THE BOTTOM LINE:
The Major Indices saw some lower lows, mostly nominal and not prolonged. EU, China still concerns as is the energy slide but from a technical perspective indices could be near bottoms.
The chart pattern last week showed a possible a bearish 'flag' form. And got me off thinking NO lower low. Another down swing developed this past week true to the flag pattern but the major indices haven't yet seen a NEW down leg just a slightly, not dramatically, lower low in the recent decline.
One way to project lows in the indices continues to be by skillful use of moving average envelopes with a 21-day moving average as the 'centered' average. You'll see my 'envelope' values on my charts below. I start with a 2 percent upper and lower envelope setting at '21' and a Fibonacci number.
The S&P 500 (SPX), S&P 100 (OEX) and the Dow 30 (INDU) in 'average' volatility conditions (in a trend) tend to trade plus or minus 2 percent above or below a centered 21-day moving average. If the bullish trend is being propelled with a lot of demand/buying, rallies may push highs to values equal to 2.5 to even 3 percent above this key moving average.
Only RARELY in an ongoing bull market will the dip to the lower envelope line be as great as seen in rally peaks; e.g., a last big SPX rally got to 3% over the average, last big pullback took prices to 2.5% (or, 2%) BELOW the centered (21-day) moving average, followed soon by a rebound.
The Nasdaq numbers in terms of percent values above/below the 21-day average we often see in the Nasdaq are greater percent values relative to S&P and NYSE, as Nasdaq bull market rallies often reach values equal to 2.5 to 3 percent ABOVE the 21-day. On declines, sell offs might only fall to 2.5 to 2 percent under.
The moving average envelope LOWER line be used as a way of gauging when a sell off may have run its course and where support/buying interest may start to buoy stocks; at least the foregoing reflects a common pattern in the multiyear bull market we've had to date.
The S&P 500 Volatility Index (VIX):
The VIX Volatility Index has again topped out at or near 20, as VIX follows a trendline higher, suggesting just slightly higher resistance around 22.3. 22 is the start of major resistance.
VIX support is highlighted in the 15.7-16 area, with next support at 14.
The pattern suggests a declining VIX and I'd consider downside plays on rallies to near 20. If 15.7 gives way, 14 is the support floor.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) has a bearish near to intermediate-term pattern as SPX fell to 2 percent under its 21-day moving average. It got oversold in terms of its fall to the lower (2%) envelope line, an RSI 'oversold' extreme and an 'oversold' status in terms of the decline in bullish sentiment; or, seen in the reverse way as a perhaps over-done build up in bearish trader expectations.
The foregoing bearish near-term picture needs to be seen in the context of a multiyear bull market, as the primary or major trend remains strongly up. This long-term trend picture suggests bullish strategies at the type of price, momentum and sentiment 'extremes' reached in this last sell off. Risk for another down leg such as to 2000 looks less likely than a rebound back to 2090-2100 resistance.
I've highlighted support at 2050, extending to 2040. Near resistance is seen at 2080, extending to 2100 and the best upside I can see in the coming week. Stay tuned on that.
Buying dips to the 2050 area offered a decent speculative play if risk was held to the low-2040 area, and projecting upside potential on a rebound back to 2090-2100.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) chart is bearish below 920, bullish above it.
Key support is at 900-895. Dips to this area have good upside potential in a rebound.
Near resistance begins at 915, extending to the 920 area. A sustained move that keeps OEX above 920 suggests upside to 930, perhaps again to 935. Stay tuned.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) has continued its downward slide. Most recently, INDU support came in at 17500. Key near resistance, a 'line' of prior recent highs, is seen in the 17800 area. Above 17800, resistance at 17900, then 18000, is anticipated.
Areas of INDU support this week are highlighted at 17500, then 17400.
Near term upside potential looks at most to the 17900 area near term. Conversely, we see support/buying interest digging in on pullbacks to the 17500-17400 zone in the Dow.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) has declined to 2 and half per cent below its 21-day moving average so I look for support in the 4900 area and on any dips to below this level. Price declines of a day or few days to the low end of these envelope lines have often marked the lows in a move.
I'm bullish at 4850 should there be another slide. Prospects to pierce 5000 in COMP are ok, maybe not so good for the Index to climb above 5050 based on the current pattern. We'll know more about buying interest if 5050 is seen, implied resistance at a key prior downside price gap and the current level of the (21-day) average.
Support is highlighted at 4900, extending next to 4850. 4845-4800 is seen as major support on long-term charts (not shown here).
NASDAQ 100 (NDX); DAILY CHART:
The big cap Nasdaq 100 (NDX) has been in a sideways to lower trend on balance after numerous prior failures for the big cap Nas 100 to climb above 4550.
Near-term resistance is likely to come in around 4450 and the key 21-day moving average; next resistance is highlighted at 4500.
Pivotal lows seen over 3 consecutive days this past week shows 4350 as first key support, extending to 4300.
I'd buy another dip and adopt bullish strategies if there was sell off below 4350; the 4350-4300 zone looks like my sweet spot to look for a tradable bottom.
The NASDAQ 100 ETF STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) fell to 106 support at QQQ's up trendline, at least the latest 'draw' of one!
The strong rebound from the 106 area at the trendline suggests a possible bottom formed in that area. If so, buying dips back toward 106 is suggested, although some added stop-loss selling could take the Q's to 105.4, possibly 105. I see 105 as sort of my 'worst-case' expectations on the near-term QQQ downside.
Near resistance is suggested at the 21-day average (Friday: at 108.6) then above this area, 110. I don't envision a sustained move just yet above the 108-108.6 resistance zone. A couple of consecutive Closes above the Average in the coming week is an initial indication of a shift in momentum to bullish/up.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) came down to support around 1225, suggested as an 'oversold' extreme by the decline falling 2.5% below its 21-day moving average. RUT has had a tendency for price swings that carried up to an area 2-2.5 per cent above the 21-day moving average and down to the same; in this case apparent support has been triggered at 2.5 percent under the centered moving average.
I favor exiting bearish positions on another dip to the 1225 area, highlighted as support by green up arrow; a sizable dip could also carry to 2015. Adopting bullish strategies in the 1225 to 1215 zone looks favorable on a risk to reward basis. Adhere to a 1210 exit point either on an intraday or end-of-day basis. RUT upside potential over time is to 1300. Max downside in my view is to 1200.
Expected resistance/selling pressure looks to come in around 1260, extending to the level of the 21-day average (currently: 1265). Next resistance is seen at 1270-1274 resistance.
GOOD TRADING SUCCESS!