Waking Up

The S&P market appears to be waking up after a long summer nap. Yesterday we saw decent volume — but not heavy — in the SPU for the first time in weeks.

Most of the large-size orders came in at 1517 and again at 1524. This is where we saw most of the two-sided action. One somewhat troubling note for bulls was the quiet sell-off in the afternoon, and we settled in the lower half of the range for the session.

Today we’re still thinking that the key area is 1512 to 1510 for support. If S&Ps were to go below that area, we would look for 1505 to be tested and then below that, strong support is between 1500 and 1498.

On the upside, the first area of resistance is 1519 to 1520. Above that, we come back to the 1524-1525 area, where much of the trading took place yesterday. Finally, above that, look for resistance between 1527 and 1530. Above 1530, look for the 1536-1540 resistance to be challenged.

Keep in mind, yesterday, volume on the NYSE was only 723 million shares. So, people are still on vacation.

The NASDAQ settled unchanged yesterday at 3959, after attempting numerous rallies toward the 4000 area. Our forecast last week that 4000 would not be defended by sellers has turned out to be inaccurate. Sellers are really defending 4000.

But yesterday’s market was one of variance, as Yahoo!
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was down nearly $12 but didn’t seem to affect the rest of the Internet sector. Intel
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sold off hard in the final hour on news, and the market evaporated lower. All being told, there are steady bids on the downside. However, nobody seems to be reaching out to get long at these levels.

For today, in general, any move above 4020 is extremely bullish and targets a move to 4220. On the flip side, any move below 3800 is bearish and targets a move to 3630. In between, we have a support at 3950 and 3933, then 3918 to 3903. Below 3900, odds are pretty good we will test 3850.

We have support between 3875 down to 3850; so it would be a grinding, choppy trade if they get down there. On the upside, we have resistance between 3976 all the way up to 4008.

Expect quiet choppy trade in this area — just like yesterday. If we do get above 4020, the first area of resistance is 4050, then 4068-4077.

The Dow settled up 60 points yesterday and briefly traded over 11,300 in the cash before faltering in to the close. Yesterday’s high of 11,319 was a 78.5% retracement of the down move from 11,750 to 9,731; 80% comes in at 11,344, and 88% at 11,506. We still anticipate some sideways-to-retracement action in here. However, the strength of the financials continues to be impressive.

If a couple of key issues in that sector build on already impressive gains, we may just keep going higher. The Dow is the only major index still down on the year.