How Far Is Up?
The question for today is how this market will react to good news. S&P futures were at 1498.70, up 700 on the strength of Cisco’s earnings. CSCO is called to open $5 higher.
On the upside, we have 1500-1500.50, 1501, and 1503.50, where S&Ps may face a struggle. If we get above that, we target 1505 and a cluster at 1508-1509-1510. We’re opening up at a key area of 1498.50 to 1499. Below that, we see support at 1497.50, 1495.50, 1493, and 1490. Remember that 1491.40 is a key 61.8% retracement.
Yesterday’s settlement just above this level bodes well for the market. We’re above the morning pivot area, which is at 1493.50 to 1495.50. Also, we have a small downside gap from 1508 to 1507.50.
NASDAQ futures are called to open 65 higher on CSCO earnings, putting us at 3782. A key number is 3843, which should be a target for bulls as it is a 61.8% retracement of the move from 4135 to 3370.
In general, the key thing today is going to be how the market reacts to good news. CSCO’s report obviously looks good for the open, and the majority of stocks will get a boost on this. The question is can we maintain this bullish posture. Our guess is no. That does not mean today we’ll have a reverse and a sell-off. What it does mean is that we’re still in the posture of selling rallies.
We think between 3850 and 3950 is a good spot to establish light position shorts, i.e. a half a position. Remember, this does not mean that we will not daytrade around these positions, as the short-term trend is obviously up.
For today, 3750 to 3770 is still the key, even though we are above that on Globex. This will have to hold and become support for this market to take off into the 3800s. If this area becomes support, 3810 is the first target, then 3843 to 3850, and above that 3900.
Any close above 3900 might be a little too much too soon, and would lead to overbought conditions in the short-term. Under 3750 to 3770, 3710 to 3690 is the key. If we were to break through that, look for 3590 with 3650 being the first line of support along the way.
Dow settled over the 11,000 target and nearly hit the 11,100 level. The market has been up 7 days in a row, with an upside open gap that we will have this morning.
Anybody who is long should look to take profits between 11,120 and 11,140. A three-and-a-half-month high of 11,120 was set on May 16. Any close below 10,950 could lead us back down to test support around 10,850 to 10,820.