On The Downside
S&Ps were trading down 750 at 1390. This is right where the cash closed, so we are trading under fair value, which is right around $7.20. Some cause for concern was weakness overseas as the DAX and the CAQ40 were trading off about 1.5% each.
For today, the crucial level is between 1394 and 1396. For the upside, we need to get through and hold above this level. If that happens, we have resistance between 1400 and 1402.80.
Above that, the market should move to 1409, which is a 61.8% retracement of the recent move of 1449 to 1335. We have resistance between 1407.60 and 1411.50. If this level were exceeded, it should clear the way for an eventual move back to 1440. If this level were exceeded today, it should target a move to crucial resistance between 1418 and 1421.
We are of the opinion that any trade above 1415 should be sold up to the 1421 level. We have support between 1384 and 1381.10. If this is taken out, look for a move to 1377. We have support between 1379.50 and 1376.50. In other words, we expect a very choppy trade with a downward bias between 1384 and 1376.50.
We think this support is critical, and if it’s broken, look for a move through 1370, as we should go down to 1365. Below 1365, all bets are off, and there is an excellent chance we will retest the weekly lows of 1335 — although that may take a couple of sessions.
NASDAQ was called to open down 81 handles at 3035.50.
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PowerRating) is called to open around unchanged off earnings, but the remainder of the second-tier stocks are called to open lower by a few dollars. It’s also worth noting we have rallied 400 handles off our low for the week. It wouldn’t shock us to see some kind of retracement. We’re going to open very close to our critical support at 3035-3020. If we get a 30-minute close under this level, look for a move down to 2950. Some light support is found at 2980-2970.
We have a level between 2950 and 2935 as support, and we do not expect that to be exceeded. On the upside, the first key area is going to be 3050-3070. If the market can hold above this zone, look for a move above 3110. Between 3100 and 3125 will be resistance. If it is exceeded, we should move to 3200. However, we consider the odds of this happening today to be very slim.
The Dow is starting to find its footing in here, but may have seen the end of the money shift into the Dow stocks for a while. We are neutral on the Dow right now, especially in light of the fact of the continuing rumors about banks and large-scale credit problems on bond undewritings.