THE BOTTOM LINE:
The Nasdaq Composite (COMP) and big cap Nas 100 (NDX) achieved a decisive upside breakout to new highs. The S&P 500 went to a new weekly Closing high and eked out a new daily chart peak. It would then appear that the broad S&P 500 at least should start to put some space above what still looks like a possible double top if looking only at the DAILY chart.
Meanwhile the big cap S&P 100 (OEX) also went to a new weekly Closing high but, again, if looking only at the OEX daily chart the big cap S&P 100 is yet to pierce prior daily Closing highs. The Russell 2000 (RUT) managed a new weekly high Close.
The Dow 30 (INDU) has made neither a new weekly or daily high so this select group of stocks continues to lag the other major indexes. I don't know how to evaluate prospects for the S&P with a weaker Dow. Calling into question the ability the S&P to continue moving higher are, as noted with my Dow commentary, are 18 Dow stocks, of 30, that are either in downtrends, reversing lower or with stalled rallies; e.g., AXP, BA, CAT, CVX, DD, HD, INTC, JNJ, KO, MCD, MMM, MRK, PG, TRV, UTX, VZ, WMT and XOM. Many Dow stocks have the potential to reverse higher IF the broad S&P 500 sees another up leg. The current picture for Dow stocks is sobering for a bullish case outside Nasdaq.
It's been a tough sell to convince the S&P world, including me on the last downswing, that the low end of the prior trading range would both continue to hold and the LAST rebound perhaps finally lead to an upside breakout of the trading range of the past 20 weeks. The trading range did narrow in some, as the LOW end of SPX's price range went from the 2000 area to 2050. Still, a sideways trend for weeks leads to pretty mixed 'sentiment'.
Sideways trading ranges, what's called in chart speak, a rectangle formation, are usually bullish consolidations since the dominant prior trend (UP) will eventually resume. It's that doubt about 'usually' that can be a killer to the bullish soul!
The S&P 500 Volatility Index (VIX):
While the S&P has been advancing in a third upswing dating from the early-February low, VIX has been going down, down, down.
It even looks like VIX might again retreat to 12.
At 12 and on dips to below 12, as I've been saying, I favor buying VIX calls, especially as a hedge against a possible sell off in stocks in the mid-May to late-June period ahead of Q2 earnings reports coming post June.
Until a jump in Q2 earnings is seen from the winter slow down of the first quarter, the Dow especially remains vulnerable to downdrafts like seen into early-Feb, into the second week of March and to a lesser extent the dip into late-March.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 chart is bullish but is following a minor 'line' of resistance higher. If SPX gets overbought in terms of the 13-day RSI, consider exiting calls or some. If I exited on shorter-term considerations; e.g., overbought, overly bullish sentiment, news, etc, I'd also consider buying back in on a pullback, especially when/if the 13-day RSI falls back to a mid-range 'neutral' reading.
I've noted a next potential resistance target at 2125, then at 2140. Looking out, longer-term weekly charts (not shown here) suggest SPX could reach 2200 before significant technical resistance at the upper end of its broad uptrend channel is seen.
Near support is suggested currently at 2100, extending to 2080.
Bullish sentiment peaked in early-April and has been trending lower to sideways recently. An influence to keep me bullish is to see new highs without the froth of traders throwing money at calls or with moderate bullish sentiment.
If my CPRATIO gets up into what I label 'overbought' territory and the RSI is at similar high extremes, be wary of over-staying in calls.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) went from 'mixed' when OEX was languishing below 920 to moderately bullish and suggesting potential for the line of prior highs in the 932 area to be exceeded. A stall in the OEX big cap Index in the area of its prior highs would set potential for a double top. The chart would then look bearish. Stay tuned.
Assuming that the prior highs are pierced, I've projected next resistance at 940. Near support is noted in the 920 area, than at 910.
On trading strategy: if I've gotten bullish and into positions at repeated tests of support, in this case in OEX on several dips to 900-896, I don't usually strain my brain to figure out if OEX goes to a new high or not. Instead I'd be more than happy to exit shy of prior highs. Let someone else stay in for what may be the last bit of an upswing. When in options, buy when you have little company, get bearish when others get bullish and stay nimble.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
Enough of the monster cap stocks of the Dow (INDU) Average are lagging to suggest keep a lid on a sustained upside Dow advance and similar break out to even modest new highs per the S&P.
