The major indices rebounded from important monthly support/up trendlines, suggesting intact long-term chart support. The next question is what potential for rallies to upper 'resistance' trendlines?
Periodically, I like to review the long-term monthly charts to assess the major Index trend(s). Even trading on a short-term basis, it's helpful to keep in mind not only the Market's short to intermediate-term trends but the long-term trend as well.
The long-term 'investment' related trend is an important backdrop. When panic sell offs occur such as seen into the late-August and late-September bottoms, it's important to keep a cool head and remember that we remain in a bull Market. Charles Dow, who established a framework to judge the primary or long-term trend, thought that only Monthly Closing levels were important in determining the dominant trend.
The U.S. Stock Market has been in a strong uptrend since early-2009, so we are coming up on 7 years of rising stock prices. Long-term uptrends are not always of this duration, but bull markets of a decade have occurred. Some bull markets are of course of shorter duration such as the 2003-2007 bull market.
Generally, bear markets are of shorter duration than bull moves; e.g., the 2001-2002 and 2008 bear markets. Typical of most if not all corrective pullbacks or bear markets are that stocks lose value relatively quickly; e.g., the 2008 bear market saw the S&P 500 lose fully HALF of its value from end-October, 2007 to end-February, 2008.
I don't cover ALL the major indices here, but the four seen below account for much of the total Index options' volume.
S&P 500 (SPX) NOVEMBER 2015 MONTHLY CHART:
SPX rebounded from lows at or near its long-term up trendline over the 3 months of August-October.
Long-term support is highlighted in the 1900 area, at the current intersection of SPX's up trendline.
Near resistance is apparent at a line of prior highs in the 2130 area. Major resistance implied by the upper resistance end of the S&P's uptrend price channel. There's no reason technically, in terms of the long-term chart, why SPX couldn't go on to new highs and reach the 2260-2300 area over time.
It's also important to note that high ('overbought') monthly Relative Strength Index readings in a bull market as seen above (and below), once high, tend to stay elevated for some time and such overbought RSI readings are not generally useful for 'timing' a top with any precision.
Conversely, spike lows into low ('neutral' to oversold) readings even on long-term charts ARE quite important for determining a likely area for an Upside trend reversal.
Moreover, in a bull market, the major indices only rarely dip into actual oversold RSI extremes, but do get to a mid-range 'neutral' reading somewhat more frequently and are important in identifying potential lows; ALONG with analysis of daily chart reversal patterns AND bullish sentiment readings reflecting LOW bullishness.
DOW 30 (INDU) NOVEMBER 2015 MONTHLY CHART:
The Dow also rallied at recent downswing lows from its long-term monthly up trendline, with the brief exception of a short-lived and slight downside penetration of INDU technical (trendline) support in August. Long-term chart support now looks to come in around 16200.
Near resistance is seen at a 'line' of prior tops in the 18175-18350 area. This area if pierced would not see resistance at the upper trend channel boundary until the 19500 area was reached. Stay tuned on that!
As with the S&P, the Dow rebounded from an area that's more or less a 'neutral' Relative Strength Index (RSI) reading and this ancillary indicator aspect tended to 'support' the idea that the Dow's decline to its up trendline would offer a bullish play.
NASDAQ COMPOSITE (COMP) NOVEMBER 2015 MONTHLY CHART:
After awhile, these long-term monthly charts look alike in their broad bullish uptrend channels. The Nas Composite (COMP) should see long-term support around 4500, the area of COMP's current up trendline intersection for December.
Near resistance has been repeatedly seen in the 5130 region, significant as the all-time monthly COMP peak from March 2000.
Long-term resistance around 5500 is suggested at the UPPER resistance end of COMP's monthly uptrend channel. Again, as with the S&P 500, there's no technical/chart aspect suggesting that new all-time highs can't occur with the Composite, such as in a rally to the 5500 area. The current chart pattern would 'support' such a move but the chart doesn't call out for such a next up leg either.
NASDAQ 100 (NDX) NOVEMBER 2015 MONTHLY CHART:
The big cap Nasdaq 100 (NDX) fell all the way to just above support implied by NDX's long-term up trendline in August. Current long-term support suggested by the support trendline intersects (for December) around 3880.
Near NDX resistance is implied, not guaranteed, just over 4800 as suggested by NDX's prior all-time monthly price peak at 4816; not far above this prior top is resistance suggested at the upper trend channel boundary intersecting around 4880 currently.
NDX's upper (monthly chart) channel line was the most difficult to determine in terms of where it 'should' intersect currently. There's potential for a move to the 'milestone' 5000 level over the next 2-3 months. Tech stock valuations are high and further upside progress is staring to look more limited than was the case for the rally taking NDX to its July touch at its upper trendline resistance.
GOOD TRADING SUCCESS!