What is with the 1390 handle in the September S&P 500 index futures? It is like free money any time the index falls under 1400. With eight of the last 13 lows residing in that handle (Friday's low being 1395.25), it is safe to assume that the bulls are still in control of the market until 1390 is breached.
After flirting with the November 30, 2007, close (1429.75) on Tuesday (1424.75 high), some profit taking ensued and nudged the index under 1400 on Thursday and part of Friday. However, the selling pressure eased just after the open on Friday and its back to the 1400 handle once again.
Now with hedge and mutual fund managers back from the beaches at the Hamptons, some trailing the benchmark indicators, will it be time to play catch-up? With many targeting the 1400 level as an entry point, there is a chance we will not even trade that low this week. On the upside, there is minor resistance at Thursday's high (1418) and major resistance at Tuesday's high (1424.75). Above the 1430 level, the market re-enters the vacuum area from the meltdown in 2007 all the way up to 1500.
Another new all time high for Apple (AAPL) this week at 674.88. And with Apple's patent victory over Samsung announced on Friday night, AAPL traded up to 675.94 in the after hours session. The big question will be whether or not AAPL can take out the intraday 52 week high of 674.88 in the regular session on Monday morning. If it can indeed keep Friday night's momentum, this stock could be poised to make a march to the psychological $700 level. With the last three highs in the 669 handle, and that area being taken out on Friday night, you may find some nervous shorts looking to cover if we pull back to that area. Below that, major support is nestled at 650, the vicinity of Monday's (649.90), Tuesday's (650.33) and Wednesday's (648.11) lows. For those investors siding with Oracle Investment Partners (who downgraded AAPL this week based on valuation) a protective sell-stop at 650 may be prudent in order to lock-in gains from the over 100 point rally this month.
While the index was finding support in the 1390 handle, Exxon-Mobil (XOM) was forming a triple bottom at 87. After bottoming on Wednesday (87.02), Thursday (86.98) and Friday (86.93) investors looking to purchase XOM on the cheap started getting aggressive. As a result, XOM resides once again in the 88 handle with Friday's close at 88.05. Most likely, this issue will test the minor resistance at 88.41 and make an attempt at a new 52 week high above 88.91. Keep in mind, there is institutional resistance at 89 so be wary of the High Frequency Trading crowd trading in front of that level.
After trading above 200 early in the week, Monday's high (201.13) and Tuesday's high (201), International Business Machines (IBM) break out turned out to be a fake out. Perhaps bearing the brunt of poor earnings from Dell (DELL) and Hewlett-Packard (HPQ) cast a negative tone on all box-makers. However, since IBM is a much more diversified company than the other two, bargain hunters were out in full force on Friday as IBM rallied over three points from its low (194.20) to close at 197.77. With only minor resistance at Wednesday's high (198.65) and a few leftover sellers at 200, IBM may approach the double top from earlier in the week and take aim at the recent high of the move at 202.
Microsoft (MSFT) is range bound for now. After failing to rally over the major resistance in and around the 31 level, MSFT starting heading back to 30. Similar to IBM, bargain hunters put in a double bottom on Thursday (30.08) and Friday (30.18) and MSFT abruptly reversed course. Now the question remains, can MSFT take out 31 on its next attempt. Keep in mind, MSFT has severely lagged the overall market during the recent rally (up less than two points from its 28.78 low) and may be poised to erupt if it can clear 31.
While IBM gave a head fake to an upside break-out, General Electric (GE) provided one on the downside. After falling below the lower end of a nauseating trading range, GE revisited its July 27 low (20.56) on Friday (low of 20.55) and did an about face, nearly reaching the double top from Monday (21.02) and Tuesday (21.05) but falling short at 20.90 and closing at 20.80. Above the 21.05 high, major resistance resides at the 52 week high of 21.19.
Chevron Corporation (CVX) closed down 55 cents to settle at 112.01. Since making a new 52 week high on August 14 at 113.87, CVX fell prey to profit taking. The retreat ended on Friday, just under 111, with a double bottom on Thursday (110.95) and Friday (110.76). Coincidentally that is the same level that CVX found support in early August during its climb to all time highs. One area of major resistance investors should be cognizant of is the triple top from Wednesday (112.35), Thursday (112.17) and Friday (112.20). Above that level, CVX may take aim at the institutional resistance just above the all time high at 114.
As the overall market declined on Wednesday, defensive stocks like AT&T (T) came into favor. T put a triple bottom in place on Wednesday (36.45), Thursday (36.43) and Friday (36.45), the exact level T bottomed on July 27 (36.44) and headed north. On Friday, T managed to sneak back into the 37 handle, but closed just below it at 36.96. Investors should take note of the double top from Monday and Friday at 37.04. Above that level, there is additional resistance at the 37.30 and 37.50, and a host of sellers if T can get back to the 38 handle.
Short-term dividend players in Johnson & Johnson (JNJ) were rewarded for their purchases on Friday. After going ex-dividend on Friday for 61 cents (adjusted close-67.13), JNJ opened at that level and went straight up to close at 67.60. Most likely, the favorable Eli Lilly (LLY) news on its Alzheimer drug trials, renewed hope in the quest for finding a drug to treat the illness. Look for major support at Friday's low 67.15, down to the July 24 low (67.00). On the upside, JNJ must contend with minor resistance at 68 and 68.45 before it confronts the institutional resistance at 69 and 70.
Wells Fargo (WFC) maintained its one and a half point trading range since August 8 (33.48-34.80). After sprinting to 34.76 on Tuesday, just below the multi-high of 34.80, WFC sold off with the overall market. However, the pullback ended on Friday at 33.76, which coincided with the August 16 low (33.78). As mentioned in previous market outlooks, the entire 34 handle has been littered with large sellers. In order to make another new high, it must first get through the double top from Thursday (34.22) and Friday (34.21). Above that level, WFC may launch its third attempt on the sellers at 34.80 and the sellers behind it up to 35.
Another defensive stock that attracted some buying interest this was Pfizer (PFE). Since making a multi-year high on July 31 (24.49), PFE has been greeted with some profit taking. PFE has been subject to some volatility whenever any Alzheimer's drug news hits the tape. After reaching 23.59 on Wednesday, PFE followed it up with a double bottom on Thursday (23.70) and Friday (23.72) before rallying and taking out a large institutional seller at 24. Expect minor resistance at Friday's high (24.10) and the double top from August 3 (24.33) and August 6th (24.37) before taking aim on the institutional sellers at 24.50.
In closing, I am cautious since my overall tone is so overwhelmingly bullish (contrary to my inherent bearish bias). However, from a technical perspective there is not much to warrant a bearish outlook. One must forget that earnings seasons did not meet expectations for the quarter and that many companies guided lower for the next quarter. Until the index breaches and closes below 1390, and all the double and triple bottoms that formed this week are taken out, you cannot fight the tape. In fact, the longer the index maintains this area, the stronger the case can be made that the market is forming a base for its next major leg to the upside.