 30 (INDU), the 5200 area in the Nasdaq Composite, 4525 in the big cap Nas 100 (NDX) and not until 1350-1360 in the Russell 2000 (RUT).
I'm taking a wait and see attitude on near-term outcomes. This market needs to get less 'whippy' for me to feel confident wading in. Rallies develop then fall apart. Buying calls at support for short-term traders have garnered 50 points in SPX here and there. There have been price swings of this magnitude on the downside too but there's not as much of a repeated prior line of resistance to work off from. Well, SPX did come close to making an exact double top at the last run toward 2120 when it hit 2115.
I'm not one to stay glued to the screen everyday to try to eke out profits on these smaller price swings. Well, to me they seem 'small' but it's relative of course. But, it's not like buying the last SPX dip to under 2000 and exiting over 2100. I'll prognosticate further on with each index as to possible outcomes.
The S&P 500 Volatility Index (VIX):
The VIX Index is trending lower as it's fallen to below 13 and could be headed for the 12 area if the recent price trend continues steady.
There's some tendency for VIX to rebound when the Index falls into its 'oversold' zone in terms of the 13-day Relative Strength Index (RSI), which is seen in the chart.
If convinced of another top ahead, buying VIX calls is one way to 'hedge' stock exposure or to speculate, especially if VIX again hits or comes close to 12. Stay tuned!
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
Here we go again as the S&P 500 (SPX) looks to be making another run to the area of its prior highs. The week began with a strong move to above the 21-day moving average, with the average then offering support on intraday pullbacks. The weekly Close was then above 2100; so far, so good for the bulls.
Now it's all about what happens if there's another stall at prior highs OR a next up leg that carries to above 2115-2120 when we can see the extent of buying at new highs.
Resistance is highlighted at 2120; next resistance is then projected for the 2150 area. I noted above in my initial 'bottom line' comments that longer-term resistance in SPX looks to come into play around 2170 currently. Near support begins at 2080, extending to 2073; next lower technical support is seen in the 2050 area.
Bullish sentiment, as measured by my CPRATIO indicator jumped at the beginning of the trading week just ended. But bullish conviction among traders isn't yet mostly nonchalant when bearish news breaks.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) is mixed in its pattern. We can most firmly say that OEX is finding good buying support in the 896-893 area and selling interest as OEX gets toward 930.
Resistance is highlighted at 925, extending to 932. Next resistance is projected at 940. Longer-term weekly charts (not shown) suggest potential resistance coming in around 950.
The 13-day Relative Strength Index isn't showing an 'overbought' extreme currently, so there's room on the upside so to speak before we'd see an RSI 'warning' sign of risk of a peak.
Near support is highlighted at 905, then at 895. I liked the risk to reward of adopting bullish strategies on dips to the 895 area. A next move to retest the last high near 925 seems quite possible. There's also potential for a retest and possible piercing of the prior 932 high. I'm less convinced of a new high scenario.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) Average is also mixed in its pattern in that its uncertain as to whether INDU is in a trading range or capable of a decisive move to new highs. INDU's current pattern suggests potential for the Average to retest resistance at 18200, with resistance extending to the prior early-March intraday peak of 18288.
I didn't highlight on my chart below a next resistance projection of around 18500. Longer-term weekly charts (not shown) suggest 18600 as potential resistance coming in at the upper end of INDU's current broad uptrend price channel.
Support is seen in the 17870 area, then at 17700. A retest of resistance ahead looks to have the edge over a retest of support.
Last week I was suggesting that: "Bullish longer-range uptrends remain mostly intact (only) in: AAPL, DIS, GS, HD, JPM, MMM, NKE, PFE, TRV, UNH, and V." I would add this week to the prior bullish potential list possible minor to moderate upside ahead in: BA, DD, CAT, GE (already happened!), IBM, JNJ, MCD, and MSFT. This expands the list of stocks with possible further upside potential to perhaps 18 of the 30 stocks.
