Rollover, Beethoven
Dominating this market is the Employment Report tomorrow and the fact that it’s rollover, with at least half the volume in the S&Ps being done in the back months. This will remain until we roll next Thursday.
Yesterday brought us a nice uptick in the Implied Volatility, which is now 1.2 points above Friday’s implied volatility low for the SPU. Also, yesterday the Mid-Cap Index closed at an all-time high.
S&P futures were up about 200 at 1506. On the upside, we see 1508.50, 1510, a key at 1512.50, and a major at 1515.50. On the downside, we see 1505, 1502.50, 1500.50, a key at 1497, and a major at 1492.50.
We had a spike reversal Monday at 1525. Unless we can get back above there, it looks like the range is going to be completed, and we’re headed back down to 1494.50. The morning pivot is between 1504 and 1506.
The NASDAQ is now trading up 5 points at 3980. The NASDAQ is stuck in a zone between 3930 and 4005. We saw heavy buying yesterday in the final half-hour from one firm. Looked like a short-cover and possible spread-trade with the SPUs, as there was heavy selling going on in the S&P at that time.
One thing to take from yesterday’s action in this market, the big caps are somewhat tired. For the rally to continue, it’s going to be up to the second-tier stocks, and they performed very well yesterday. If this continues, any close above 4020 targets a move to 4220.
For today, we see support in a zone between 3950 and 3938. Under this, we expect a move down to 3915 and 3890. A close on an hourly basis below 3890 will point to 3850 to be tested. Resistance is essentially from 3985 up to 4020. If we get above 4020, especially on an hourly close, all systems are go.
The Dow saw a pretty good retracement yesterday of about 1%. It’s the tale of two markets as some of the old standbys — KO and GM — are losing ground, while JPM closed at a recent high. In general, we still expect more sideways-to-down drifting before finding support between 11,100 and 11,050 in the cash.