Of CPI And Witches
It’s the last day of options expiration, and “triple witching at that,” so if we get a sell-off in the morning, we’d be leery of it continuing all day. Watch for a possible end of the day rally.
Keep in mind that option-expiration Fridays — particularly the “triple-witch” — have been increasingly less volatile in the past three years. We do not anticipate today — barring any unforeseen news — to be any different. It would surprise us to see a range of more than 1.25% in S&Ps. These days are characterized by high volume and little movement. So, traders, beware.
CPI came out this morning with a headline rate that was more benign than anticipated, while the core rate was right at the consensus level. In its wake, we saw an initial rally followed by selling. S&Ps were trading unchanged after being up as much as 650 points after the CPI was released.
On the way down, our targets are 1501.50, 1499.50, 1497, 1495.50, a key area at 1493, and a major at 1488.50. On the upside, we see 1505.50, a key area at 1507.50-1508, 1508.90 (Globex high), 1509.50 and 1512.50.
To get out of immediate trouble, we have to get above 1508.50. Our Morning Pivot is between 1503 and 1507. So look for a lot of choppy trading in that area.
NASDAQ failed yesterday to hold the 3850 to 3865 zone that we had highlighted. The market then quickly sold off to 3800 and bounced back into this zone, only to fail strongly to the close. As we finished with a net change of -850 points, this can only be construed as bearish. This market has shown an inability to hold rallies.
Oracle’s
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PowerRating) performance this morning, off $3, is further testament to the supply of stocks. Therefore, sell rallies until this trend changes.
From a longer-term perspective, we don’t think it will change until there is a capitulation sell-off.
For today, we see crucial support between 3740 and 3765. If we close on an hourly basis below this zone, we should exceed Wednesday’s low of 3671. Along the way, we’re going to have support between 3715 and 3705, and underneath 3700 we’ll have some support between 3690 and 3685. Below 3671, look for 3640.
In the short-term, we expect 3640 to provide a bounce area. Any settlement below 3740 is bearish.
On the upside, we see 3827 to 3841; above that is our critical area from yesterday of 3850 to 3865. Stretch this area a little further and the market will begin to look better above 3875. Above 3875, 3900 should be challenged. The market did a fair amount of volume between 3880 and 3895. If we get up here, this zone will be critical moving forward. Anything above 3921 could be construed as a breakout to the upside.
The Dow is like a broken record. Still churning. We are now roughly 300 points from our intraday high this month in the cash. We are still looking for support between 11,100 and 11,000. We are currently in this zone at 11,087. We do think support will be found, however, any close below the psychological 11,000 level definitely will be negative.