Calling into question the ability of the S&P to continue moving higher are 18 Dow stocks that are either in downtrends, reversing lower or stalled; e.g., AXP, BA, CAT, CVX, DD, HD, INTC, JNJ, KO, MCD, MMM, MRK, PG, TRV, UTX, VZ, WMT and XOM. I usually tally up the stocks in bullish patterns but the reverse picture here looks telling here.
I've highlighted support in the 17930 area and the 21-day moving average, with next support coming in around 17800.
Near resistance is at 18200, extending to 18280. Any sustained advance above 18200 would be bullish or at least suggest to 18400, perhaps to 18600 longer-term.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) is bullish in its pattern as the Index achieved a decisive upside breakout above 5000 and COMP's prior intraday highs in the 5030-5042 area. I noted last time that a sustained advance that took the COMP above 5000, would then suggest potential to the 5100-5125 area.
I've pegged near resistance in the 5100 area (at the red down arrow), extending to 5150 and resistance implied by my upper moving average 'envelope' line currently intersecting around 5150.
Near support is highlighted (per the green up arrow) at 5000. No surprise there, at this 'milestone' level. Next support is suggested at 4950 and the area of the 21-day moving average.
COMP has advanced into an initial 'overbought' 13-day Relative Strength Index (RSI) reading in that upper (65-73) 'red' zone. Bullish sentiment is moderate to neutral; no bullish 'fever' at hand, which bodes well some further upside. If there's a corrective pullback into the 5040-5000 area, it would likely be a dip that finds good buying interest.
NASDAQ 100 (NDX); DAILY CHART:
The big cap Nas 100 (NDX) is showing an accelerating uptrend as the Index broke out above resistance at the line of prior highs in the 4470 area. There was then a further upside price gap to above 4500. Bullishness in the tech-heavy Nasdaq seems a bit overdone but I wouldn't trade against this strong bullish trend either.
Near resistance is projected at 4550. At or near 4600 resistance I suggest exiting calls with this area being my maximum upside target currently. Near support is at 4450-4470, extending to 4400.
Volatility implied by the VXN Index is as low as it tends to get. Pullbacks tend to come at VXN at and under 14. It's a tendency, not a promise folks but it suggests to bullish traders to not get complacent. There were multiple chances to buy NDX calls with dips below 4300 but maybe limited opportunities to exit NDX between 4550 and 4600, assuming we get there.
The NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) went from looking like a third lower upswing high and a potential bearish pattern, to a sky shot higher in a substantial breakout move.
Resistance is suggested at 111, then 112. Traders would be wise to take profits in this zone if reached. Near support is highlighted at 109, with next support at in the 108 area.
There were multiple opportunities to buy short-lived dips to below 105. If there was that favorable of an entry or higher I suggest not getting complacent and over-stay. There's limited potential for a move above 112 in my estimation based on longer-term chart analysis. Only the daily chart is shown here, but at 112 QQQ would be a bit over 4% above the 21-day moving average and quite 'extended' by this measure for QQQ.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) chart remains bullish in its pattern and the Index has trended higher, within its uptrend price channel now since early in the year. There is the matter of a new high but RUT's upside advance has stalled. Given the strong move in Nasdaq and even the move to a slight new high in S&P, RUT is lagging. However, stay tuned as the Russell doesnâ€™t have far to go to make a new high for the current advance.
The longer-term weekly RUT chart is bullish (not shown here) and suggest eventual upside potential to perhaps 1350-1360 but not in a straight line by the looks of it. Unlike the other major stock indexes at least, RUT doesn't have an upper channel line suggesting technical/chart resistance just overhead.
Near support comes in at RUT's up trendline, currently intersecting in the 1257-1260 area. Next support is suggested at 1250 and a Close below 1250 lasting longer than a day would be bearish on a near-term basis.
GOOD TRADING SUCCESS!