Morning Commentary for Monday, August 9, 2010

Good Morning SOM traders…Last week the market did it’s usual dance to news events ending with yet another thriller on Friday by opening and grinding down on a disappointing pre-market Jobs Report only to rally almost all the way back by the close. The market shook off the bad news as it seems to continue climbing a “wall of worry”. Definitely a bullish sign!

Looking forward…Tomorrow (Tuesday) is the FOMC announcement which used to be a big market mover but since right now (at least through the November mid-term elections) the odds of the committee raising rates is almost zero, only parsing the accompanying statement can have any impact. On Friday pre-market we get both CPI and Retail Sales which could have a much stronger influence on direction. Overnight the Asian markets were slightly higher and at the time of this writing Europe is quite a bit higher up over 1.5%. The US index futures are higher as well so we should expect a higher opening today.

Technicals…The S&P is in a tight trend line triangle and still in the broader trading range of approx. $1,040-$1,130 so we continue to watch for the break out in either direction. The longer it stays range bound the greater the breakout, like a spring being coiled. The bias is bullish based on the bounce off the bad Jobs Report and this morning’s confirming futures. There is a lot of constructive support for the S&P nearby. The trend line at $1,110, the 20EMA at $1,101, the 50EMA at $1,098 and the 200EMA at $1,095. So within 15 points there are four major supports which will be very difficult for the market to crack. If it does “look out below”! On the upside we look to re-test the $1,131 resistance level. Here is what I see for technical support/resistance (all MAs are 6 month/daily, exponential):
DJI: support $10,500 (prior swing low), resistance $10,905 (prior swing high)
SPX: support $1,110 (see above), resistance $1,131 (prior swing high)
NDX: support $1,870 (20EMA), resistance $1,941 (prior swing high)
RUT: support $646 (20&50EMA), resistance $670 (prior swing high)

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Tagged as: ndx, rut, spx, vix