DOW Hits 50% Fib Retracement

Last night on our call we revisited the potential of DOW reaching the 50% tracement level on some more strength. The index hit that area and it acted as resistance intraday. With 4 straight days up to the 50% retracement area, the chance for a pull back is becoming greater.

DOW Daily Chart:

DOW 1 year / Daily Chart

DOW 1 Year Daily Chart:

SPX 1 Year / Daily Chart

Below is a 1 year daily chart of the SPX

SPX 1 Year / Daily Chart:

RUT 2 Year Chart

The RUT found a support bounce near the August lows and is trying to inch it's way back up. The RUT is currently just above the 23.6% fib retracement area while the NDX has already climbed to the 50% area. This price action to me shows the relative weakness of the RUT index. Notice too that the RUT has convincingly broken it's uptrend and continues to show weakness. In order to reach the previous highs in the 855 area it will need to retest the back of the upward trendline as well as break through several horizontal resistance areas. The probabilities favor more sideways movement between 735 and 800 in the near term. I've listed a hypothetical unbalanced Iron Condor to give an example of a trade that would offer a good risk reward and limit downside risk. This trade example is for educational purposes only.


RUT 2 Year Chart:

NDX 2 Year Daily Channel

The NDX once again is showing it's strength and bounced off channel line support. More importantly is that it's cleared and is currently holding above 2050 which had a lot of congestion.

NDX 2 Year Daily Chart (ascending channel still intact)




Below you'll see a 60 Minute Chart that better illustrates the trend break and corresponding "raising window" created by the gap up Wednesday morning.

NDX 30 Day / 60m Chart:

Market Bounces

Earlier this week I posted a 60 Chart of the SPX showing a bullish falling wedge pattern forming. It confirmed a break to the upside this morning and hit our fib target this afternoon.

SPX 60 Minute Chart:

Dow Levels

Below is a 2 Year / Weekly Chart of the DOW showing a support bounce last week at the 12,750 level. This area has both horizontal and trendline support. If the DOW continues to move up next week, 13,500 will be a likely resistance area as it was a previous support level.

DOW Weekly Chart:



The Daily support shows the bounce on Friday more clearly. I've drawn Fibs at Friday's low to show retracement targets. If this market decides to get the Christmas Spirit and incite a Santa Claus rally the DOW could easily retrace to the 50% 13,500 level.

DOW Daily Chart:

NDX Levels

I posted an 8 Year / Weekly Chart to get a better perspective on the NDX in relation to it's past pricing action. From this perspective although the index looks like it's trying to put in a bottom, it also looks "heavy" like it wants to retest the 1960 area as some point in the next few weeks. On the weekly it's over extended from the longer term channel and with the bearish tone in the market, some more panic selling could drop it "down to" or "back in" the channel. A bullish Santa Claus rally could head back up to test the 2100 area.

NDX 8 Year / Weekly Chart:



I'll be paying close attention to the green uptrend line drawn from Nov 13 through Friday and will turn pretty bearish short term if it closes another day below that line.

NDX 1 Year / Daily Chart:



The NDX 15m Chart has been consolidating into a pennant formation. We'll have to see what price action Monday brings and to see if it's able to break out to either the top or bottom. Top resistance target should be 2080 and bottom support should be 1980.

NDX 20 Day / 15 Minute Chart:

SPX Levels

Looking at the SPX weekly, it found some support last week in the 1420 area and got a little bounce on Friday. The chart is showing some potential secondary support in the 1390 area where it has both Fib and trendline support. Resistance on the weekly looks to be in the 1480 area.

SPX 5 Year / Weekly Chart:



The SPX is forming a Falling Wedge Pattern on the 60 Minute Chart which has a bullish bias. If the SPX is able to break out of the wedge to the upside, one might look for it to fist clear the 1450 area and head to the next fib level of 1468. It will likely resist at 1470.

SPX 60 Minute Chart:

RUT Levels

On Friday, the RUT broke out of a 6 day downtrend channel to the upside and hit resistance at the 760 area to close at 755. The next upside target once it gets over 760 would be 765 where it will hit both horizontal resistance and the 50% fib level. To the downside, there should be some support at 750 and if it breaks below 750 then 745 may be the first pause before it tests the lows again 737.

