Burden Of Proof
With a significantly higher open in S&P futures this morning, the question again will be posed to the market: Can we rally from higher levels? If we can, today could be a hallmark day. However, the burden of proof is still on the market.
We are not expecting a strong short-cover rally, as we think most of that was taken care of yesterday, so we do expect choppy action today.
S&Ps were trading up 1800 this morning at 1370.80. Globex high was 1371.50, which was 50 cents above yesterday’s session high. Pretty good earnings seen from a couple of companies after the close yesterday, Microsoft
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PowerRating) being the biggest. MSFT now trading up $5.50.
For today, the key area for resistance is 1373-1375. If S&Ps can get above this, it should target a run to 1385. We have resistance between 1382.50 and 1387. If the market were to move above this, there is a very good chance we could rally to Tuesday’s high area between 1395 and 1396.
We have resistance between 1393 and 1399. On the downside, the first leg of support is going to be 1368 to 1365. Below this, 1358 to 1355 comes into play. If they fail below 1355, the gap should be filled at 1352.80, followed by a trade down to 1345. We have support between 1348 and 1345. Any trade below 1345 could send this market right back down — and most likely to test the 1332-area.
The NASDAQ was trading limit up at 3250 bid, up 9500. Using rough estimates on the cash, we could open another 95 higher, which means as high as 3340. If that’s the case, the big number will be 3365, which was Tuesday’s high. If we get above this, we’re looking for 3420. If the market can settle above 3360, we think it will take much of the short-term pressure off.
Support is going to be hard to judge because we’re not sure where the market will open. Using a 3330 open, we see support at 3305-3295, then 3260-3245. If we get below 3245, watch for a move to 3180. This area will be critical.
Below 3180, it could be a complete reversal, and the market could move as low as 3080. Along the way, we’d have support between 3130 and 3120.
As for the Dow, it’s called to open 150 higher. It’s still worth noting that yesterday’s opening was our low for the past 18 months. Again, the burden of proof is on the market. In general, the question is: is this a trader’s rally or the start of something bigger?