THE BOTTOM LINE:
Chart patterns will often if not usually suggest which way a next move is going to unfold but in this case one interpretation suggests a bottom is in place but another (i.e., a possible bear 'flag') suggests risk of another downswing ahead. We're in the Greek/EU casino!
I used to say to people that said that trading stocks is 'gambling' that, no we can forecast stock prices much of the time. However, the EU situation looks quite unpredictable.
If there's another downswing ahead, this may set up a bottom. But how soon a next rally might unfold may be hard to predict. When the Market is held hostage to political situations it's often a crap shoot; especially so with crisis situations and political/economic 'muddling' through. We thought the USA could be fractured! Happy Independence Day nevertheless even if stock market participants don't feel very 'independent' at the moment!
My individual index charts will provide my input as to wide-ranging support and resistance points. I've focused especially on potential support areas. I thought we might have seen a bottom already but there remains an alternative interpretation of another shoe to drop ahead. The current uncertainties will get sorted out over time and we'll get back more to our own Market fundamentals. Meanwhile, risk little to no money on gambling!
The S&P 500 Volatility Index (VIX):
The VIX Volatility Index broke out of its prior trading range by its decisive upside penetration of 15.7. VIX 'resistance' now looks like 20. Support now looks to lie in the 15.7 area, or what was previous VIX resistance.
I wrote last week that an "eventual breakout above 16 in a volatility 'spike' is a possibility but not soon." However, SOON came very fast!
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) daily chart seen next suggests that SPX has either made a bottom in the 2060-2056 area (possibly to be re-tested) or, alternatively, the last sharp decline and subsequent rebound has formed a possible bear flag suggesting another down leg ahead that could carry to 2015 or so. The 2000 area shows up as longer-term support on weekly charts (not shown here).
Near resistance comes in at 2100, extending to 2110. Near support as noted, suggested by the prior recent intraday low is at 2056, with support extending to 2046. A next lower support or downside target suggested by the aforementioned bear 'flag' pattern is highlighted at 2015 in SPX.
In terms of the Relative Strength Index (RSI), SPX has reached an oversold extreme already. Bearish sentiment also got to a level at the last downswing that might 'signal' a bottom also. However, bearishness would likely get more extreme or increase again on another decline.
S&P 100 (OEX) INDEX; DAILY CHART
Within the S&P 100 (OEX) chart is bearish now on both a short-term and intermediate-term basis. I've kept in the place the prior up trendline as indicating a near-term resistance at 918, extending to 922. Next resistance is highlighted at 930.
Support is suggested at the prior intraday low in OEX at 905, but major support in the 900 area could get retested in the event of a next sell off which is quite possible with this 'mixed' chart pattern.
OEX did reach an oversold extreme at the last low but in this Market, with the indecision pattern that's been traced out, a single oversold RSI reading doesn't mean as much as the last time RSI got to a 'fully' oversold extreme in March.
A favorable risk to reward on owning calls in the 900 area if reached, would be seen if exit was made at 895, as upside potential would look to be back up to 925, at the recent 'breakdown' point.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) may have reached a bottom at the recent 17600 low. INDU has the most favorable chart for the bulls in that it has reached the low end of the trading range seen on the daily chart shown here. Although, if I were to predict based on the longer-term trading range seen on weekly charts (not shown), it would suggest that potential support comes in around 17560.
We could call support or buying interest as likely in the 17600 to 17500 zone. Near resistance is at 179000, extending to 18000.
If I was going to take a flyer on either the S&P or the Dow, INDU probably is the lower risk play at the highlighted support seen here with the daily chart. An upside rebound may be slower to come however. I also should note that major support seen on the very long-term monthly chart looks to come in at 17200-17125. See my most recent Trader's Corner month-end review.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) chart remains above its current up trendline, as highlighted on the chart which is potentially bullish but this trendline could yet get pierced of course. I've noted current trendline support in the 4965 area.
In the event that COMP's up trendline is pierced, next support is seen in the 4900 area, extending to 4850. If COMP is seen to have the same 'bear flag' pattern as SPX, downside potential is to 4850.
Near resistance is highlighted at 5050, extending to 5100.
The 13-day Relative Strength Index (RSI) AND my trader sentiment indicator have both reached 'oversold' extremes once already. There's nothing to say that they won't see oversold readings occur again; another instance of which would probably be an opportunity for bullish plays but this can't be forecast yet given that our Market is caught up in this EU drama. Stay tuned!
NASDAQ 100 (NDX); DAILY CHART:
The big cap Nasdaq 100 (NDX) has the same basic chart pattern as the broad Nas Composite seen above in that the Index appears to have 'held' an up trendline, although one that's been re-drawn on the last decline. If one trendline is pierced, I look to see if there's a lower trendline that might be 'valid' as a next lower support. Potential trendline support is highlighted at 4386 currently.
The COMP chart pattern is also now such that technical 'support' has to also be seen as coming in at prior lows from late-March in the 4320-4300 area.
Resistance is suggested in the 4470 area, extending to 4500 as seen on the chart, with a next strong line of resistance at 4550.
If I was going to look at a speculative buy if there is a further move lower, it would be in the 4300-4320 area if reached. Longer-term weekly charts (not shown) suggest support at 4300-4275. If NDX fell to this area, risk to 4250, with an objective to 4500.
The NASDAQ 100 ETF STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) as usual saw a significant spike in volume when technical support gave way at 108. This is the typical pattern of closing the barn door after the horse is out or could be seen as the tendency to have CLUSTERS of sell-stop orders in the same or similar areas.
Near support as suggested by my re-drawn up trendline is seen at 106.8 currently. Support extends to 106. If support at the prior lows for the period seen on the chart was to be retested, buying interest would likely surface around 104.50-104.3. I'd buy the stock in the 104 area if reached, risking to 103.5 with expectations of rebound potential to 108, perhaps to the 110 area again.
Major support comes in at 100, although I think the Q's are unlikely to see 'par' again to borrow a bond term.
Near resistance is highlighted at 108.3, extending to 109. 110, extending to 111 looks to be fairly major resistance currently.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) which was in a steep uptrend has broken below its support up trendline, now highlighted as resistance at 1270-1275. Near support is seen at 1240, extending to 1230, then at 1220.
When RUT has reached an oversold RSI extreme it's often marked a buy point. Since no technical pattern is repeated ad infinitum, we may see a lower price low ahead and just ONE 'fully' oversold Relative Strength Index extreme may not be a place to 'mechanically' buy into.
Stay tuned on RUT as the Index charged ahead of the pack and may not be an immediate candidate to jump back into. The move to my upper trading 'envelope' line near 1300 was a good speculative short as it turned out especially when it was coupled with an overbought RSI extreme. The two indicators generated a good technical sell 'signal' in this instance.
GOOD TRADING SUCCESS!