Fourth Rally Setup???
Heading toward the July 4 holiday, we may see a rally, but they usually set it up first by taking the market down. We might see a rally late Friday or on Monday (which is a half-day). Also if you look at last month’s FOMC meeting, we sold off sharply afterward. But we’re a little skeptical of this break. We think we might be snoozing for a month. Meanwhile, we are also entering the period of “warnings” of earning expectations. All eyes are squarely on next week’s Employment Report.
This morning S&Ps were down 1,000 at 1461. We have a major cluster today between 1465 and 1467.50. That area will be the key this morning. If we can’t get back above it, we’ll be short against it. If we do get above it, we target 1471, 1473, a key area at 1475.50, and a major objective at 1477.50.
On the downside, we see 1457.50 which was last week’s low, 1454.50, 1451, and 1450.50-1446. 1450.10 is the 200-day moving average. Keep in mind that we’ve traded between 1457.50 and 1512.40 for the past 20 sessions.
NASDAQ was trading down 50 at 3765. There’s starting to be a fair amount of resistance building above 3850. Yesterday’s final half-hour sell-off, especially in the semi-conductor index, does not bode well for the bulls. Between 3800 and 3870, the 5-day through the 20-day moving averages reside. If we get a close beneath these averages by 1% or greater, it could signal a move back down to 3650. We continue to watch the semi-conductor index for clues.
It is worth noting that there is still the “up gap” between 3572 and 3645, left over from the June Employment Report. Any further weakness should lead to a test of this. This gap, if we were to trade down to it, should be purchased.
For today, we see support between 3763 and 3753, 3733-3725, and 3706-3697. Any close on an hourly basis below 3700 is not constructive for bulls, and will most likely lead to a test of the gap area.
Resistance is at 3804-3818, 3834-3842; if we get above that, 3865 becomes a big number. If we can closely on an hourly basis above 3865, we are looking for 3950.
Dow continues to be in the same wedge pattern that we have been outlining for weeks. It is a classic situation in which one day three stocks advance sharply, and then the next day four stocks decline sharply — leading to skewed results in the average. However, any hourly close below 10,580 in the futures could be sold for an expected run to 10,475. We would not be a buyer until we were able to get above 10,750 in the futures.