Can We Follow?
In the equities index markets today, the question is can we hold — and follow? This morning, S&Ps were trading about unchanged at 1359.50.
On the upside we have 1363, 1365, 1369.50-1370, which was yesterday’s fast-market high print. 1366.50 was the high of the day from the Dec. 19 Fed meeting before the sell off.
Key area is going to be 1371. We have a major objective at 1373. Above that is 1375 and then 1379.50. On the downside, we have 1358.50, 1354, 1350, 1346, 1341.50 and 1335. A major area of support is at 1330.
As for the NASDAQ, we made a new contract low and then proceeded to have the single largest one-day rally in the history of the market. For our purposes, we will continue to 2550-2565 as our high area.
The key thing to remember is this: 2550 to 2500 is where this market stalled the week after Christmas. Then we had a dramatic selloff starting on Dec. 29 and ending yesterday. NASDAQ is now trading around 2510, down about 20 handles. The whole ballgame today resides between 2550 and 2570. If we get an hourly close above this zone, it should lead to 2650 and possibly up to 2700.
Between Dec. 14 and Dec. 19 we traded between 2550 and 2700. We cannot overstate the importance of this area. It should be very solid resistance and tough trading up to 2700. Nevertheless, we think if we get above 2570, odds are we will get a test of 2700.
On the downside, the first support area is 2495 to 2470. This area was actively traded yesterday before making our move to 2565. If we get below this zone, look for a move to 2410. 2410-2400 is the critical support on the downside.
If we break this, first, we will be double-limit down. The 5% limit will come in at 2398.50. We think that will most likely put a little fear into the market. If we break lower than 2400 and the second limit, we think trading will get very aggressive and could lead down to a trade of 2325.
Remember, we settled up 362 handles yesterday. Limit down is only 65 handles. Even if we go double limit at 130 handles, we’re basically giving back a little more than one-third of yesterday’s gains. The key will be closing above 2400-2410. If we close below that, all bets are off.
The Dow trade above 11,000 during its highs yesterday, the highest level since November. Same question here — can we build? Obviously, this is the best-performing index, and the only major index that is higher than we were last week. Any close above 11,100 is terrific. As long as we stay above 10,500, all should be well.