Setting The Scenario
For S&P futures today, probably the most bearish scenario would be a first-hour rally. If that’s the case, we think the market will sell-off the remainder of the day.
S&P futures were trading up 250 at 1486. Pretty decent overnight range, with a high of 1487.80 and a low of 1478.50 on volume of nearly 2000 contracts.
Friday’s session was cumulatively very weak, as breadth was poor, volume was heavy and the market failed to react positively to pretty good news — i.e., Oracle
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PowerRating) and CPI. We do expect to see some support in SPX (cash) around 1460. In addition, it would not surprise us to see a weak open followed by a short-covering rally sometime after 9:15 a.m. Central.
Specifically, S&Ps need to get through a resistance zone at 1486.50 to 1490. If they can do this, expect a move towards 1497.50. Between 1497.50 and 1502 is another resistance zone.
On the downside, 1485 is a key area, and under that we have pretty good support between 1482.50 and 1480. If this fails, look for 1475.50. Below 1475.50, look for support between 1471 and 1468. If this fails, we think the market is going to be on its way down to 1455. The Morning Pivot is 1482.50 to 1484.
NASDAQ was trading up 2900 at 3747.50. It has had nearly a 100-point range overnight, with a high of 3765 and a low of 3670. That low is 100 points below the low set on Sept. 13. Also pretty good volume, nearly 1000 contracts. The 100-handle overnight range certainly is a testament to the environment we’re in right now.
We expect this to continue. What that means is sharp moves throughout the day in both directions — whether it be short-covering or flat-out selling.
For the NDZ, we have had a very steep sell-off. We have good support in the NDX (cash) around 3600. In fact, we’d go so far as to say that the market held up reasonably well on Friday, leading us to think that for the short term, the selling may be completed this morning. Adding to this, we are nearly 6% below the 20-day moving average.
For today (including Globex numbers), we see support between 3720 and 3705; under that, 3685 to 3670. If 3670 fails on an hourly close, look for the 3610 to 3590 support to be tested. Along the way, 3635 to 3625 will be crucial.
Under that, 3565 to 3552 is the final stand. We have resistance between 3750 and 3770, and above that 3795 to 3815. If they get above that, we target 3865 all the way up to 3895.
The Dow had a flat-out bearish close on Friday, as we settled below the key 11,000 area. Technically, we suffered a “knock-out.” We do have some support here at 10,900 in the cash. Any settlement below 10,900 targets a move back down to 10,500. We have now lost nearly 500 points since the September 6 high.
It would not surprise us to see some choppiness around in here. But there can be no doubt that, technically speaking, for now the environment is bearish.
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