S&Ps Head For 1500s
As long as S&Ps hold above 1494.50, we should make a move back towards the 1504 Globex high, and then try for a big resistance area between 1510 and 1514.50.
In S&Ps, 1510 is the high settlement from April 25. 1511 is Friday’s high, so that should prove to be crucial if we can get up there — and should also pose stiff resistance. If the market were to get above this resistance zone, we think the rally could accelerate into the 1525 to 1530 zone. On the downside, below 1494.50, we’re looking for 1489, which is unchanged. Between 1488 and 1483, we have support/neutral zone. If the market trades below 1483, and then cannot get back above 1488-1490 area, look for a sell-off toward 1473.
This morning, PPI came out this morning, basically in line, although the core rate was a touch stronger than the consensus. However, it fell within the range of estimates. S&P on Globex this morning were trading at 1497.60, up 860. This is where we were trading before the number came out. Volume is relatively light, as only about 1300 contracts have traded since PPI. We did get an initial rally off the number, trading up to 1504. At 1498, we are at yesterday’s high. Also, 1498.20 was last Friday’s settlement, and also the high for the week. This is a pretty impressive performance, considering that we are trading around unchanged for the week on the heels of a 10 pct rally for the prior two weeks.
One general note is that next week will bring us triple witching, as well as CPI and Retail Sales. Today, PPI as pretty much middle of the road, yet we are seeing strong buying in the pre-open, which should lead traders to think that the theme of this market is strength. Historically, next week will provide a rally, especially from Wednesday onward. It would not surprise us to see the market close in the low 1500s today, characterized by a choppy trade, but laying the groundwork for a larger rally.
Meanwhile, NASDAQ traded to limit up on Globex this morning at 3900 bid. Currently, at 3870. Only 15 contracts traded at the limit, and overall volume was light at 700. We are approaching a huge zone of resistance in the NDU. 3917.50 is a 50% retracement of our yearly high to low, which occurred between March 24 and May 24. 3920 is our high settlement for May; 3950 is the intra-day high for May 1, and 3956 is the 100-day moving average. That zone should prove to be very difficult to overcome during today’s session. Yesterday’s high was 3865, approximately where we’ve been trading this morning.
We’re looking for general support between 3810 and 3790. If we trade below that zone, we think the market will trade down to yesterday’s low of 3730. Below that look for support at 3708, and under that we see strong support between 3685 and 3675. If we are able to close on the on an hourly basis above 3960, 4000 becomes squarely in sight. If we were to settle above 4000, first, it would surprise us and, secondly, it should not be a move that you’d look to fade. It will show strong belief in the tech sector.
The Dow was hampered by PG yesterday. Today, Dow futures were trading up 55 at 10,890. We have a strong resistance between 10,950 and 11,025. Contained in that zone are the 100-day the 50-day moving averages; also yesterday’s day session high, as well as our 3-week high settlement which occurred on Wednesday, and the 2-week high which occurred last Friday of 11,025.
We think that only an extremely strong rally could get us through this whole resistance band. We’re not forecasting this for today. Support is between 10,804, which is a 30-day moving average, and 10,780, which is yesterday’s low. In general, we are still avoiding this market, as we find it in a range/wedge pattern. And we’d rather play the breakout or the breakdown.