THE BOTTOM LINE:
Last week I was speculating on an upside breakout ahead and focused on the lagging Dow 30 (INDU) as having (counter-intuitively) a bullish pattern to suggest it! I noted that: "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 if projected out into the future. I've done a '5' count on the legs (price swings) of this pattern. 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."
I referenced a daily chart of the aforementioned INDU triangle pattern, noted as potentially bullish, with the end of 5 price swings, suggesting I'd explain the 'interesting' (and somewhat unusual) chart pattern in a subsequent Trader's Corner later in the week. I penned this Thursday ahead of the strong Friday upside INDU move that followed. As I'm such a (somewhat) 'pure' technician I wasn't even thinking of the employment report that was coming on Friday that could have moved the Market and Dow strongly one way or another. But, as I hold, Index price action alone tends to FORECAST future trend direction.
Here's the chart and is about the same as I showed in my Thursday (5/7) Friday Trader's Corner EXCEPT of course for the last 'bar' seen below in my first chart; i.e., Friday's OHLC (Open, High, Low, Close).
If you didn't (avidly or otherwise) peruse the aforementioned article I invite you to click on the above LINK for an explanation of what's involved in a triangle pattern and an explanation of why the long-standing (24-25 weeks) trading range looked like it might be ending.
Ending with a move that would pierce long-standing upper (resistance) end of the multiweek trading range that continues the dominant bullish trend. STAY TUNED ON THAT! as we wait to see if decisive new highs in the S&P and Nasdaq indices are NEXT. And, of course, the Dow hasn't made a new intraday or Closing high yet either. But, a bullish upside 'breakout' is suggested in INDU as I lay out, so I anticipate new highs in the major indexes to follow. Stay tuned on that!
The S&P 500 Volatility Index (VIX):
VIX popped this past week, but it was a short-lived bout of volatility, which isn't unusual, especially if the dominant uptrend is resuming. A smooth trend, up or down, doesn't usually come with all that much volatility.
VIX can't seen to get much above 14 for any extended period, then tends to settle back down near 13-12.5 as seen recently. When the Index gets 'oversold' according to the RSI, the Market has sometimes seen another round of volatility. VIX finds a 'reason' to rally a bit but that advance isn't sustained.
Nothing doing here that suggests a trade. VIX options continue to be mostly a hedge for fund managers as 'insurance' if stocks were to take a sharp, especially unexpected, dive.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) has again rallied to just under its well-defined line of resistance at 2120. As I noted last week SPX has also been showing good buying interest on dips to the 2080 area and that was seen again this past week.
I anticipate a move, an upside breakout, above 2120. Next resistance is then suggested in the 2140 area, extending next to around 2160. A Close below 2080, not reversed the next day, would be a bearish fly in the ointment to my bullish stance.
I had more to say in my recent (5/7) Trader's Corner on the implications of a broad trading range that becomes as narrow as seen currently, from approximately 2080 to 2120. A 'rectangle' formation like this is assumed to have good potential for a next move higher which resumes the prior dominate trend.
The RSI and my call/put sentiment indicator patterns have been more or less 'neutral' in their patterns. There was a noticeable pick up in bullish trader sentiment with Friday's employment report, but my CPRATIO indicator isn't at an extreme either. It might get that way if there's a strong move above the prior range as short-covering buying and new buying would likely be strong after such a lengthily sideways trend.
S&P 100 (OEX) INDEX; DAILY CHART
Last time I was seeing the S&P 100 (OEX) as "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."
The past week's dip below the 21-day moving average was short-term bearish but key support held again in the 915-910 area. And, OEX is back above its 21-day average and knocking at the door of its line of prior resistance. The longer a sideways move like this goes on within a long-term uptrend, the stronger the chance for a strong upswing once resistance is finally pierced.
Support continues to be seen in the 915 area, extending to 910. No change from last week there. Fairly major support still seen at 900, but I doubt we'll see OEX down there any time soon.
