LOOKING TO CHALLENGE OVERHEAD RESISTANCE
By Harry Boxer, The Technical Trader (www.thetechtrader.com)
The indices had somewhat different trends today. The Nasdaq 100 had a loss on the day, but it was chiefly due to the SOX semiconductor index falling almost 5%. Considering that being the case, the Nasdaq 100 didn’t do so badly being down just 18.
The session started out with a gap down which set the tone for most of the day. We had an initial sharp pullback on the Nasdaq 100 and the S&P 500 in the first hour or so. Then the indices rallied into the lunch hour & got right to resistance and failed there. Another sell-off in the afternoon took us to the lows for the day on the Nasdaq 100, actually taking out the morning lows and support by a few points.
But the key was that the S&P 500 and Dow did not take out their morning lows, and thus created positive divergences. I anticipated that would lead to an afternoon rally, which we did get. The last couple of hours the market surged forward and closed at the highs for the day going away on the S&P 500 and the Dow, with the Dow up 56 and the S&P 500 up 9.
Even though he Nasdaq Composite and 100 came back, they did not manage to get back to the morning highs because of the SOX index pressure.
However, stepping back and looking at the overall picture, the Nasdaq 100, after having surged for a couple of days, pulled back today to just below price support and managed to come on and close nicely. If we can continue this pattern, I think we may have put a bottom in.
The S&P 500 is acting much stronger. After a successful right-handed extended V bottom pattern last week and a breakout earlier this week, the index flagged or coiled all day without violating its rising 21-day moving average on the hourly charts and closed strongly. Given that, there’s a good chance over the next session or two we challenge overhead resistance around 930 on the S&P 500, which is about 20 points from here.
The Nasdaq 100 needs to get back over yesterday’s high, which was up around 991. That’s a good 30 points from here, so they have some work to do on Nasdaq. But if the SOX can get in gear with the rest of the market, perhaps we’ll have a continuation with the entire market rallying in sync.
A review of the technicals today showed the New York Stock Exchange was marginally positive, with about 110 more advancers than decliners, about a 16-15 positive margin. Up/down volume was almost exactly dead-even flat with about 950 million up and down, a total of nearly 2 billion shares traded. Quite heavy. Nasdaq was much lighter today. Advance-declines were negative by 1400 to 1960, and up/down volume was 3-1 negative, 375 million up and 1.16 billion down. Total volume was 1.5 billion, so New York’s been outpacing Nasdaq on volume and technicals over the last few days. Perhaps a flight to quality.
A review of my personal board shows that because it’s laden with tech stocks and semiconductor stocks, almost all of the stocks were down. Only Amgen managed to edge into the positive column by a few cents.
The losers were Nvidia, down more than 5 points on some very negative earnings news, and that stock got hammered to another new low for the year on very heavy volume. Other than that, Veritas down 2.18, IBM down 1.39, eBAY 1.21, Brocade 1.14 and QLogic 1.20 were the point-plus losers today.
Overall, viewing the pattern, particularly on the hourly charts, I think the Dow and S&P 500 look very promising. We are now right at the declining tops line on the S&P 500 for the last few months. If we can breakthrough that, we certainly could have a lot more of an advance over the next week or two, and we may very well have put in the cycle bottom I was looking for in the mid-to-end of July period.
As a result of the extreme negative oversold oscillator readings, as well as the volatility/fear readings and imminent cycle lows that were expected last week, the market is now rallying as I strongly indicated it would likely do. I’m now looking forward to seeing if the market can extend its gains.
Good trading!
Harry |
