The Same Old Song
If we could get everything on the same page — the financials, the techs, and all else — we’d have a rally. If not, we expect more of the same.
This morning, S&Ps were trading up 200 points at 1512.50. Durable Goods was released this morning; came in weaker than expected, and the market caught somewhat of a bid on that. However, everyone is waiting for tomorrow’s GDP number.
For today, we have a key number at 1514.50, a small at 1516, a major at 1517, then 1519, 1520.50, which is a long-term objective, followed by 1525.50, 1527 and 1530.
On the downside, we have 1510, 1509, 1505.50, a key at 1503, 1499.50-1500, a major at 1498, and under that, 1496.50. After an early sell-off yesterday, the market crept up and we closed higher on the day on moderate-to-light volume.
There was a little more participation and order flow yesterday, at least for the first hour of the day. Also in the S&Ps yesterday, declining issues led advancing issues by a 7 to 6 margin. Also, 51 sub-indexes fell, while 36 rose. Of the 500 stocks, 275 fell and 207 rose.
You have to be impressed with the NASDAQ’s strength. Was it convincing enough to lead us over 4000? We’ll find out. We settled at 3902, still in the area that the sellers are defending. It looks like 3925 is going to be the key, as we made a high yesterday of 3918, matching Tuesday’s post-FOMC reaction high.
Strong money flow into INTC and CSCO yesterday, as INTC closed at an all-time high. Very tough to fade the tape. However, in light of INTC and the entire SOX performance, one would think this index would be sharply higher.
We now suspect that CSCO may be the key to deciding the fate of the index. If CSCO can get above $70 on a closing basis, we think the 4100 area will be exceeded on our way back to 4300 to 4400. Obviously, this is longer term.
For today, we see support at 3905 to 3898, 3873 to 3860, and then a key number at 3848. If we sustain trading below that level, look for a run back to the 3805-3795 zone.
If that were to fail, look for yesterday’s low to be tested at 3773, and most likely exceeded on its way to support between 3750-3740. Resistance is at 3925; we think this is key. Above that, we’re looking for a move eventually to 4000 today. Along the way, 3955-3970 will provide resistance.
Above that, expect the new phenomenon to show itself between 80s and 90s. As we’ve have seen lately, most of the institutional trading has been done in the NDU is this zone. (It doesn’t matter what “handle” it’s trading in.) Above 4000, most of the crowd will anticipate buy stops. We would not expect any of those until the market trades above 4015. A move above there could lead us to a quick spike to 4040. Generally, this market remains slow.
Dow continued sidways action yesterday, gaining five points but closing sharply off the lows. Again, the key will be the financials, as every financial stock was lower yesterday. If the Dow rallies today, it will be due to the financial performance. Otherwise, expect more sideways to grinding lower-style trading.