Top Heavy?
A word of caution for S&P futures today: it looks like this market may be a little top heavy. S&Ps were trading at 1482.50, down 370. After the Q2 Non-Farm Productivity Report, S&Ps rallied to unchanged around 1486, but have since fallen back. They did trade as low as 1479 last night.
With PPI on Friday and CPI next Tuesday — and a one-day Fed meeting on Aug 22 — we expect to trade in a range. We believe 1478.50 — which we outlined yesterday — will be a key pivotal point within that range. 1478.50 is roughly a 50% retracement of the 1533 to 1424 move.
For today, on the downside we see 1480, 1479, 1478.50, a key area at 1477.50, 1475.50, 1473.50, 1472.50 and then yesterday’s low of 1470.50. On the upside, we see 1482, 1483.50, 1485, 1488, 1490.50 (yesterday’s high) and 1491.40, which is a 61.8% retracement area. The morning pivot will be 1484.50 to 1487.50.
NASDAQ futures yesterday could not get through the 3750 key resistance area. This area will grow stronger in terms of resistance the more time we spend below it. This morning, NDU was trading at 3710, down 12.50.
If you take the down move from 4135 to 3370, at yesterday’s high of 3755 we retraced 50.4% of that move; 61.8% comes in at 3843. On the upside, we feel the entire area between 3750 and 3843 will be choppy and very difficult for the market to overcome.
Keep in mind we’ve rallied over 10% from our lows last week — meaning it would not surprise us to see some of this rally lose steam. Along the way in this area, above 3770, 3795 to 3805 is resistance. Above that, 3820 to 3825 and then 3843 to 3850. On the downside, we have good support between 3710 and 3690. If this fails, 3650 could be tested quickly.
Yesterday’s low of 3643 should provide a minor target, but trading below that should lead to a test of 3605-3595. Anything below that zone becomes more serious, especially if we were to settle below 3580.
For the Dow, our numbers for yesterday still hold. We see support at 10,770-10,725. We were able to settle above the key resistance at 10,883, as we settled at 10,924. We are now above all the moving aveages from the 3-day to the 100-day. Technically, this bodes well.
We continue to look for 11,000 and eventually 11,100 this week. It could put us toward the top end of the range. We are not forecasting any breakthrough of the range. One thing to note on the cash side, the volume was very light yesterday in the Dow stocks.