Stock Market Room For Further Upside....Transports Bottoming?

Stock-Markets / Stock Markets 2015 Jul 18, 2015 - 03:38 PM GMT

The short-term charts were overbought on the Nasdaq, Dow, S&P 500, etc. It would be good if we could unwind them. That's exactly what we saw on everything other than the Nasdaq, but that was because Google Inc. (GOOG) was up so much on their earnings. Also, Apple Inc. (AAPL) did well, and it's heavily weighted, but, for the most part, things did unwind. A little more wouldn't be a bad thing, but that doesn't have to happen since the trend overall is still higher and weakness is being bought up. I say higher overall since the long-term trend is up and since 2040 S&P 500 has held on a closing basis. The bears came close, but no cigar. 2044 two times the best they could muster up. Today saw a small gap down on the S&P 500 and Dow, while the Nasdaq gapped up on Google Inc. (GOOG). The rest of the day was spent in a very narrow range as the bulls were trying very hard not to allow too much in terms of price erosion. They're doing their best to keep the S&P 500 close to 2134.

They can once again smell that breakout level and don't want things to get too far away from them. They defended well for sure. Quiet unwinding on price early on while charts offer up room for upside action is the perfect medicine for the bulls. No guarantee but we're back at that same point we were last time we were up 2130 and failed. In other words, no excuses. A good day for the bulls. They need to build on this early next week and with earnings good overall, and Greece basically now in the rear view mirror, it's there for the taking. Not that they will, but it is there for sure. There are no big events to knock this market down except for one. Tuesday evening we get the earnings from Apple Inc. (AAPL). If it's a disaster it will hurt the chances for the bulls to get this market to break out, but if it's decent, it will aid the bulls in getting the S&P 500 through 2134. Apple Inc. (AAPL) will be huge, and after the Google Inc. (GOOG) report, hopes are high as are expectations. Will next week finally be the week? Apple Inc. (AAPL) will have some say for sure. Should be exciting if nothing else.

I love to talk about how charts set up technically. Price-oscillator connections can tell us an awful lot about opportunity. The last time we were near 2134 on the S&P 500 there was room for the breakout, but it never happened. The same room is there now, but it is different this time. The reason? Multiple gap ups are now supporting price just below current levels. That's important. It's harder to eradicate price when gap ups supported by decent volume is there to protect. I'd have to say I'd honestly be surprised if the market doesn't make some type of real attempt to break out. Maybe it'll fail, but the evidence is powerful in terms of the technical's. The only headache would be a disaster from Apple Inc. (AAPL). We shall see, but when one steps back and observes, you have to like what you see if you're a bull. The daily charts are very strong. No excuse time is back once again only this time the excuses are even less thanks to those bullish gaps lined up in a row.

I have learned the no guarantee way of looking at markets. There are never any guarantees about anything. That said, we have had one major laggard going on and that's from the land of the transports. They led the market lower once 2130 failed on the S&P 500 last go around. The question is, will the transports start moving higher from here? There is hope. I'll explain. Kansas City Southern (KSU), a leading railroad stock, had earnings that allowed for a huge gap-and-run day. It helped the railroads as they have been in a bear market and have led the transports lower along with the airlines. The iShares Transportation Average ETF (IYT) has a nice, strong gap up off the bottom. The gap being at 146.87. It is above that now but below the key resistance level or the 50-day exponential moving average at 149.79.

Which will win out? I'm thinking the move over the 50's because the oscillators are moving strongly with price. No guarantee. I must remind you all of that, but the oscillators are favorable with price. If the transports can make the move over the 50's, the bears are in deep trouble. The earnings from Kansas City Southern (KSU) was a nice start, but we're not there yet. I think the S&P 500, and the transports, would be in concert if the move over 2134 occurs next week. Bulls have hope, but only hope for now. See it and respond.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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