THE BOTTOM LINE:
All the major indices, except the Dow and Russell 2000 remain 'stuck' in long-standing trading ranges. However, INDU looks to have long-term trendline support around 17000 (17125 is its recent low). And RUT may find support back at a long-standing line of prior resistance at 1200; i.e., resistance, once pierced, tends to 'become' support on subsequent pullbacks.
A recent long-term weekly Dow chart showing implied support in the 17000 area, at the low end of INDU's broad weekly chart uptrend price channel, is seen in my recent 8/13 Trader's Corner.
As the Russell chart pattern I've referred to, suggesting support on pullbacks to the 1200 area (prior resistance) also is a pattern best seen on RUT's weekly chart seen after the daily RUT chart; i.e., on my last chart at bottom.
Fundamentally, this Market doesn't lend itself to overarching generalizations other than uncertainty on the earnings and interest rate picture ahead, with whippy price action magnified by lower summer volumes.
Technically, what continues to 'work' in suggesting tradable tops and bottoms is when upswings and downswings reach my upper and lower trading 'bands' or more accurately known as upper and lower moving average envelope lines used on the major indices, that 'float' at set percentages above/below a centered 21-day moving average. Buying dips to the lower envelope lines has worked well in exiting bearish positions. However, subsequent rallies from such 'oversold' extremes have been limited recently in INDU, RUT and perhaps recent rebounds in the S&P and Nasdaq may not gain much traction. Stay tuned on that.
A key thing to say about using this technical indicator, this tool of moving average envelopes in the indexes, is that it suggests highs and lows that are unlikely to be exceeded at all short or medium-term, at least by much. Use of the right percentage input above and below the 21-day average, is a terrific tool for use in exiting or entering positions.
Lately, it's uncertain HOW MUCH upside potential on rebounds that occur from lower envelope lines. The charts that follow will show how prices tend to behave at lower and upper envelope lines. It's a useful tool, but isn't all that should go into a trading decision in terms of upside or downside potential; e.g., SPX mid-week this past week dipped sharply lower but then rebounded almost exactly from the lower envelope line seen on my first chart. How high this rebound might carry is another strategy decision that has to be made.
What's implied in most cases such as this past week's dip TO or near my lower SPX envelope line, to use this example, is that FURTHER downside is probably quite limited in both price and duration; e.g., 1-3 days is about as long as we'll see prices under or above my lower and upper envelope lines; with the exception of some catastrophic event.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) is mixed in its trend, which is basically sideways and has been for over 9 months. Hard to believe after years of prior monster GAINS, that SPX has been narrowly range-bound between 2000 on the downside and 2130 on the upside.
A characteristic tendency, especially in a lateral trading range market given 'normal' or low volatility has been for SPX to trade between moving average 'envelope' values set to 2 percent above and 2% below a 'centered' 21-day moving average. I always use the same moving average length input (21) but vary the upper and lower envelope values as needed. In a strong bull market trend, the upside value that 'contains' most rallies might be 2.5-3%. In a dominant downtrend the downside value may expand also as declines will carry farther than rallies.
The aforementioned tendency for percent envelope values that is 'ideal' for SPX (and OEX and the Dow) is highlighted below. When the decline carried to the lower envelope line, I suspect that many of you didn't see 'bottom' possibilities first and foremost because of a moving average envelope indicator. Stay tuned to this possibility over the years!
I liked owning SPX calls in the 2050 area, although time spent there was short-lived. What I upside is, I can't predict so well. If the Index pierces its 21-day moving average in 2100 area, then to above 2110, upside potential is maybe back to 2130 area.
Initial support is highlighted around 2073, extending to 2050. 2040 begins fairly major support. Bullish sentiment dropped significantly into or just ahead of the recent low. My CPRATIO indicator is a 'leading' indicator suggesting a bottom within 1-5 days of lowest point of bullishness.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) is also range-bound and has tended to make tops at prices that are 2 percent above the 21-day moving average. More on use of the moving average envelope indicator for the Indexes (only) is seen above in my S&P 500 commentary.
The most recent intraday sell off carried TO, and just under, 905, at lower support suggested by my 2 percent envelope value or trading 'band'. 900 offered pivotal support and sellers were not willing to try to push it to this 'benchmark' where buying interest was undoubtedly good. I've noted initial support again at 915 at the 66% retracement level (of the prior advance). Next support is 905, extending to 900.
Near resistance is seen at 928-930, then at 935-937. I favored buying OEX calls/selling OEX puts on the dip toward 900 as exiting stops could be set just under 900. I make a lot of trading decisions that are at projected 'extremes' which also means 'defensible' stops are not far from trade entry; e.g., just below key support points in terms of bullish strategies.
Re trade entry at what look like 'extreme' lows or highs. I know that major trends may devolve into trading range affairs where a strong trend won't bail me out of a sloppy trade decision; e.g., where I depend on a strong uptrend to make a trade profitable versus patient waiting for a good-sized dip. Of course sometimes you just have to jump into a fast moving trend, up or down.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) has struggled to gain traction on the upside. It's been better to bet on the downside on rallies into resistance. For the period shown, INDU has seen downside trend reversals at lower and lower rally highs. Buying into 'oversold' situations such as at my lower (2%) trading band has led to upside reversals but which, in turn, led to mostly short-lived rallies.
