THE BOTTOM LINE:
The S&P 500 (SPX) quickly retraced 62% of its prior sharp run up, the Dow nearly 100%, all, of its prior weaker gains. The big cap Nasdaq 100 has only given back a mild 38%.
The Market has two 'problems' technically in terms of achieving a next sustained bull move:
1.) The inability for the non-tech stock 'economy' to pick up; enough so to see the S&P 500 break out above prior highs that formed a line of resistance at 2125-2135, as highlighted on that chart below.
SPX is in a large 'rectangle' formation or in old time trader speak a trading range. In a primary bull market, sideways trends like the pattern of the past few months are typically resolved with a decisive upside penetration move in the DIRECTION of the major trend which is up.
Occasionally a 'rectangle' is part of a rectangle top. A decisive DOWNSIDE penetration of the lower end of such a rectangle as seen in the SPX chart further on might suggest a bearish intermediate or even long-term trend reversal.
2.) The second 'problem' so to speak with the technical position that the Market is in has to do with the major tech indices hitting resistance(s) implied by the UPPER end of long-term uptrend price channels.
Why the significance of this (upper channel) line? It's simply it being the high end of the advancing price trajectory of the Nas Composite (COMP). The long-term COMP chart seen first of the charts sees slow going or stopping when it's bumping up against its upper channel line; and, implying the upper level of COMP valuations that investors are willing to pay. That's what it means to be up against the trendline. The RATE of price increase SLOWS down considerably.
The S&P 500 Volatility Index (VIX):
The VIX Volatility Index topped out at 20 recently but found support when VIX fell to the 12 support area where it then rebounded some.
Initial resistance to a further VIX rise is in the 15.7-16 area.
A tendency for a future jump in implied volatility has been seen after periods when the 13-day Relative Strength Index (RSI) gets 'oversold' (like a stock or Index would) such as seen in a couple of recent instances.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) has been in a broad trading range for some months now in what in technical analysis speak is a rectangle pattern. A rectangle such as highlighted below suggests that a decisive upside penetration of the UPPER end of the box would suggest potential for a substantial move higher.
Conversely, a rectangle top is suggested by a decisive DOWNSIDE penetration of the lower end of a broad trading range like this; i.e., to SPX daily, then Weekly, Closes below 2050-2040.
I'm of the mind that we'll see an eventual move above 2130-2135 resistance but further sideways action like we've seen could go on for a few weeks. Weekly Closes above 2050 best keep bullish potential alive.
Initial support is anticipated in the 2070-2075 area. Major support comes in around 2050. Near resistance is at 2100, extending to 2120. Major resistance is at 2130-2135.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) saw a steep rally and now an equally steep decline that's retraced a little more than half of the prior upswing. The 62-66% retracement zone often develops as a bottom or interim bottom, suggesting to look for support at 918-915.
Support/buying interest below the 915 area is at 905 extending to 900. Overhead resistance is highlighted at 930, extending to 935.
I'm bullish on OEX in the 915 area, but that area should be the low unless the Index is going to retest 900. Doubtful I think but price volatility is picking up with earnings.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) has been the weak sector within the larger NYSE universe. INDU's intermediate trend is sideways but will turn LOWER with any sustained decline below 17500.
Near support is seen at 17500 and extending to 17430. Since late-February the INDU pattern as been for a strong rebound only after a move to my lower envelope line at two percent below the 'centered' 21-day moving average. The Dow is nearing that point again.
Key near resistance is at 17800 at what was expected support, but which became, the recent 'breakdown' point. Next resistance is at 17900.
A 100% retracement is back to the area of prior lows in the 17500 area and if reached, this area down to 17430 has favorable risk to reward on bullish strategies. Controlling risk is the key by setting an exit point at just under 17400.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) sailed above the prior top in the 5150 area, hitting 5230 but only to see a quick and sharp pullback. One that should be noted hasn't yet seen a 'normal' 50% retracement; i.e., to 5065.
Near support is anticipated around 5050. A retracement pattern to 62-66 percent suggests bullish alerts for apparent lows being made at 5027-5011. 5000 is seen as major chart support.
Near resistance/selling pressure anticipated at 5150, extending next to 5200 at was the recent bullish 'breakdown' point.
A bullish buy into dips into the 62-66 percent retracement zone at 5027-5011, with an exit below 5000, offers a trade look.
NASDAQ 100 (NDX); DAILY CHART:
The big cap Nasdaq 100 (NDX) hit an upper overbought 'extreme' implied by brief highs made around 4700 at my upper moving average envelope line (at 3.5% above NDX's 21-day moving average). It's unlikely to see any prolonged advance above this upper line in this kind of market and quite often sharp pullbacks come next, as seen this past week.
I discussed in my initial bottom line Market overview, that the broad Composite (COMP) and the big cap Nas 100 (NDX), given prior monster multiyear gains, are now hitting the upper resistance ends of long-term uptrend price channels (shown for COMP at top).
4700 looks like fairly major resistance currently. Near resistance is also likely at the low end of the upside price gap at 4643.
Near support is suggested in the 4500 area and at the 21-day moving average currently, with support then extending to 4450. Fairly major support begins at 4400.
I favor looking at possible bullish plays on pullbacks to the 4500 area knowing a sell off in that area could extend to at or near 4450. I wouldn't stay in with Closes below 4400.
The NASDAQ 100 ETF STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) chart is bullish but short-term trend down given the sharp sell off carrying fast back to the 111; surprise, as 111 was so recently a (upside) 'breakout' point. Holding the line here at 111 support is my 'most' bullish expectation.
A next expectation is the Q's drop back to the 110 area and hold around its 21-day moving average. If NOT, support is at 108, where I'd be a buyer of the stock; a rally to 111-112 as a target and exiting if wrong just under 107.
I've highlighted expected resistance at 113, then at 114.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) as quick as it went up, back down again. From my upper 'envelope' extreme now to the area of the lower trading band at 2.5 percent under the 21-day average.
1225 is noted as possible support if the drop stops here. Otherwise, support at 1220, then 1215 should put breaks on further selling. Overhead resistance looks likely at 1250, and probably a next point to short. Next resistance is just overhead at 1260. Two consecutive Closes over 1260 would suggest trend momentum was back up.
In the 1220-1215 area, if reached, RUT seems like a 'low-risk' buy adhering to a 1205 exit anticipating a potential rebound to near 1260.
GOOD TRADING SUCCESS!