THE BOTTOM LINE:
The major indexes continued to climb strongly this past week but with traders cautious and not in a strong bullish mode. My bullish/bearish (CPRATIO) sentiment indicator didn't flip up once into readings reflecting trust and belief in this rally. My kind of Market! The Dow crossed back above its 200-day moving average which is kind of a big deal in that even 'fundamentally' oriented money managers will tend to notice this event in terms of suggesting renewed upside momentum.
You can buy current low/no interest bonds at par easily enough but a chance to buy the Nas big cap tracking stock QQQ at 100 and under looks to have come and gone for now at least. As long as we remain in a bull market, as demonstrated by recent lows holding key support(s), trust that the economic sky is NOT falling. Still, such periods of disbelief is opportune as it brings opportunities. And, it's easier to buy bottoms in a bull market than pick tops, which are trickier to 'time' in my experience.
I'll get into considerations of the 'psychology' of trading and the merits of a 'technical/chart' approach to trading in an upcoming Trader's Corner column or two which I will get to again soon. Needless to say, forward thinking is a great advantage versus most traders who wait until they see 'the whites of their eyes' so to speak. To take one example, a double bottom like seen in the S&P 500 recently won't convince most that bullish 'news' will be forthcoming again. It's usually if not always like this.
The average market participant doesn't believe that market action or key price patterns that unfold PRECEDE events related to earnings, economic news and other such considerations. However, such prescience is what got savvy professional traders to buy into that second bottom. Charles Dow commented on this kind of dynamic 100+ years ago. Human nature doesn't change all that much!
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) has regained considerable upside momentum and a bullish chart. My upper resistance trading band, a 21-day moving average upper envelope line is now set at 5 percent above the centered moving average. As below, so above; i.e., the last low was around 5% under the 21-day average and resistance may now come in/start to come in the SAME percentage above the 'centered' (21-day) average.
I wrote last week that "SPX could fail on a first attempt to breech 2050 but as long as bullish sentiment remains relatively low I'm not overly concerned about any major downside reversal."
Not much more to say about that, just check my CPRATIO sentiment indicator at the bottom of the SPX chart. Not once did this indicator rise above a 'neutral' mid-range reading.
I also noted last time that 2000 was a key resistance and this level, now flips to 'become' a secondary support per my green up arrow. Near support also flips from resistance to support at 2050.
As I said before, 2050 represented SPX's prior 'breakdown point' and was a key level to pierce and a pivotal bullish penetration because the S&P is now back above the LOW end of its prior long-standing trading range. Best bullish news going forward is for the Index to build renewed support around 2050. Next overhead resistance comes in around 2100 as highlighted.
The Index is now into its 13-day Relative Strength Index 'overbought' zone so higher risk of a shakeout/minor pullback is goes with this reading.
The S&P 100 (OEX) INDEX DAILY CHART
The big cap S&P 100 (OEX) continues bullish in its pattern as the Index has climbed well above resistance implied by its 21-day moving average. My upper resistance trading 'band' is re-set to 5% above the 'centered' 21-day moving average. I have seen often a next high at least equal to the prior low in terms of percentage values above/below this key trading average.
OEX cleared both prior resistance points I highlighted last week at 900 and 920. A next resistance zone is now suggested at 940 to 948 which was the prior intraday peak for the Index.
Near support is seen at the 'milestone' 900 level in OEX, with technical/chart support extending to 880.
The RSI is up into 'overbought' territory with some risk of a pullback implied and a key reason that I favor buying oversold lows; e.g., as suggested by the first and then second (higher) bottoms. The first intraday bottom just off my daily chart here was very briefly seen at 810 with that day's Close at 830; the lowest Close the next day was 820.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) continued to climb what has been sometimes termed a 'wall of worry' and this past week pierced its 200-day moving average and significant technically; gets some notice from money managers who otherwise aren't otherwise especially technically oriented.
Climbing a wall of worry rather than that of a powerful trend shows up in my daily CBOE equities call-put ratio seen with SPX (above) and my COMP chart (below) not registering a single day in the past two weeks that climbed above a mid-range 'neutral' reading. There have been dips in bullishness seen with my CPRATIO indicator but NO bullish spikes in trader 'sentiment'.