In my initial 'bottom line' commentary above with its link to the Dow weekly chart analyzed this past week highlights the long-term up trendline comprising the low (support) end of a long-term uptrend price channel. The weekly Dow chart suggests key longer-term support coming in around 17000. INDU has already seen one intraday low at 17125.
Owning Dow Index calls when INDU got into the 17200 area may see upside Dow potential to 17600-17660, which is noted below (down red arrows) as resistance. Next Dow resistance not highlighted is at 17800, extending to 17900, where the top (resistance) end of the current daily chart downtrend channel intersects.
Near support is highlighted at 17300, extending to 17200. Major support as noted already per INDU's longer-term weekly chart up trendline (not shown here but via the above link) comes in at 17000.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) for the period shown has traded between my UPPER 3.5% moving average envelope line (twice) and twice down to the lower 2.5% envelope or trading 'band'.
Rallies in its strong uptrend have carried COMP higher above the 'centered' 21-day moving average at 3.5% ABOVE the average, than declines have carried the Index down to around 2.5% BELOW the centered average.
Upper and lower envelope values that 'contain' most up/down price swings can be different by a half to a full percent or more depending on strong trend direction. Unfortunately, some moving average envelope indicators ONLY allow setting the SAME value for upper and lower envelope values.
The aforementioned price swings have often also seen overbought or oversold extremes in terms of my CPRATIO sentiment indicator, but such 'extremes' often occur a day or a few (e.g., up to 5) days before an actual tradable top or bottom is seen.
COMP support is highlighted at the milestone 5000 level, with support extending to 4950. Near resistance comes in at 5100, as suggested by the 21-day average, with resistance extending to the 5150 area. Major resistance begins around 5230, extending to around 5260.
NASDAQ 100 (NDX); DAILY CHART:
The big cap Nasdaq 100 (NDX) is near-term bearish on this last pullback but within a still-bullish intermediate to long-term uptrend. The recent pullback retraced just over 2/3rds of the prior advance and went on intraday to reach my lower (support) envelope line at 2.5% below the centered 21-day moving average. My upper and lower NDX envelope percent values are the same as the broad Nas Composite.
The last rally peak near 4700 also occurred simultaneously with an 'overbought' or high Relative Strength Index (RSI) reading. The bottom made prior to that high started not only from the lower envelope line but occurred along with a low/'oversold' RSI. The two occurrences together of envelope and RSI extremes were pointing to compelling trades in both cases.
This last low might have been a 'compelling' buy but I'm less convinced. If you bought into the last dip such as to/near the lower envelope line, I suggest exiting if 4450 support is pierced. Near support is seen in the 4490-4500 area. Fairly major support begins at 4400, extending to 4350.
Upside potential is may be for a recovery move back up to the 21-day average, currently intersecting at 4580. Next resistance is seen in the 4615 area. Major resistance beings around 4700.
Lastly, I'd note that the last extreme low in the Nas 100 volatility index (VXN) per the chart highlight below came just ahead of the last major NDX top. That inverse VXN/price relationship, along with other factors, can at times provide added input for an exit on bullish positions and possibly a reversal into a bearish play. I'd emphasize that the price pattern should be primary in suggesting a possible top.
The NASDAQ 100 ETF STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) is mixed with the short term trend definitely lower with the intermediate trend mixed. The recent low reversed from my lower (2.5%) envelope line. The prior upside price gap was 'filled in' and a rebound followed.
Near support is highlighted at 110, extending to 109.5. Major support is anticipated if the Q's again dip to the 108 area.
Near resistance is seen in the 111.6 area, at the 21-day average. Next resistance comes in at 113, with fairly major resistance beginning around 114.
Bullish plays looked ok on a risk to reward basis at the lower envelope line with exiting stops just below 108 and with upside potential back to the 111.6-112 area.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) is bearish in its short to intermediate pattern. The long-term trend has not reversed to the downside however and I have something to say about that on the long-term weekly chart that follows the daily chart.
RUT, relative to my first chart is finding support at around 3 percent BELOW its 21-day moving average, but recent rebounds from this area haven't carried above resistance implied by the same (21-day) average at least not by much in one instance of penetration. Moreover, price action has traced out a downtrend price channel that's also highlighted below.
RUT resistance is implied in the 1230 area at the current 21-day moving average, extending next to the 1247 area, the intersection of the upper resistance end of the bearish downtrend channel.
Current support is highlighted at 1200, extending to 1190-1185. If I had to be in RUT options, no choice, I'd rather be in calls or short puts around 1200, than hanging on to put positions thinking that there's just no support floor to RUT.
There is something more to say about the significance of potential support in the 1200 area in RUT which is best highlighted in the long-term weekly chart that is seen after my daily chart.
RUSSELL 2000 (RUT); WEEKLY CHART:
The 'something' more to say about the significance of 1200 as potential RUT support is highlighted in the WEEKLY chart seen next. There were several instances over 2013-2015 that RUT failed to pierce 1200 on rallies. This pattern set up in technical/chart terms a strong line (a horizontal 'trendline' so to speak) of resistance in the 1200 area.
There's a long-standing rule of thumb that resistance, once penetrated, tends to 'become' support on subsequent pullbacks; that's a good guess here but stay tuned!
GOOD TRADING SUCCESS!