Market SnapShot for Wednesday, June 9
Yesterday morning, we pointed out that the June S&P futures contract, at the Monday intraday high at 1339, formed a harami pattern (consolidation or hesitation) on the 45-minute chart. It could not hold support at 1331 and quickly moved down. Near term, a 50% pull back of the uptrend from the low of June 2 gives us a target of approximately 1308. Given that 1308.50 served as resistance for almost a week last week when the market was locked in a trading range, it should be a good level to find support, at least temporarily.
On the daily chart, the June S&P 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. The June 30- year Treasury bond futures contract closed at another 20-day low today, continuing the downtrend. The Producer Price Index figures will be out on Friday morning, and going into the number, bond traders will be nervous. Expect trading to remain volatile for the balance of June as we have a slate of economic numbers due out next week, along with triple witching, the expiration of options, futures and options on futures. There is a two-day FOMC meeting on June 29th and 30th, so we expect an action packed month that will be very important for the market going forward.
Here is a quick update on the NASDAQ 100 index, the NDX. A very large head and shoulders top appears to be emerging as rotation continues in the market. As of this moment, the pattern measures some 350 points from the top, which subtracted from the present "neckline" of approximately 1922, yields an ultimate target of 1569 or so. We will keep this in mind, but will not lose any sleep over it unless the neckline is broken, if ever.
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.
During the trading day, we analyze and provide market commentary on 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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