Disappointing The “Bulls”
Once again, the S&P market yesterday was only able to rally from lower levels, and as we approached unchanged-to-positive levels, the market quickly sold off. For the bulls, yesterday was relatively disappointing, as the market had every reason to continue a spike-reversal rally but could not muster the enthusiasm to do so.
What this tells us is to expect more of the same — which is to not be a buyer of breakouts, but a buyer on strong dips. We continue to think the market will act very similarly, at least today.
S&P cash settled at 1364, in the middle of the key area of 1360-1370 outlined yesterday. Also, on the cash: if you take the intraday low of the year at 1325 to the recent high of 1530 on September 1, yesterday’s low was an 88% retracement.
This morning, S&Ps were up 700 at 1385.50. For today, on the upside we have a resistance level between 1388.50 and 1393. If the market gets above 1393, look for a move to yesterday’s high of 1398.50. Above this, we have resistance between 1401.50 and 1403.
The next target is then 1407.90, which is a 38.2% retracement of the recent fall from 1480.90 to 1363.10. Anything above 1407.90 could lead to some intense short-covering, which we think would stall-out around 1425.
On the downside, we expect support and very choppy action between 1382 and 1378. Below 1378, expect a run to 1371, and if we can violate support at 1371-1369, we should take out yesterday’s low for a move to 1355. Along the way, support will be found at 1365-1364 and 1360-1358.50.
The NASDAQ was trading up 60 handles at 3185. The market was all over the board yesterday. Very disappointing in that, after staging a big rally off the lows of 180 handles, we were unable to hold that move and settled near our lows of the session.
The Comp Index is trading 21% below its 200-day moving average. If you go back, since 1990, only the Gulf War and the 1998 Crisis have matched the magnitude of this move. What is very disturbing is there is nothing specific about this move; we cannot blame it on anything. Also, for the NASDAQ Composite, if the year ended today, it would be the worst performance since 1974.
For today, we see resistance at 3190 to 3205. Above that look for a move to yesterday’s high at 3260. Resistance will be at 3268- 3273. If we get above that, there could be much in terms of velocity, and it could move us all the way towards 3400. In other words, if we start a short-covering rally, levels aren’t going to matter, and it will be a momentum train.
We see support at 3160 and 3146, then 3120 to 3115. If we get below that, look for yesterday’s low to be exceeded at 3080 and then a trade down to 3050. We have support between 3050 and 3035. If 3035 is broken, odds are we will trade down to 2950.
The Dow was the weak sister yesterday, continuing to struggle, and is coming to a crucial support area. Any close below 10,200 in the cash is extremely negative.