THE BOTTOM LINE:
The S&P 500 (SPX) and Dow 30 (INDU) have been finding some support/buying interest as seen in slightly higher lows off the recent bottom, but higher highs are illusive.
The Nasdaq Composite (COMP) has been hitting a recent line of resistance at approximately 4825 and at 4328 in the Nas 100 (NDX). Both COMP and NDX have eked out Closes above their respective 21-day moving averages which is a technical plus but more is needed to suggest a possible further upswing.
Traders and investors of course are waiting for Fed action or not on raising rates. The charts suggest what looks like 'basing' action so a minor rate hike (or, no hike) could be priced into the Market and allow stocks to rally at least back to re-test the prior 'breakdown' points; e.g., to 2050 in SPX, to 17000 in INDU, 5000 in COMP and 4500 in NDX.
With an up day on Friday, although prices were all over the place intraday, bearish sentiment increased some. A rise in bearish plays on an up day may look encouraging for the bulls. As my daily 'sentiment' indicator is based on the ratio of total CBOE equities call volume versus daily put volume, this aspect may also be simply too few traders willing to bet on calls and a minor increase in put buying to hedge downside risk.
Bearishness, as suggested by the recent dips in my CPRATIO 'sentiment' indicator (displayed with the SPX and COMP daily charts) dipping into the oversold 'extreme' zone, is rife. I think this factor of possible 'excessive' bearishness is something that keeps me from getting overly bearish myself, especially at potential bottoms and within long-term bull markets. I've seen the lemming effect for decades where gloom is usually quite overdone at lows. In Market bubbles, bullish 'sentiment' gets wildly overdone too but can go on MUCH longer.
When I indicated the Market trend is down, I would note that this is the 2-3 month intermediate-term trend. The long-term trend in the major indexes hasn't reversed its multiyear uptrend to down.
This Market is tough to call as to upcoming direction, but I lean to a bullish stance based on the past pattern of many of these big panic declines that rebound, but initially just tentatively and later to re-test pivotal resistances such as to the breakdown points already mentioned.
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) is bearish in its pattern after SPX fell sharply from the low end of its multimonth trading range at 2050, which was the key 'breakdown' point on the chart. 2050 then becomes the level which the Index needs to regain to turn the intermediate trend back to bullish. Immediate resistance comes in at 1985-2000.
The recent rebound and gradual trend higher came until SPX has hit resistance a few times now at 1985-1990. The pattern traced out from the lows could be seen as a consolidation ahead of another downswing, such as one re-testing prior lows around 1866-1867. I don't see the chart as suggesting another such sell off but it could go that way. My view is that buying interest will be found in the 1900 to 1880 zone assuming another such dip.
Closing above and maintaining most closes above the 21-day moving average is a tip off to trend momentum turning back up. If that doesn't happen, prepare for another possible dip. Exit bearish strategies on another sell off into the support area highlighted.
Bullish sentiment is low according to my CPRATIO indicator. I think that bears will be surprised if stocks rally on a minor rate hike as the uncertainty will be resolved and a small increase is probably well priced into the SPX; for now anyway.
S&P 100 (OEX) INDEX; DAILY CHART
The S&P 100 (OEX) is bearish in its intermediate trend. The long-term trend in all the major indexes hasn't reversed to down relative to the Market's multiyear uptrend. However, there's little point in going beyond the 1-3 month chart picture from a trading, versus long-term investment, perspective.
The big cap S&P 100 index needs to climb back above 900 to turn the trend back up substantially or just to regain the LOW end of its prior multimonth trading range. Immediately ahead, a move back above the 21-day moving average, currently at 872, is needed to suggest the possibility of a climb next to 900. Stay tuned on that!
Key near support is seen at 840, with next support at 820. I think 840 will end up as a support on a further downswing and would exit bearish strategies on such a dip.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) is bearish. Many of the 30 stocks are of course down substantially from their highs. I assess AXP, CAT, CVX, DD, IBM, INTC, KO, MCD, MRK, PFE, PG, maybe AAPL, UTX, VZ, WMT, and XOM as unlikely to mount sustained rallies anytime soon. Actually, AAPL looks like it was a past and future buy on dips to 100. Let's say that half (15), not 16, of the Dow 30 are a likely drag on much of a recovery rally happening soon in INDU.
