Realignment
Look for a realignment in the first 45 minutes of trading, given that S&P futures were at a steep discount to cash. This morning, S&P futures were trading down 1200 at 1391. This puts us 700 below cash and about 1800 below fair value.
On the way down we see 1389.50, 1388.50, 1387.50, 1386.50, 1383, 1380.50, 1378.50, and 1375. On the upside, we see 1394, which will be critical, then 1397, 1402, 1404, 1405.50, and if we’re going to get out of trouble, we need to get above, and stay above, 1408. The Morning Pivot area is 1396 to 1398.
The NASDAQ was trading down 80 at 3262. Nortel
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PowerRating) is the culprit after its earnings report yesterday. NT is effecting both optical networkers and old-line networking stocks. The reason the 100 will be so affected is JDS Uniphase
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PowerRating) is called to open 15 lower, and Cisco
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PowerRating) is trading 5 lower. Those are the #1 and #5 stocks in terms of percentage value in the 100. The market did touch limit down on Globex, but was unable to sustain it.
We see support between 3235 and 3223. Under that, look for a move to 3180. We have a gap between 3155 and 3180. If we get aggressive on the selling, this gap should be filled.
Resistance-wise, 3308 to 3325 is the first level, followed by 3350-3360, which is critical. If we get can above this zone, it should take the short-term pressure off the market, and lead to a move back to the 3400s, probably towards 3430. Note that we are now trading 90 points below the cash settlement, so if we were to open here, the cash should open 110-120 points lower.
As for the Dow, it continues to rebound and is now very near the 10,450 level, which is about 63% recovery from our recent down-move starting at 10,900. Look for a retracement of the recent gains, probably towards the 10,150 level.