Morning Commentary for Monday, January 3, 2011

by Steven Chanin on January 3, 2011

Good Morning SOM trade and Happy New Year! After 2 weeks of grinding slightly higher on very low volume and low vols. over the holidays, the markets are poised to gap higher on the open of this first trading day of the 2011. With help from the liquidity provided by the Fed. in 2010, the Dow finished up 11%, the S&P up 12.8%, the NDX up 17% and the RUT up 21% all with long term bullish trends. During the month of December, the S&P closed lower only five trading days out of 22. Looking forward…here are this week’s economic announcements that could move the markets (all announcements are pre-market, 8:30am, unless indicated and all times are EST) – Tuesday: FOMC minutes (2:00pm), Friday Monthly Jobs Report and for a little added Friday fun Uncle Ben Bernanke will also be speaking at 10:00am. Overnight the Asian markets were higher and at the time of this writing Europe is higher and US index futures are significantly higher indicating a gap higher opening today.

Technicals…While all oscillators are at extreme overbought, remember that the markets can continue to move higher while remaining overbought. The NDX touched the pre-crash 2007 high of $2,234 but closed below on Friday at $2,017. However, if it closes above today, as seems likely, that will be very significant and will add fuel for the other indexes to continue higher to do the same. Here is what I see for technical support/resistance (all MAs are 6 month Exponential):
DJI: support $11,104 (20 EMA) resistance $11,905 (prior swing high)
SPX: support: $1,243 (20 EMA) resistance $1,310 (2008 swing high)
NDX: support $2,097 (20 EMA), resistance $2,234 (pre-crash swing high)
RUT: support $764 (prior swing), resistance $801 (2008 swing high)

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