Buyers Looking For More
Good morning. The market will focus on dissecting the release of the July NonFarm Payrolls report, the spectacular turnaround in the Nasdaq yesterday and if it can maintain its upside bias through today’s trade.
In the SPU, we have an oscillator base building between 1453-1458–if this can hold, we are looking for a move to the 1490-1500 area. Along the way, 1472-1475.50 will be the most critical resistance. Above this, 1481-1483 comes into play, followed by 1490. It is also worth noting that over the past 20 report days of payroll, the average gain is 1600 in the SP500 future. On the downside, below 1458-1453, all bets on the long side are off, and we would look for a test of the 1444-1442 support zone. If this fails, 1435-1433 should be the final stand of support.
For the NDU, all eyes are on if we can have a follow trade after yesterday’s large short-covering rally. Above 3710, look for 3750-3770. If we get above this resistance zone, expect the rally to take us to 3820-3835. If we settle above 3800, all systems go on the upside. On the downside, first support is between 3680-3670. If this fails look for 3630-3615, any trade below 3590 should be construed as heavily bearish and lead to 3520.
In general, this market has room to run. After testing and intraday trading through the -10% difference between the 20-day MA and the current price, for the 2nd time this week, the market found short covering and fresh buying when it needed it. Where do we go from here? We’d be surprised if this run would take us over 3900 on a settlement basis in the next week. Instead, we would look for the market to slow down and attempt to build a base in this level for a move higher in the fall.
For today’s session, traders should be aware of one element that few seem to be discussing–hourly earnings which came in at +0.6, well above the 0.3 estimates. It would not surprise us to see the highs for the session put in during the first 90 minutes followed by a choppy downward move. It also should be noted that yesterday’s session produced a tremendous amount of short covering–from here it will be fresh buyers taking us higher, and we’re not sure that this report will provide the impetus needed. So, how do you play it? Close to the vest today, close to the vest.
Our morning pivot zone rests between 1464.50-1466.
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