Where The Money Flows
The key issue in this market is the money flow — namely out of techs and into financials and cyclicals.
Remarkably, the NASDAQ did not affect the S&Ps on the way down yesterday as much as they did on the way up. The S&Ps were very strong even though the NASDAQ was down nearly 5% at its worst. When the NASDAQ started rallying, S&Ps accelerated to the upside. The Dow and the S&P are holding comparatively well.
This morning, S&P futures were trading up 450 at 1415.70. On the upside, we have resistance at 1416.50, 1418.50, a key at 1420.50, a critical at 1421.50. The high yesterday was 1419. Then we see 1424.50, 1427, 1429 and major objective at 1431.50.
On the downside, we see support at 1414.50, 1410.50, 1408, a major at 1404.50, 1401.50, 1399, and a critical at 1397.50. Our Morning Pivot is between 1413 and 1410.
The NASDAQ was trading up 52 handles at 3162.50. Today, we see resistance at 3180-3195, then 3220-3225. If we can get above 3225, look for a move to 3250, with resistance at 3265-3282 and 3300-3305. We see support at 3130-3120, then 3105-3095. If we get through this level, look for a move through yesterday’s low of 3060.
We have support between 3050 and 3035. If we fail to hold support here, look for a move to limit down, which today comes in at 3012.50. If limit down fails to hold, we could go as low as 2950.
One general NASDAQ comment, Cisco
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PowerRating) made a new calendar-year low yesterday and settled at a new low for the year yesterday. Again, money is coming out of tech and is put to use elsewhere. The big fear right now is that we trade near the lows for the year. We have not been able to sustain a bounce.
This situation will play out one way or the other, shortly. Either support will fail and we will trade down as low as 2800 in the NASDAQ, or support will hold and we should begin the rebuilding process for a move toward 3900. The most bearish scenario would be sideways trading in a 6-8% range for the next two weeks. In other words, this market needs to make a stand.
As for the Dow, we have now rallied 1243 points in nine trading sessions. The financials are strong.. But if you take a look at the chart on the cyclicals, this is a spike up in a downtrend. At some point we will have a retracement. Look for it to occur sometime this week, toward the 10,500 level in Dow cash. Still, it is worth noting that if the market can hold 10,500 on this expected retracement, it could lead to a setup for a larger rally into the new year.
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