Shifting Gears
For S&Ps to get out of neutral and into a bullish gear, we need to get above 1521 and not go below 1518. This morning, S&P futures were trading up 400 points at 1518. On the upside, we see 1521, a key area at 1525.50, a major area at 1530, yesterday’s high at 1531.50, and a critical area at 1532.
On the downside, we see 1516, 1512, 1511.50, 1509, 1508.50, a key area at 1505.50, a critical at 1502.50, and a major at 1500. The Morning Pivot will be between 1517 and 1519.
The NASDAQ is trading up 40 handles at 3823.50. Most of the equities are looking to open higher. No particular news behind this. Rather volatile day yesterday, as the market made a 3795 low early and then rallied to 3920 before losing that gain and making a new low at 3752 in the afternoon.
This type of trade is telling us that bets are being placed — meaning, there is a battle between fresh buying and fresh selling. When that happens, you typically get a gyration in the market within a 5-7% range. It seems battle lines are drawn between 3950 and 3750. Any close above or below this area should be significant for the remainder of the year.
Continue to expect sharp reversals throughout intraday trading. Also, for daytraders, it is certainly time to widen stop areas, as these types of swings will produce many missed opportunities if stops are too close.
If you examine the up move from 3476 (on Aug. 3) to the recent high of 4210, 3752 was a 61.9% retracement of the move. On the resistance side for today, we see 3815 up to 3835, then a key area at 3850. On Monday afternoon, after the high was made, the market failed to hold this support area and went down to new lows. Therefore, 3850 will be a critical area for resistance. Then we see 3875 to 3887.
Above that, 3900 to 3921 should be resistance. If we get above 3921, it will be “one helluva rally,” and will most likely signal the end of the short-term pressure. Then 3950 comes into play for the big move.
On the support side, we see 3797 down to 3789, then 3755 to 3745, and 3718 down to 3706. Below 3706, things could get a little dicey. We would then expect a move down to 3660. Support can be found between 3665 and 3652. Any settlement in the 3600s targets a move down to 3476.
Very interesting day Monday in the Dow. IBM
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PowerRating) were both down significantly, and yet the index only lost 25 points. We think this type of trade will continue, and the market is attempting to find its base. We continue to think 11,100 down to 11,000 in cash is very strong support.
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