Critical Levels

With S&Ps trading up 8.00 at 1346.50 this morning, this market faces some critical levels.

We have a critical level between 1337.50 and 1335. Above this, we have a key area between 1342.50 and 1345, where much of yesterday’s trading took place in the afternoon. Above this, the key level will be 1347.50, and above that, the market begins to look better and the odds increase for a test of yesterday’s highs.

We think that the first stop will be some resistance between 1356 and 1359. Above that, look for 1365 to trade.

On the downside, below 1335 the odds become very strong for a fill-the-gap type of day, which means a choppy downward trade into the mid-1320s. If the selling were to accelerate, we would take out Wednesday’s low of 1322.50. If they get below that level, look for 1315. We have support between 1317.50 and 1312.

Below 1335, how the market trades down will be critical. If this is a retest of Wednesday, we would expect 1325 to hold on an hourly closing basis and most likely lead us to a higher trade in the next week.

NASDAQ was trading up 38.00 at 2676. We have resistance between 2675 and 2690. If the market gets above this, look for it to challenge another key resistance area between 2725 and 2740. If we get above this level, it should clear the way for a strong up move toward 2830. How we trade at these two levels of resistance will be critical.

Any settlement above 2780 takes short-term pressure off the market. That level will be good for the next couple of days. On the support side, we have support between 2615 and 2595. Under that, 2565 to 2545.

From the November 1 close to yesterday’s close, the NASDAQ 100 futures (NDZ) are down 19.3%. At some point, this market will begin to stabilize. Sentiment is worsening and the money flows continue out of tech. But as a trader, you need to ask yourself how much lower can we go in the short run?

The Dow continues to hold up. Drugs and financials are hanging in there. We do not expect that to change.