Pivotal resistance continued to be at 932, and next resistance then is AGAIN projected at 940. Fairly major resistance is anticipate at 950-955.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
As I noted above in my initial 'bottom line' commentary the Dow 30 (INDU) had through last week traced out a bullish 'symmetrical triangle' formation as highlighted in my daily Dow chart seen next. Please also check out the LINK to my Thursday Trader's Corner article also seen above for more background info on triangle formations. Such patterns don't occur often but they are predictive as to an expected outcome. I was struggling some with how a substantial and sustained advance was going to occur, which I was thinking was going to come in the S&P 500 WITHOUT the Dow participating.
I kept looking at the Dow's chart pattern until a light bulb went off so to speak with an 'ah ha' recognition of a well-known wave pattern: an initial strong upswing ('thrust'), followed by 5 subsequent back and forth price swings ('legs') where each subsequent move was less than the distance covered in the prior price swing. See my INDU chart below.
For a change I stopped tallying the individual 30 Dow stocks as to whether they there were more in a dominant bullish or bearish pattern. This type of 'bottoms up' analysis is often fruitful but not always.
Technical/chart support (sorry, not marked on my daily Dow chart) is at 18000, extending to 17950. Next lower support comes in at 17800, extending to 17750.
INDU resistance is at 18200, extending to 18275-18300. Next resistance then is projected for the 18400 area and extends to 18450. A monthly long-range target for INDU before resistance comes into play is to the 19000 region. Dow 20000 anyone!?
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
After another retreat in the Nasdaq Composite (COMP) to its up trendline, the subsequent rebound again carried to above COMP's 21-day moving average. A next bullish challenge is seen in the Index mounting a sustained advance above this key trading average.
Support, suggested at the intersection of COMP's up trendline, is at 4920, with next support highlighted in the 4850 area.
Resistance is highlighted at 5040-5045, then again at the pivotal 5100 level. Assuming there's an eventual sustained move above 5100, a target/resistance is at the prior all-time intraday COMP peak (March 2000) at 5132; next resistance is then projected in the 5200 area at my upper moving average line.
NASDAQ 100 (NDX); DAILY CHART:
The big cap Nas 100 (NDX) chart remains bullish as NDX rebounded from trendline support in the 4350 area and Closed above its 21-day moving average which turns its near-term trend back up. Next lower support comes in at 4300.
NDX resistance is again suggested at 4500, extending to 4550. Whether NDX has potential to pierce its prior recent intraday peak at 4562 and beyond involves some long-term chart guesswork for me; on potential upside before NDX hits the top (resistance) end of its long-term uptrend price channel. On my most recent month-end (Trader's Corner) April technical review I noted possible resistance at 4500.
Projecting long-term technical 'resistance' for NDX is open to different interpretations depending on how you draw an upper trend channel line: NDX's monthly upper trend channel line might come in around 4800. Hey, they used to think age of the universe was 15-20 billion years; now it's been 'defined' at 13.7 billion!
Back down on earth the NDX daily chart looks bullish, especially if NDX can maintain levels above or mostly above 4450-4465. A decisive downside penetration of 4350 would be short-term bearish but fairly long-term support begins in the 4300 area so the potential downside doesn't look huge currently.
The NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) shows again this week the same bullish pattern as the underlying NDX in the Q's rebound from 106 support and Close above its 21-day average.
A further rally to re-test 110, then 111, chart resistance could take QQQ to a new high above 111, as to 112 or a bit higher.
Near support is seen at 108, then 107, extending to 106. A move to below 108 would not be maintained current upside momentum as I currently anticipate chart support in the area of the recent Thursday-Friday upside price gap.
QQQ's On Balance Volume (OBV) line has again turned higher, which is a bullish plus.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) isn't 'leading' the other indices higher like it was for awhile but RUT did hold support in the 1220 area on the recent decline, which is also the area of my lower moving average envelope line implying one type of 'oversold'. A low oversold (13-day) Relative Strength Index (RSI) also occurred before the recent rebound.
Last week I noted that: "If I viewed the Russell in isolation and didn't try to extrapolate to the rest of the major indices, I'd say it's a fairly compelling buy." I didn't add, on a risk to reward basis, but that's what was somewhat 'compelling' in buying into a sell off like this provided an exit point in the 1200 area.
Support is highlighted in the 1220 area, extending to 1210.
Pivotal resistance is seen at 1250 currently, extending to 1260. Longer-term resistance is seen in the area of the prior top at 1275-1278.
GOOD TRADING SUCCESS!