Bullish price run ups were seen in BA, CSCO, GE, MSFT, TRV and big time in MCD. INDU now has near support in the 17500 area and well up from 17000-16900. Next support is highlighted at 17200.
Near resistance is suggested in the area of INDU's down trendline intersecting around 17766, with next resistance seen at 18150. The Dow's long-term uptrend channel (not shown) suggests major resistance comes in around 19200 currently.
As with the S&P, the Dow has climbed into its 'typical' overbought zone in terms of its 13-day Relative Strength Index (RSI) reading. I noted the same last week in saying that "We may see some corrective action ahead but the trend looks higher overall." I liked owning Dow Index (DJX) calls when the Average found repeated support in the 16000 area, but if you are waking up to bullish potential just now, risk to reward potential is maybe ok but no longer compelling, absent big pullbacks.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) continues bullish in its pattern as it first climbed above 4800, resistance implied by its down trendline. I wrote last time that I anticipated "that COMP could (also) again climb above 4900, but this time with possible 'basing' action at and above this level which would suggest a retest of 5000 in the Composite." This level not ONLY 'retested' but exceeded!
Next technical resistance now looks to come in around 5100 and as previously noted last week, with fairly major resistance staring at 5200. Near support is seen at 4900, then 4800.
COMP has just climbed into its 'typical' overbought zone in terms of the 13-day Relative Strength Index or RSI but bullish sentiment is still moderate without any extreme bullishness according to my CPRATIO indicator. And, accordingly, I would rate the chances of the Composite going to new highs ABOVE 5200 as reasonably good. Stay tuned!
NASDAQ 100 (NDX); DAILY CHART:
In continued bullish action, key resistance in the Nasdaq 100 (NDX) was pierced at 4470-4500, suggesting a possible next test of 4700, which is highlighted as near technical resistance. Next higher resistance is projected in the 4780-4800 area.
Near support is seen at the LOW end of the sizable bullish upside price gap at 4500, with next support likely in the 4400 area.
NDX, like the broad Composite has climbed into an overbought RSI reading as of the end of the week, suggesting that risk of a pullback, such as back into the sizable 4600-4500 chart 'gap' area, has increased. I don't anticipate more than the aforementioned chart gap being 'filled in' with still higher levels to come after and for NDX to at least retest its prior 4694 intraday high and prior Closing high of 4679.
Study of the Nas 100 Volatility Index history, VXN, suggests a tendency for eventual NDX tops being made when VXN settles back to the 14-13.7 area. VXN ended the week at 16.6
The NASDAQ 100 ETF (Tracking) Stock (QQQ); DAILY CHART:
The Nas 100 tracking stock (QQQ) is bullish in its chart pattern with QQQ having rebounded to back near the high end of its prior 106-114 trading range. I anticipate QQQ continuing higher and at least retesting the high end (114) of its prior price range which is of course now not far overhead from the Friday QQQ Close.
QQQ resistance is assumed to come in around 114-114.4 at the prior top. Next higher resistance is projected at 115.1 Near chart support for QQQ is seen at 110, extending to 108.
A key volume measure, the On Balance Volume indicator or OBV is trending higher, which is a bullish secondary technical aspect. Daily trading volume has picked up a bit on QQQ's recent advance. The last substantial SPIKE in the Q's volume is noted as a 'selling climax' on the daily volume indicator. Major volume spikes is the other pattern worth paying attention to in terms of trade volume. Otherwise, look for a predominate up or down trend in the OBV line.
The RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000's (RUT) chart pattern could be seen as predominately 'neutral' in its recovery to date. RUT at best could be forming a Head & Shoulder's bottom. A decisive upside penetration of 1170, with support found in this area on pullbacks would suggest that RUT would make a further bullish recovery.
Currently I am mostly focused on the potential (or not) for RUT to climb to resistance levels implied by a 50 percent to a Fibonacci 62% retracement of RUT's prior decline; i.e., to potential resistances highlighted at 1187, then in the 1213 area.
Near support is suggested at 1140, extending to 1120. A RUT Close below 1120, not reversed (back to the upside) in the following session, would suggest the Index being pulled lower again.
Given the bullish charts with the Nasdaq, S&P and Dow, the Russell is lagging considerably and doesn't look to offer a clear cut trend other than sideways.
GOOD TRADING SUCCESS!