THE BOTTOM LINE:
The major indices held technical/chart support on Thursday's sharp 1-day sell off; e.g., in the 2050 area in the S&P 500 (SPX), in the 5050-5000 zone in the Nasdaq Composite (COMP), and around 4600 in the big cap Nas 100 (NDX). Noted again from last week: "low bullish sentiment/expectations continues to be a bullish plus."
As I also wrote last week: "Suggesting new highs for this move to come, as much as anything, is that traders are not 'believing' in the rallies much, not yet, as can be seen in my CPRATIO sentiment indicator on my SPX and COMP charts." The recent 'bullish' (Thursday) low in my CPRATIO model shows this graphically. An upside break out to new HIGHS is yet to come and may not this month unless the tendency for a December "Santa Claus rally" kicks in. Stay tuned on that ... and, the Fed is due to the holiday party to at least start to take away the proverbial 'punch bowl'.
Good to remember, ahead of 'panic-attacks' and sudden sharp downturns, WHERE support lies. Given the reality of computerized trading, especially in lower volume periods, sell offs can come fast and furious and cause panic selling. In reality and for example you could have been prepared to buy SPX calls when the Index dipped to the 3050 support area, even Closing there.
You didn't need to be watching the Market all day to get into a bullish strategy on the next day's early trading. Of course that was IF you considered that the sell off likely a bear raid so to speak and therefore suggested a bullish positions. Selling puts was a favorite of mine. IF, on the other hand, you believed late in the past week that stocks were about to go into free fall again (fear, panic), you would have been perhaps deer-in-the-headlights paralyzed and froze. Hey, I've been there!
Now this is not to say that the major Indices are going to push on to new highs anytime soon and especially not the Russell 2000 (RUT), but they are mostly rebounding from, and finding buying interest, on sell offs, suggesting that once past end of year-early 2016 jitters, there WILL be a new up leg and a move to new highs. I find it hard to believe that the red hot big cap Nas 100 (NDX) isn't going to pierce its top made back in early-2000. The broad Composite (COMP) has seemingly led the way as COMP just had a monthly Close (5142) above its prior 5132 price peak from March 2000.
[My usual chart highlights for resistance levels are red down arrows; my highlights for support areas are the green up arrows.]
MAJOR STOCK INDEX TECHNICAL COMMENTARIES
S&P 500 (SPX) DAILY CHART:
The S&P 500 (SPX) continues bullish in its pattern as most recently suggested by Index's strong rebound from 2050 support, which quickly regained SPX's 21-day moving average. On moving average (downside) penetrations best to wait a second day to see if there's follow through.
Significant SPX resistance/selling pressures is seen in the 2100-2115 zone, with a pivotal next resistance at prior highs that formed repeatedly around 2135. A decisive upside penetration of 2135 that was sustained would suggest potential to the 2200 area.
Word Play: piercing a prior resistance that is 'sustained', is suggested by prior resistance 'becoming' an area of support. Those who missed the break out will buy on the pullback.
Near support is seen around 2050, with fairly strong next support suggested at 2020-2025. A Close below 2000 that wasn't reversed (back to the upside) in the next 1-2 sessions suggests possible SPX downside to 1950.
I noted in my initial 'bottom line' comments the relative 'lack' of strong bullish sentiment during and on the lead up to what have been tradable rallies as seen above by comparing price action with the 'extremes' of my CPRATIO indicator. The most recent example of a dip in this line into my 'oversold-extreme bearishness' zone seen above (green up arrow) exactly preceded Friday's substantial upside rebound to back above support, although still shy of new highs of course. The longer this kind of low-bullishness pattern continues suggests contrary potential to advance.
The S&P 100 (OEX) INDEX DAILY CHART
The S&P 100 (OEX) chart is bullish in the rebound of OEX from a possible up trendline as highlighted on the chart. Because of the current intersection of this trendline, near support is suggested at 915, with substantial next support in the 'milestone' 900 area; 880 is next, and fairly major, support.
We've seen rally potential on pullbacks but not yet the desire of the bulls to bid up prices above the 940-947 zone. A move above the prior highs that found support there on pullbacks would suggest upside to 980 over time.