RUT 20 Day / 15 Minute Chart:



On the 5 year Weekly chart the RUT has broken the long standing upward channel and is now forming a downward channel on the Weekly Chart. Last week formed a bottoming tail (bullish) on the Weekly chart, but we'll have to see if this weeks price action confirms to the upside. On the weekly chart my upside uber-bullish target would be 800 and my downside uber-bearish target would be 725. On Friday the rally in Homebuilders is what gave the big boost to RUT. The homebuilders were in an extremely oversold area as seen here in this chart. Below you can see that the RUT is near the bottom end of the downward channel and is also in an fairly oversold area.

RUT 5 Year / Weekly Chart:

Homebuilders Support Levels

The Homebuilders Index is starting to show a potential bounce to the upside on both the 2 year channel and 6 month channel. This could help to strengthen the RUT in near term if price continues to increase over the next few sessions. Note on the chart how the channels have held very well.

Dow Jones Homebuilders Index: 2yr / Daily Chart

Banking Index Finding Support on 2003 Lows

The banking index has made a free fall in the last few months that is attempting to find support near the lows of 2003 on the 5yr chart. There can certainly be more movement down, but I'm going to keep my eyes on the possibility of a relief bounce in the near term as the RSI is bottoming out and the weekly chart is starting to form a bottoming tail.

S&P500 Banking Index 5 yr / Weekly Chart:

Broker Dealer Index Looking for Fib Support

The Broker Dealer Index is trying to find support at the August lows. This screenshot taken midday on Wednesday. We'll see how the daily candle closes to give us a better idea of next direction. Broker Dealers are a heavy component of the S&P500 so it can be a good indicator of the SPX direction.

Broker Dealer Index 1yr / Daily:

SOX Still Weak

The Semiconductor index has started another leg down as it broke longer term fib support today.

SOX 2 Year Chart

SPX 30m Chart

On Tuesday the SPX rallied back to the descending trendline on the intraday charts, and the following morning it broke above but then hit some solid resistance at 1490. Wednesday closed near 1470. Thursday opened lower on a gap down and stayed under the descending trendline for the rest of the week. One could argue that it's put in a higher low at 1445, but on the daily and weekly charts, the SPX is looking more bearish then bullish.

SPX Intraday Chart:

SPX Rally to Resistance

The surprise rally today marched back up to the 100% fib retracement on the 3 day daily chart where it intersected with the descending trendline that starts on October 31st.

It will be interesting to watch tomorrow to see how it reacts to that potentially strong resistance. Anytime when multiple support or resistance levels intersect, they become stronger. We'll see if the market agrees.

SPX Daily Chart:

Friday: Late Afternoon Jitters

The Friday trading session was quite tame and even a tinge bullish up until the last 30 minutes when a flurry of selling took down the NDX down to new lows. The SPX and DOW followed suit and also closed near the lows of the day. Amazingly, the RUT held up much better then the others and closed smack in the middle of the days trading range.

Also of note, while the NDX continued the sell off into the last minute of the session, all the others got a little relief bounce in the last 5 minutes.

With that action, the NDX formed a "shaved bottom" daily candle which suggests there could be continued selling on Monday morning. Important also to note that NDX did NOT hold support at 2050 and closed at 2034 - The 2000 area seems the next likely level to stall or find support.

NDX Daily Chart:

NDX Daily Chart: Pull Back to 100% Fib Level

The NDX gapped down on the opening this morning, and so far has found support at the 100% fib line. With such a fast move down, a relief bounce may be right around the corner. If not, the next fib support is at the 2000 level.

NDX Daily Chart

Banking Index Puts in a Bottom?

The S&P Banking Index created a bottoming tail candle today on the Daily Charts at 161.8% fib support. We will need to watch tomorrows close to confirm this possible reversal signal. If we do reverse over the next couple of days, watch carefully as the descending trendline may act as resistance as the banks try to turn things around. The banks may need to create a double bottom before a sustained rally can develop.

S&P Banking Index: 1 Year / Daily



S&P Banking Index: 10 Year / Monthly

Internet Index Loses Steam at 261.8%

The Internet Index has been on a tear since early September and we noted on are call about 6 weeks ago that it had approached the 100% retracement level. I thought that it might find that as resistance, but it didn't and continued it's rally to the 161.8% area, paused for 2 days and then made an ascent to the 261.8% fueled by strong Google earnings.

The pull back from the 261.8% started innocently on Wednesday and had a mild pull back to 530 and bounced. Today it continued but in the process it destroyed the primary upward trendline that had held so well over the 2 month rally. Although it bounced a bit today, the break of the trendline was severe, and it's been my experience that when a primary trendline is broken, the next extended move is a retest of the secondary trendline which in this case quite a ways down. This retest may take months to develop, but do keep an eye on this index as it's been the major component to fuel the NDX over the last few months.

