Moving Sideways …
Look for a sideways market today. We’d be extremely surprised to see a trade beyond one standard deviation today. Opportunities will come from either selling some rallies or buying dips. But for day-trading purposes, we do not expect follow-through on either side of the market.
S&Ps were trading down 260 at 1398.50. For today, we have resistance between 1407.50 and 1410.50. If they get above this cluster, it could make a move up to 1417.50. We have resistance between 1415 and 1419. Anything above this, we have a strong level between 1424.50-1430.
On the downside, we have support between 1397 and 1395.50. Under that, 1391-1389 is support. If we get below 1389, look for a move to 1378.50. Along the way, there will be support between 1383 and 1381.50. Also keep in mind that today is options expiration.
NASDAQ was trading down 3000 at 3415. Taking a look at the cash, we settled yesterday at 3403. Now, the intra-day highs in the cash for Oct. 4, 5 and 6 were between 3468 and 3492. This is a critical area of resistance. Any close above this level in the cash bodes extremely well in the short run. For futures, we see resistance between 3465 and 3468, then 3488-3495.
If we get above this zone, 3520-3535 is our estimate for the high end level (based on the cash that we just discussed), meaning we should have stiff resistance there. If the market can get above this, there could be some very aggressive buy-side enthusiasm that could take us up to 3620.
We have support between 3410 and 3395, then 3375-3370. If we trade below 3370 expect some retracement of yesterday’s move, and we would look for a trade down toward 3300. Along the way, 3325-3318 is support. Only steady trading under 3300 would be construed as a strong negative, and would most likely lead to a move toward 3250.
One general note about yesterday in the NASDAQ: there was major buy-side enthusiasm, which was reflected in the stock prices not to mention the nearly 8% gain in the index. Again, the question is can we rally from higher levels?
If yesterday was anything more than a vicious bear-market rally, we need to base over a period of days and then move higher. If we were to retrace roughly half of yesterday’s move, we think it would again leave the same issues on the table that we’ve had during this decline: that we cannot sustain buying at higher levels.
Dow stock earnings coming out including MRK and KO. Key number for Dow cash is 10,300. We need to close above this zone to begin to look better. More importantly, they need to sustain. The market needs to base before it attempts to move higher.