Tech Downdraft
S&Ps were trading down 1100 at 1359.50, in a market downdraft that continues to be linked to the technology sector. On Friday, we closed about 400 points below fair value. If we open below 1360, we will open below Friday’s low.
For today, we see support at 1354, which is a key area, then 1352, 1348.50, small targets at 1345 and 1342, and a key area at 1337. Last week’s low was 1335. On the upside, we see 1362.50, 1365.50, and 1367, which is a key area that we need to get above to take some of the sting out of this market. Then, 1372, 1375 and 1378, which is another major objective to get above and stay above for the upside to improve.
NASDAQ is trading limit down at 2844. The first level of support at 2820-2800. This was the key area off our rally from our Monday lows. If we fail at 2800, look for 2755, last week’s low, to be exceeded. We would expect a trade down to the 2720 area. We have some support between 2780 and 2770.
Under 2750, we have support between 2725 and 2715. If all hell were to break loose, our double limit comes in at 2749, so the 2750 target is very viable.
Resistance is a little difficult given this open. We see 2880-2896 is the first level of resistance, then 2915-2925, and then 2939, which was Friday’s settle. If we get above that, we expect 2980-3000 to hold the rally.
The key thing today will be how networking stocks perform after the open, given a downgrade of this sector by Morgan. If they cannot bounce, it most likely will affect other sectors in the technology area, which will in turn lead to more significant declines.
We expect the Dow to attempt to maintain above the 10,500 level. The only way we see this failing on a closing basis is in a broad market sell-off. This has not been the case during this down move. It is a tech-laden downdraft, and the Dow is much less affected.
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