I do see fairly solid technical/chart support at 16000 in the Dow as I wrote about last week in analyzing the weekly chart (not shown here again). The 15 Dow stocks acting as a drag on the market are now getting toward, or are, oversold. I've pegged INDU support below 16000, at 15800 per the daily chart highlights below.
Near Dow resistance is seen at 16650, then at 17000-17100. 17070 was the low end of INDU prior trading range from October of last year going into this recent sharp decline. Once penetrated (especially so decisively) prior support tends to 'become' subsequent resistance. INDU needs to regain 17070-17100 and hold this area on dips to turn the chart pattern back to a more bullish picture or one having at least bullish potential again.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) is bearish as its recovery rally has hit resistance repeatedly now around 4825 as highlighted below. To turn the chart to a more bullish hue would take a move back above 4900; not only that but a sustained move above 4900 where this level defined or showed up as support on pullbacks.
Fairly major resistance and a next test for the tech heavy Nasdaq would come in at 5000. To turn the chart back to decisively bullish, COMP needs to again trade predominately above 5000. Reminder: 5132 was the prior all-time COMP monthly peak from March 2000. Seems like a century ago! 5128 was the highest monthly Closing high recently, in July 2015.
Near support is highlighted at 4700, with next support at 4600. 4500, extending to 4430, is major support.
Bearishness, as seen in the recent dips in my CPRATIO 'sentiment' indicator into the oversold 'extreme' zone, is rife. I think this factor or what is perhaps 'excessive' bearishness for stocks ahead is something that keeps me from getting overly bearish myself. I've seen the lemming effect for decades where gloom is usually quite overdone at bottoms. (In bubbles, bullish sentiment gets wildly overdone too but this can go on MUCH longer.)
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) chart turned decisively bearish on the waterfall decline below 4400 initially, then in the 4300 area which I'd define as the key recent technical 'breakdown' point. Recently, on the recovery rebound, NDX has been hitting selling pressure/resistance at 4328 predominately with a couple of prior rallies a bit higher intraday but which faded by the Close.
I've highlighted resistance (above 4328) at 4400, then at 4500. NDX would need to get above 4500 to put price/trend momentum squarely higher over time.
Near support is seen at 4200, extending to 4150. Major support begins around 4000.
NDX volatility as measured by the 'VXN' index has been declining but is still relatively high and not surprising ahead of Fed action. The Fed hasn't been a key external (to the Market) factor in years. Get used to it! That is, assuming the economy keeps growing and the Fed continues to put on the breaks, even gently and gradually.
The NASDAQ 100 ETF STOCK (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) is bearish in its pattern although there's been of course a good-sized rebound off QQQ's panic low. What would turn the chart bullish? We're almost there, which is a Close back above 106 and more importantly than 1-2 days of that, is a SUSTAINED move above 106. Where what is a current (and pivotal) resistance at 106 'becomes' a floor of support/buying interest on future pullbacks. Stay tuned on that!
I've noted near chart resistance of course in the 106 area, specifically at 105.8 to 106 even. Next resistance then is highlighted at 108-108.4; 108.4 would take QQQ back to resistance implied by its previously pierced up trendline.
Near support/buying interest looks like 102.7-103, extending to 101.5 to 101. Fairly major technical support begins at 100.
The On Balance Volume (OBV) indicator is slightly encouraging for a further rebound in that the OBV line has turned up a couple of times in recent days. Volume is a secondary indicator and price action is the main event so to speak but the aforementioned OBV/price pattern is what's often seen at significant bottoms.
RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 (RUT) is bearish in its pattern and it will take a substantial move higher to suggest otherwise; specifically to above RUT 1200-1220, representing a key technical resistance zone.
Near-term, a RUT Close above 1160 that's maintained on the next trading day (and for the most part on subsequent days) would suggest upside potential to initial resistance highlighted at 1180. As already noted next and pivotal, chart resistance in the Russell 2000 starts at 1200.
Near support and anticipate buying interest is highlighted at 1140, extending to 1120. Fairly major support comes in at 1105-1100.
RUT got as 'oversold' at the recent Closing low in terms of the 13-day Relative Strength Index (RSI) as the Index has got to in the past 3-4 years; e.g., at key tradable bottoms in 2011, twice in 2012 and again in late-2014. The caveat to this is contained in the 'risk' statements re stocks, etc. that 'past results are no guarantee of future activity'. Stay tuned!
GOOD TRADING SUCCESS!