THE BOTTOM LINE:
When volatility is low and a price range pretty well fixed, butterfly spreads have been attractive and are more than insects in my garden with condor strategies not just trips to spot magnificent birds soaring around my coastal climes.
The Russell 2000 (RUT), which was soaring has come back to my lower moving average envelope 'support' and got oversold. If I viewed it in isolation, I'd say it's a buy.
The S&P 500 (SPX) needs to achieve a decisive upside penetration of 2120-2125 and it keeps playing with that level. Right now it's 'showing' a double top but it seems buoyant on dips to the 2080 area so stay tuned.
The Nasdaq 100 (NDX) has trendline support at 4400 and looks capable of a move to new highs around 4600 but it's a dangerous game too.
The Dow 30 (INDU) has an interesting pattern, which in wave terms (not usually my discussion topic) looks like a 'symmetrical' triangle; i.e., descending and ascending trendlines that converge ahead. I've done a '5' count on the legs of this pattern. And, if I ignore the fact that more of the 30 stocks are in bearish patterns than bullish ones, I'd say the next 'leg' could be a breakout to the upside.
A MIXED MARKET but with some interesting but divergent Index patterns. Stay tuned for change which IS a constant. More detailed, specific Index commentaries are further on.
The S&P 500 Volatility Index (VIX):
I know, when the Dow is up 200 points, then down 200 (more or less) the next day it seems like a volatile wild market out there but it ain't necessarily so relative to the VIX.
VIX can't seen to get much above 14 and tends to settle down near 12. When the Index gets 'oversold' it rallies a bit but nothing sustained, so not much excitement in terms of trading the options. Mostly a hedgers market currently for fund managers.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) needs to achieve a decisive upside penetration of 2120-2125 to break out of a trading range that its has been in for 24 weeks as I note in my initial 'bottom line' commentary above. SPX keeps playing with that level. Right now it's 'showing' a double top but the Index has been buoyant with good buying interest on dips to the 2080 area so stay tuned.
A decisive and sustained downside move to below 2080 would be bearish and suggest a retest of next support in the 2065-2060 area and possible more major support at 2040.
Key resistance is at the double top that formed in the 2120 area. The pattern could almost be a 'triple' top but I the two tops in the 2120 area are most well defined. Next higher resistance is suggested by the extension of the previously broken up trendline which intersects currently around 2145.
The RSI and my call/put sentiment indicator are mixed. We could construe these indicators as 'neutral' and suggesting potential for a move in either direction. OR, a continued SIDEWAYS or lateral price trend ahead.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) is mixed to bullish in its pattern. A 'mixed' pattern in the sense that the dominant chart pattern showing here is a bearish double top. That said there hasn't been much of a downside retreat from the recent top which is what we'd usually expect from this formation.
Moreover, support/buying interest continues to show up at the 21-day moving average; which, from a trading perspective is an important measure of either support or resistance in all the major stock indexes. I'm watching where OEX goes next relative to the 21-day moving average, for directional clues as to the next price swing.
Support is seen in the 915 area, extending to 910. Fairly major support then is suggested around 900.
Pivotal resistance is at 930-932, and next resistance then is projected at 940, extending to 944.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) has an interesting chart pattern from a wave perspective and which is not usually a common discussion topic with me. But INDU looks to have traced out a 'symmetrical' triangle formed by descending and ascending trendlines that converge ahead. I've note a '5' count on the 'legs' (dominant up and downswings) of this pattern. If I then also ignore the fact that more of the 30 INDU stocks are in bearish patterns than bullish ones, I'd say the next price swing or leg could be a breakout to the upside.
Note: The aforementioned 'symmetrical triangle' formation I've referred to with the numbered 'legs' is a pattern I'll discuss in a Trader's Corner article in the week ahead.
This week I won't tally the individual 30 Dow stocks as to whether they are in a dominant bullish, bearish or neutral (sideways) trend. This type of 'bottoms up' analysis is often fruitful but not always. Especially when the INDU chart pattern is quite mixed like it is currently.
Support is highlighted at the up trendline at 17870, extending to 17800 even and technical resistance at the down trendline intersecting around 18100-18110 currently, with resistance extending to 18280-18300.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
Now that the Nasdaq Composite (COMP) retreated to and rebounded from a point 'defining' an emerging up trendline and quickly rebounded back above its 21-day moving average, the pattern of higher upswing highs and higher downswing lows remains BULLISH.
Trendline support comes in at 4930, with support extending to 4900. I don't expect it but a Close below 4850, not reversed (back to the upside) the next days would be bearish.
Resistance (red down arrow) is highlighted at 5050, then at 5100, extending to 5150 on up to 5185. Worth noting also is that 5132 is the prior all-time intraday high for COMP dating back to March 2000.
NASDAQ 100 (NDX); DAILY CHART:
Given the same pattern as the broad Nasdaq Composite, the big cap Nas 100 (NDX) remains bullish especially given NDX finding support on its last dip to the 4400 area; which also makes a 3rd point in an up trendline. The same pattern as COMP of higher rally highs and higher downswing lows is bullish in NDX.
I don't think that the Nas 100 has huge upside potential beyond the highs already seen, with potential corrective action coming in after a next upswing which the index seems embarked on. Resistance is seen in the 4550 to 4600 price zone. Fairly major resistance suggested by the very long-term monthly chart (not shown here) looks to begin at 4600.
Support is highlighted at 4400, then at 4350. Fairly major support starts at 4300.
The NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) shows the bullish pattern of the underlying NDX, which mirrors the broad Composite (COMP).
Another upswing to re-test resistance in the 111 area is possible with an advance to 112 a possibility. At 112, QQQ would be fairly 'extended' on the upside as suggested by my upper moving average envelope line. Stay tuned on that!
Near support is highlighted in the 108 area, extending to 107.
Daily trading volume was increasing on the most recent downswing which may mean that panic selling may have run its course. The On Balance Volume (OBV) line has turned up, which suggests that buying may resurface and a rebound continue.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT), which was soaring before at least until it made a minor double top then broke below support in the 1260 area and the 21-day moving average and kept on going.
RUT has come down to my lower moving average envelope 'support' and got oversold in the process per the 13-day Relative Strength Index (RSI). If I viewed the Russell in isolation so to speak and didn't try to extrapolate to the rest of the major indices, I'd say it's the most compelling buy.
Support is highlighted in the 1220 area, extending to 1200.
Pivotal resistance is back at the bullish 'breakdown' point in the 1260 area with next resistance in the area of the prior intraday top at 1278.
GOOD TRADING SUCCESS!