STOCK RALLY CONTINUES -- SOME POTENTIAL UPSIDE TARGETS -- NASDAQ TESTS DOWN TRENDLINE

INTERMEDIATE TERM RALLY CONTINUES... The stock rally that started in mid-June continues to gain ground which confirms that the market has put in an intermediate term bottom.   The question is how far that intermediate rally can rally within the current downtrend.   Hopefully, the charts shown below will help determine where upside targets are located.   The daily bars in Chart 1 show the S&P 500 trading above its 100-day moving average and nearing a test of its June high at 4177.   The red horizontal trendline also shows potential resistance along the spring lows.  That's an important test because a close above 4177 would interrupt the negative pattern of lower peaks and lower troughs that have been in effect.  If that happens, prices could rally to more significant overhead at its 200-day moving average (red arrow).

HIGHER RESISTANCE LINES COULD BE TESTED... Chart 2 puts the current rally in better perspective.   It shows the SPX testing its red resistance line drawn along the spring low and June high.   A decisive close above that resistance line could signal a further rally in the SPX to its 200-day average (red line) and a falling trendline drawn over its January/March highs (blue circle).   The combination of those two important resistance lines should provide a significant barrier to the current rally if it gets that far.   And could happen without disturbing the downtrend intact since the start of the year.   The Nasdaq market has already cleared its first technical hurdle.

NASDAQ 100 TESTS DOWN TRENDLINE... The tech-dominated Nasdaq market has led the recent rally in stocks.    Technology stocks also led the market higher today (along with consumer discretionary and communication services).   Chart 3 shows the Invesco QQQ Trust already trading above its June high and now testing a falling trendline drawn along its January/March peaks.   If that falling resistance line is exceeded, the QQQ could rally up to a test of its 200-day moving average (red arrow).   The horizontal red lines show Fibonnaci retracement lines drawn from the December high to the June low.  They could also provide overhead resistance barriers if the current rally carries that far.

ENERGY LAGS BEHIND...  Energy was the only stock sector to lose ground today.   That was due mainly to a drop in the price of oil.  Most other commodities also weakened.   That could carry good news that inflation is peaking.  And may help explain why bond yields have been dropping.   That combination could also be supporting stock prices.