No change in my view from the past couple of weeks to look for a move to new highs in OEX. I don't anticipate the big cap S&P to stay locked in a trading range in a still-expanding economy. I published a Trader's Corner piece the other day (see 11/30/15) which is a current look at the bullish long-term S&P 500 chart. Bear markets are formed when recessions develop.
THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:
The Dow 30 (INDU) has bullish potential given its continued rebound and rally tendencies since its bullish 'W' bottom formation that formed over September. The bottom pattern could also be seen as a broad 'V' bottom. That said, where's the 'beef'! Where's the ability for the Dow to punch through its succession of declining stair step highs? Therein lies the question!
INDU has pivotal near resistance in the 18000 area; next resistance comes in at 18200, extending to the prior 18350 high.
A move above each of the 3 areas highlighted in the chart suggests potential to and significance for, a move to the NEXT higher resistance.
As anticipated, the Dow held above its 200-day moving average. There was a SINGLE day penetration but I generally discount 1-day forays and instead tend to rely on two consecutive days above or below key chart points as suggesting potential reversals.
I've highlighted initial technical support at 17500 which I also mentioned last week, with next technical/chart support coming in around 17200.
NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:
The Nasdaq Composite (COMP) has a mixed pattern. Near-term you could say there's a potential bearish double top that formed around 5163. Above this comes a next resistance at the summer COMP peak at 5232. If 5230 was pierced, a next target, possible next resistance is 5300.
On bullish upside potential in general and a reason to suspect an eventual further up leg, COMP has been in a very strong uptrend for 7 years. While you could suspect this is pretty long for an expansion, there's no 'rule' about the length of bull markets. There is a long-term uptrend price channel where we can analyze a top area of potential resistance as coming in around 5500 in December.
Near support is suggested at 5050-5000 with pivotal next support at the prior recent 4900 low. 4800 begins fairly major support.
NASDAQ 100 (NDX); DAILY CHART:
The Nasdaq 100 (NDX) resumed a high-level consolidation near prior highs, a pattern suggesting substantial potential for NDX to pierce 4737 and go on to test its all time peak just above 4800; 4816 as noted on the chart dating from March 2000. Just inflation alone should mean there's potential to 5000 over coming months!
Buying interest in NDX as suggested last week did show up at 4600 on the dip and that level is highlighted again as initial support. 4500 is next support which I doubt gets re-challenged anytime soon given the strong rebound from 4500; this after a sizable upside price gap got 'filled in'. This type pattern, the strong buying that showed up, supports why it's said that underlying gaps form underlying support.
As is often the case in very strong uptrends, a correction that even moved the needle on the Relative Strength Index (RSI) down to a 'neutral' mid-range reading as highlighted below, often tends to precede a next rally. The lagging indices are more likely to get 'fully' oversold in terms of my 13-day RSI.
The NASDAQ 100 Tracking Stock (QQQ); DAILY CHART:
The Nasdaq 100 tracking stock (QQQ) dip to the 112 area set up a buying opportunity, certainly short-term, possibly intermediate-term if new highs are seen above 115-116. Near QQQ resistance is highlighted at 115.
A sustained move above 115, with this level 'becoming' subsequent support, is a pattern suggesting 2-3 point upside as a next swing objective; e.g., to 117.
A Close below 112, especially if continued into a second day, would present a more bearish note than I'm anticipating here. Next key support below 112 is likely (again) in the 110 area.
The On Balance Volume (OBV) line is moving sideways to lower which is a minor price/volume bearish divergence.
The RUSSELL 2000 (RUT); DAILY CHART:
The Russell 2000 Index (RUT) is in a meandering 'trading range' which has been somewhat predictable. In recent months RUT has traded within the moving average 'envelope' band highlighted below. Downside volatility was greater than upside as is clear from RUT downswings that fell to 5 percent below the 'centered' 21-day moving average and just half that (2.5%) on rallies to above the average.
RUT has resistance/selling interest showing up in the 1200-1205 area; resistance then extends to 1220. Near support is seen at 1170, then 1160. 1140 begins fairly major support.
A near-term trading range may be between a potential 'maximum' 1160 on the downside and 1220 on the upside.
GOOD TRADING SUCCESS!