Hello, Q4
Today is the first trading day of the fourth quarter, which will likely mean money inflow for the first few sessions. Also, both the bond and the S&P contracts’ 30-day historical volatility have bottomed from extremely depressed levels, indicating that the fourth quarter should be wild. The best play a trader can make is to go with the trend that begins to develop next week after the Employment Report.
This morning, S&Ps were trading up 750 at 1461. A key area for S&Ps will be between 1456.50 and 1452.50. If the market holds above this zone, we think 1467 to 1470 comes into play. Above 1470, we have Friday’s high of 1473 and then Thursday’s close at 1476. If the market gets above 1476, 1479 to 1481 should stop any further up move for today.
On the downside, if we went below the 1456.50 to the 1452.50 zone, then 1448.50 to 1446 is critical. Below this, we would expect the 1438 low to be exceeded, with a move ultimately down to 1429. We have support between 1433 and 1429. Below that, things could get a little dicey. We would expect volatility to increase dramatically at these price levels and target a move ultimately to 1418.
The NASDAQ was called to open 40 higher at 3661. The market continues to spend time under 3650, which is not healthy. In addition, there still seems to be stock for sale in the main, large-cap issues as we saw on Friday.
The zone from 3625 down to 3580 will probably determine our next move. Assuming we continue to hold above it, the market should be able to move higher. However, any settlement below this zone should target a move down to 3150.
We continue to expect choppy, volatile trading in here. It is interesting to note that for the month of September, the futures contract lost over 13% of its value. The question is whether the selling is over or is there more to come. Historically, Q4 has been very strong for the equity markets.
For today, we see resistance from 3676 to 3688, then 3705 to 3723. If we can get above this zone, we should go back and trade to Thursday’s settlement at 3758. Any close above 3758 is bullish.
We see support between 3640 and 3625, and then the whole zone between 3625 and 3580. Under 3580, 3550 should equate to a new low in the cash of 3500, which would be lower than two Fridays ago when Intel shocked the market. Below 3550, look for 3475, which would match our August low.
For the Dow, IBM
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PowerRating) and Hewlett-Packard
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PowerRating) were hammered Friday. That was the main contributor of the Dow ending down 173 points. Still trying to hang onto an uptrend. Any close below 10,450 is bearish.