The key area to watch now is the primary trendline (green dotted line) to see if the index can pop back above and continue it's ascent on the 423.6% level. A more likely scenario would be to kiss the bottom of that trendline and consolidate for a while as it digest the parabolic move up over the last 3 months. The price action will tell so keep your eyes on the chart.

Internet Index 3 Month / Daily Chart

NDX 2 Day / 15m Chart

Note the fib levels on the close today and the interesting price action in the last 15 minutes as it fell from the 38.2% back down to 23.6% support.

Looking forward to tomorrow, a likely range would be between 0% $2066 and 50% $2145.

The black dotted line you see between those 2 levels is the bottom of the sideways channel it's been in for the last month or so. It peeked it's head above it, but fell below in that last 15 minutes.

NDX 2 Day / 15m Chart:

NDX 3 Year Chart

The NDX has been extremely strong since July 06, and in June of 07 it broke out of the longer term channel formed on the weekly chart as seen below by the black dotted line. After a big run up in July of this year, there was a 200+ point correction that then reversed and created this last 11 week bull rally in the NDX. The index has been UP 9 of those 11 weeks. This week was a much anticipated pull back that although violent, doesn't look that bad in the context of the Weekly Chart -- However, by looking at the weekly it also seems plausible that the NDX could continue to fall over the next couple of months to retest the channel line again as it did in August.

Also interesting to note is that the NDX has never gone longer then 6 months (in the last 3 years) without retesting the 30MA on the weekly chart. Keeping with that trend we might look for the NDX to retest the 30MA within the next 8 weeks.

NDX Weekly Chart:

SPX Daily Chart: Downtrend Continues

The SPX Daily Chart has formed a descending channel over the last 21 trading sessions and today the SPX tested but held the lower channel line. The bottoming tail candle that was formed today could be construed as bullish, but we'll have to see how Friday closes to see if that bullishness is confirmed. If we do close above today's high then it's a feather for the bulls, but in the bigger picture, the SPX has already confirmed a lower high and a lower low on the daily so the general bias remains bearish.

The SPX has spent the last 2 days under the 200MA which also adds a bearish tone to the index. We'll wait to see what tomorrow brings us, but watch those channel lines as they're likely to be a trading range over the next few weeks. Any close above or below those lines should be watched carefully. It's important to wait for the close as illustrated by todays action. Many intraday sell offs of today's magnitude can reverse in afternoon sessions to find key support areas like it did today.

SPX Daily Chart

RUT Intraday Fibs Act as Support

Here's an intraday chart showing the support found intraday at the 161.8% fib. Notice also the resistance on the descending trendline on this 2 day chart.

RUT 2 Day / 5m Chart:

NDX 30 Day Chart (Sideways Channel)

Here's a snapshot of the NDX collapse this morning showing it finding some intraday support at the bottom of that channel line. Lots of panic selling. Will be interesting to see if it can hold up here, technically it would make sense to hold here as it's also getting support by the 50MA.

NDX 30 Day / 30 Minute Chart

NDX Daily Chart

The NDX is back in the sideways channel and is currently sitting UNDER the 30MA on the daily chart. Technically looks like it wants to test the lows of this channel in the 2125 range. Keep your eyes on this area, the recent low is 2116. A close below 2116 and the 50MA would create a bearish short term bias.

NDX Daily Chart

RUT Breaks the Neckline

The RUT broke the neckline of the Head and Shoulders pattern on the daily chart yesterday indicating a bearish bias for the index. The next level of support on the RUT would be in the 770 area.

RUT Daily Chart:

RUT: What a Difference a Day Makes

I was surprised this morning when I got down to my computer and saw DOW futures down over 100 points, but I shouldn't have been. Of course we sold off hard today and I learned the lesson yet again that anything can happen and we ALWAYS have to be prepared for the unexpected.

Yesterday after the close, the RUT was looking good and was above the 30, 50 and 200MA -- very bullish, but after today's sell off the RUT is under ALL of those moving averages again -- bearish.

What concerned me tonight as I was studying he chart was the lack of any price support under today's close. If we continue to fall on Friday the first support level I see is at 789.00, but the next horizontal support area isn't until 770. Notice the GREEN AREA illustrated in the chart below that shows the absence of any price support until 770.

I've posted a few RUT charts with different illustrations to give you some support and resistance ideas.

RUT Daily Chart



RUT Daily Chart with Fib Levels