Consolidation Time
We would look for today to be a consolidation day. The key will be if we can build a base from here and then make a run for the highs.
We have retraced about 50% of the move from September 1. We’ve been able to rally back from lows. Now we need to keep that momentum going and make a run for the highs.
This morning before the opening, S&P futures were down 800 at 1432. We see a key area at 1433.50. On the way up, we have a gap between 1433.50 and 1439. Above that, we have 1441.50, 1445 which was yesterday’s high, 1447.50, 1449.50, 1452, and major objective at 1457.50.
On the downside, we have 1433.50, 1432, 1430.50, 1429.50, 1427.50, 1425, a key area at 1422, and major support at 1418.
The NASDAQ was trading down 55 handles at 3245 on the heels of downgrades in Applied Materials
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PowerRating) and Xilinx
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PowerRating). Also, WorldCom
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PowerRating) was trading down $4. These will certainly have an impact on the opening.
For today, resistance is at 3275-3290, then 3310-3320, and above that look for 3350, which will take out yesterday’s high of 3337. If it can hold above 3350, look for the market to build on its strength and move towards 3500. Along the way, 3395-3410 is resistance.
Any trade above 3410 should lead to a trade up to 3450. On the support side, we see 3250-3235, and then 3225 is a key level. If we get under 3225, look for a move to 3180. Of course, to do this we would have to go through limit down, which today is at 3205. Below 3180, we have support between 3155 and 3142. If this were to fail, we could trade all the way to 3050.
As for the Dow, the market keeps chugging -— nearly made it to 11,000 yesterday in the cash. We were a mere 5 points away. We keep looking for a small pullback to the 10,500, but every day it keeps moving up. Suffice it to say that we have now rallied from 9654 to 10,995 in 10 trading days. So we are due for at least some sideways movement. But only a close down below 10,500 would be bearish. And if the market retraces under 10,800-10,650, it’s probably an area at which to initiate longs.