Searching For A Bottom
S&Ps are becoming increasingly volatile between 1470 and 1456, which is usually due to the market searching for a bottom. However, any breach of 1450 could lead to a failure to find a bottom and possibly target run to the 1400 to 1388 area.
If the 1450 area holds, we expect a bounce to take us toward 1490, and possibly 1500. However, in general we think the upside is relatively capped for now. This may change after the next Fed meeting in August.
This morning, off the release of a stronger than expected GDP report, S&Ps broke 900 points before rebounding to the current levels. S&Ps were up 1 point at 1464.70.
For today, we have a band of resistance between 1466 and 1472.50. The market has to get over this zone to look somewhat attractive. If this occurs, look for a move to 1481. If short-covering ensues, we could get all the way to 1488.
We see the morning pivot between 1464.50 and 1466. Then on the downside, we have a support band between 1463 and 1458. If we trade through this band, we should test the key 1449-1452 zone. If this does not hold, we could see a quick drop to 1437. Anything below 1437 should lead to the support band of 1431 to 1428.
NASDAQ was trading up 19 points at 3726, off the heels of a dramatic down move yesterday — especially in the final 20 minutes of trading. Overnight, we made a low of 3665.
For today, the key will be what we do below 3700 — assuming we trade there. But if we do, 3695 is a 38.2% retracement of the lows in the spring to the recovery high of 4131. If we trade through this, 3651 is the recent low that comes into play.
If the 3650 area does not hold, we should attempt to fill the gap left over from the June Employment Report, which could take us all the way down to 3550. Right now NASDAQ is fighting a lack of confidence among the bulls.
Along the way today, we see support between 3708 to 3690. Beneath 3650 we have support between 3637 and 3625, also 3609 to 3598. Resistance is between 3735 and 3747, 3774 to 3790, and 3805, which is critical. If we get above 3805 and hold it on an hourly basis, we are looking to exceed yesterday’s high of 3843 and probably get as high as 3875.
Dow was the best performer yesterday, yet it did not recoup the losses left over from Wednesday’s session. In addition, we did see some strong selling toward the close of the Dow.
We are still in the wedge pattern, and only a break of 10,450 would lead to further downside pressure. On the upside, only a move above 10,760 would get the bulls back in business.