Looking For A ‘Spark’
Frankly, we’re looking for some catalyst to spark activity in the S&Ps, which we expect will occur sometime after Labor Day. Yesterday’s Fed announcement certainly was a non-event. Trading after the announcement was nothing more than dull.
This morning, S&Ps were trading down 420 at 1503.30. Volume has been decent; nearly 1500 contracts traded overnight on Globex. We see a key number under the current level at 1502.50, followed by 1500, 1497, a critical area at 1495.50, 1492.50, 1490.50, a critical number at 1489.50 and a major number at 1486.50.
On the upside, we see 1506, a key area at 1507.50 to 1508, a major number at 1510, 1512, 1515, which was yesterday’s high, 1516.50 and 1520.
In the NASDAQ, meanwhile, things are a little more interesting. Again yesterday, this market failed to maintain strength seen throughout the session and closed lower on the day. This morning, the NASDAQ was trading down 30 handles at 3815, which puts us below the cash settlement.
On a 60-minute chart, we had a breakout from an “inverted triangle,” which targets a move to 3750 and possibly down to 3685. For today, we see support between 3811 and 3795, under 3795 we expect the support zone between 3758 and 3750 to be tested. If this fails, we think the selling could pick up and lead to a test of 3700.
Along the way, we believe the support zone between 3710 and 3690 is still valid. We still have our second target of 3685 to be reached; we would be covering shorts in that support zone just laid out.
On the resistance side, we see 3840 to 3855. Above that, where we saw most of the activity yesterday, is anywhere between 3880 and 3900. This will be critical moving forward. We made the statement yesterday morning that we feel the sellers are defending the 3900 area and will not choose to defend 4000. This has led to some decent activity between 3880 and 3900.
We did make a high yesterday of 3918, but our lack of sustained trading above 3910 leads us to think that was nothing more than a “print.”
Keep your eye once again on the semiconductor stocks. In addition, Cisco
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PowerRating) fell sharply in the final hour of trading yesterday. And finally, the Internet stocks are beginning to move to an important area and bear watching. If we were to get above 3920 today, we think the shorts will capitulate, and we’ll be on our way to a close above 4000.
As for the Dow, financials led the way. However, it’s worth noting that in the final 30 minutes there was some profit-taking in this sector as JPM traded over 150 only to fail to close above that level as it came close to a new three-year high.
What that suggests to us is that the market may be a little “heavy” up here, and may need a period of a week or so before deciding its next direction. Our most likely scenario we feel is a move back down to 11,000 and possibly to test the support 10,950 before stabilizing and making a move for 11,400.