The outer technical picture for stocks looks good, for now. However, serious resistance for the major indexes is just a few buy orders away.
The charts show a fairly clear picture of the NASDAQ, Dow and S&P 500 completing the right side of a "T" or triangle on its tip formation. The "T" and the triangle both end at triple/quadruple top; a lid that's been on the market since May.
What happens after the NASDAQ hits 2300, The Dow kisses 10,700 and the S&P touches 1130? If bulls can break the 4 month dam, optimism can run free and the indexes should rush higher. If the dam should hold, the rest of September and October could continue their reign as the cruelest of months for investors.
When we opened up our box of market internals and indicators, what we saw is not what we expected to see. Despite another positive week for stocks and apparent straightforward technical outlook, our vital signs slumped.
September's rally has been built on declining volume (see chart above), and both of our models have returned to sell signals.
MOMENTUM MODEL: Sell
This is the BIG surprise to iStock. With stocks ever so slightly up last week, we thought MO would have kept most of its JO, but JO has joined Elvis in leaving the building. After sporting a buy signal of 5.56 last week, MO has fallen to 2.64, slightly below the minimum buy score of 4. If our technical "T" or triangle scenario plays out, this indicator probably moves back into the buy column. But, like the market, MO will either breakout or breakdown based on if bulls or bears win at resistance overhead.
MARKET LEADERSHIP: Sell
The NASDAQ is struggling to make up any ground on the other indexes. The score did improve slightly last week, like from a C- to a straight C. The NASDAQ still needs to outperform by nearly 1% in the days ahead to take the lead. With an inflection point straight ahead, we don't expect this score to change in the week ahead.
i Stock Of The Week
Last week the Consumer Services Sector was the top performer, gaining 4.88%. Bed Bath & Beyond, Inc. (BBBY) is one of the stocks that helped push the sector higher.
Just
looking at its chart, BBBY should continue to run a good race. The
stock appears to be headed straight to $42, up from Friday's close of
$40.35.