Market SnapShot for Tuesday, June 8
Yesterday, the June S&P futures contract traded in a very narrow range, consolidating gains made last Friday. At the intraday high yesterday at 1339, a harami pattern (consolidation or hesitation) formed on the 45-minute chart, with important support established at 1331. Short-term support is seen at 1331, 1324, and 1308.50.
On the daily chart, the June S&P has recovered slightly more than half of the losses of the recent sell off. Short term resistance remains at the 1335 area where the 50-day moving average is located overhead and at 1350.
There are no changes to our comments on the S&P 500 cash index.
At this point the SPX, has made a 62% retracement of the uptrend that originated in March 1999. This has been deeper than the kind of pull back we would expect if the market was still strong. However, the market did get a bit overdone to the upside in terms of frothiness and so we cannot conclude that a steep pull back means the market has reached a top on an intermediate term as of yet.
Over the past three years, the SPX has breached the 20-week exponential moving average less than half a dozen times, and until the market closes below the Weekly20EMA, we will give the market time to show us what it wants to do.
For now, we will draw a pair of parallel lines on the daily chart of the SPX. One line will be at the all time high of 1375.98 and the other at the recent low of 1277.31. We will watch this bounce to see how far it goes and will be watching for signs of failure along the way. Resistance overhead is at 1327, 1350.50, 1367 and 1375. Support is at 1277, 1260 and 1220.
As an aside, we note that the number of new highs and new lows made a divergence at the bottom. While the market made new lows last week compared to the week before, the number of new lows did not go up and the number of new highs did not go down. In fact, the number of NYSE stocks making new highs is still outnumbering new lows, perhaps signaling that the market as a whole may be still healthy, while the blue chips got quite overbought.
During the trading day, we analyze the S&P 500 stock index and Treasury bond futures because they are two of the most closely watched financial futures contracts traded around the globe. They lead the market during the U.S. market hours and overnight trading sets the tone for the open in New York. What happens in the trading pits in Chicago has tremendous impact on the underlying cash indices, interests rates, and market sentiment in general.
Individual investors can take advantage of index-based investments by visiting the NASDAQ Amex market site to research SPYDRS, Dow DIAmonds, and NASDAQ 100 QQQ at options.nasdaq-amex.com
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