More Than “Fair”

S&Ps were trading up 80 cents at 1418 this morning, which is significantly above fair value by about 1000 pionts as we had an extremely aggressive institutional buyer on the close of trading yesterday.

Today in the S&Ps, we have key support between 1415 and 1417.50. If we can hold above this zone, we’re looking for a move to 1425. Along the way we have a cluster of resistance between 1423.50 and 1425.50. If this zone is exceeded, look for a move to 1436. Along the way, 1430.50 to 1432 will be resistance.

Any move above 1436 should be respected and most probably will target a trade up to 1460 within the next couple of sessions.

On the downside, if we fail to hold the first support zone, look for 1408. Along the way, we have support between 1410 and 1407.50. If this zone fails, we should trade back to yesterday afternoon’s heavily traded area between 1403 and 1402. If this were to fail, we think sellers would get rather aggressive and lead to a move to 1389, with support between 1391 and 1388.

The NASDAQ was called to open 10 points higher at 3505. Again, very impressive opening as we are called to open 80 points above cash. Yesterday’s trade was full of rumors that Cisco
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would be added to the Dow, and we had a very volatile, choppy trade. However, there was major buying in the final 15 minutes, which led to such a strong close.

Today, we have support between 3485 and 3470, then under that, look for 3430 to trade. If we fail at 3430, the market should take out yesterday’s low and move to 3390. We have support between 3405 and 3390. If this were to fail, it will target a move back down toward 3200 over the next couple of sessions.

Resistance is at 3510 to 3515, and above that, 3530 up to 3545. If we can take this out, we should exceed Friday’s high of 3558 and clear a move to 3620. If this level is exceeded, especially on a closing basis, the next area to look for is 3780, which is our most recent high from the end of September. In other words, this market is very near making new highs for the month.

In general, traders should observe that the style of trading that worked very well the past few weeks is not working right now due to a change in market conditions. In other words, aggressive positioning for breakouts and so on, is and will produce poor results — probably for the next week or two. It is important for traders to realize when market dynamics shift, and they have shifted. Money is coming back into equities, and barring an external event, the next week or two looks relatively tame. One needs to adjust his/her style of daytrading accordingly.