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For today's session, we have a support zone between 1437-1433. If this holds in the first 60 minutes of trading, we should test the 1444-1447 resistance area. It is worth noting that a significant number of ticks were registered in this area yesterday. Above this resistance zone, 1450.50 is critical. Think of this number as a light switch--above it short-term buys are in place, below it, one wants to maintain shorts.
On the downside, if we trade below the 1433-1437 support band, we are looking for a trade to support between 1425-1423. If this zone fails to hold, look for 1415. This number is critical,as the market has performed well in the mid-teens. Any settlement below this level could accelerate the downdraft even more.
The NDU is trading at 3606, off 11.00 on light volume. For today, 3650 should be the key on the upside. Above this level, the rally should accelerate to the 3700-3710 resistance zone. If this area is surpassed, 3750-3770 should be the top level for the session. On the downside, below the support band between 3595 - 3580, we should test 3550. If this fails, look for the 3520-3500 support level to hold the markets fall. It is worth noting that we have retraced only 26.5% of the recent downmove from 4080-3460, technically speaking, we could trade up to 3800 and still be in a downtrend. Here are intraday bands of support/resistance between our major objectives: Support - 3599-3591, 3569-3556, 3529-3515, 3503, 3495, 3465-3445. Resistance - 3629-3645, 3673-3680, 3695-3702, 3727-3745.
In general, we are expecting volume to lighten up over the next couple sessions, with short covering before Friday's employment release. Also, the first day of the month typically leads to fund money/hedging of portfolios into the futures arena. Keep an eye on the spread between SPU and the Cash, as all morning it was at a steep premium, before heavy dealer selling in the last 15 minutes brought us in line. For today, our morning pivot zone is between 1442 and 1444.50. One other note--our model covered a short position in GE and initiated longs in HWP. For more on this, check out our stock picking section.
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