Tallying bullish chart patterns suggests potential for further gains and a mildly, not wildly, bullish outlook.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) has a mixed chart but COMP looks headed to a retest of important technical resistance in the 5000 to 5040 area. A sustained move above 5000-5040 is needed to suggest potential to the 5100-5130 area. Longer range resistance on weekly charts (not shown here) comes in at 5215 so the daily and weekly charts line up so to speak.
Support levels are highlighted at 4900, then at 4865.
Bullish sentiment seems a bit 'overdone' given the possible difficulty of piercing milestone resistance at 5000-5050. I don't see major upside potential for COMP ahead; if the Index can achieve a decisive upside penetration of 5000-5040, perhaps there's move ahead that reaches the 5100-5125 area.
NASDAQ 100 (NDX); DAILY CHART:
The big cap Nas 100 (NDX) is mixed but the most recent rally, like the one that preceded it, looks capable of re-testing prior highs and possibly busting out above those highs. 'Capable' is the operative word as it's hard to say whether there's a move to a new high afoot. We don't see many 'triple tops' in the indexes but stay tuned on that!
I put foot in mouth last week when I suggested that: "Lows in the 4289-4280 area have been seen 3 times now but this implied line of support may not hold up on a re-test of it." Well, buyers did come in yet again at the prior lows! Prior support levels are important in technical analysis but the MORE times those levels are re-tested, skepticism about how much buying will keep showing up there also comes in.
Resistance is suggested at 4450, then at the prior intraday peak at 4483. I didn't highlight a potential next resistance above the prior top but it looks like NDX has potential (in a new up leg) to 4550, which is also longer-range weekly chart resistance over the coming two week period. Support is highlighted at 4350, extending to the 4300 area. I envision more potential in the coming week for a re-test of prior NDX highs than a retest of 4350 support coming up.
Volatility as measured by VXN is at a low level around 14 where the Index has made tops in the past. Just saying!
The NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nas 100 ETF (QQQ) is mixed like the underlying Nas 100 index pattern in that the current rally is the third attempt to re-test the prior top and possibly break out to out to new highs. The third time may be the 'charm' here and it is true that for whatever reason TRIPLE tops are less common than double tops.
Assuming QQQ pierces near resistance at 108, then makes it to the 109-109.4 area of its prior top, I'd bet on it to keep going, at least a little. Either a rally ahead here tops 109 by a little or short-covering and new buying kicks in for a more prolonged advance. A sizable further up leg could take the Q's to the 111 area.
Near support is now bumped up to 106, with next lower chart support coming in at 105.
This recent rally has been accompanied by QQQ's 'typical' low volume on upswings, so unlike breakout moves in individual stocks such as just seen with GE this past week. Well, that was big news for the company but the volume to price pattern is different in the NDX tracking stock. You can mostly trust bulls have turned to bears if there's HEAVY volume in QQQ. What I do look for as a volume 'confirmation' is the On Balance Volume (OBV) line heading UP; you can see the OBV line above the daily volume 'bars'.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) remains bullish in its chart pattern as it continued to find technical support on pullbacks to its up trendline. I thought (last week) that resistance at 1260 would be tough to overcome but it's really a retest of the prior intraday high at 1268 that's the focus now. Assuming a new high/upside 'breakout', next resistance looks like 1280, extending to 1286.
RUT has the most bullish longer-term chart in that upside resistance projections are well above current levels, which is not the case in the other major indexes. Resistance looks to come in around 1300 on weekly charts (not shown), but a next longer-range target is closer to 1350-1360. Technical/chart support is seen at 1250, extending to 1240.
I would keep an eye on the 13-day Relative Strength Index/RSI in that RUT has a tendency for pullbacks of 20-30 points (or more) when the RSI hits overbought levels as suggested on the RSI bottom portion of the daily chart.
GOOD TRADING SUCCESS!