Market SnapShot for Thursday June 3
Going into Wednesday morning, we drew a pair of parallel lines (at 1280 and 1308.50) on the 45-minute June S&P chart to mark support and resistance. The market traded down at the open, broke 1279 by one point, setting another 20-day low on a daily basis, but rallied for the balance of the day to close near the high of the day. Notwithstanding this action, the S&P still made a "down" day with a lower high and lower low. We are still inside a trading range and we are now watching this consolidation to see if this will be the beginning of a bounce or if market goes lowers from here. 1278.00 is key.
Resistance overhead is at 1300 (20 EMA on 135-minute chart) and 1317 -1325 (20 EMA Daily, 50 SMA Daily, and also previous support level). Support is seen at 1291 (20 EMA on 45- and 60-minute charts), 1280, 1260 and 1225. Given the anxiety building about inflation going forward and what the FOMC meeting later this month will bring in terms of changes in interest rates, trading will be very volatile again this week, with the key Employment number due out this Friday.
There are no changes to our comments on the S&P 500 cash index, the SPX. For almost a month, there was a trading range between 1315 and the highs at 1375ish. With the break of key support at 1315, the uptrend on the daily chart from the October 1998 lows was broken. The 20-day exponential moving average and the 50-day moving average were broken, portending to a more serious pull back for the market. On the daily chart, the bear flag was broken on May 21 and led to the breaking of key support. Nearby support is at 1280 (most important number at this time), 1260, 1245 and 1220. Resistance overhead is at 1320. The 200-day moving average is at approximately 1200. A one-third retracement of the advance from the October 1998 low to the May 1999 high gives us a figure of approximately 1200. On the weekly chart the SPX is sitting on the 20-week exponential moving average. This will be the first place we can look for support. The second place is the 50-week moving average, which coincidentally is at 1200, where should be support at the July 1998 highs.
The NYSE new highs and new lows have been of concern lately, since it diverged on the highs in the 1375 area. We are now seeing new lows moving up and new highs shrinking. The 10-day moving average of the high/low net differential, pioneered by Justin Mamis, has not made a new high since January 1999. When the SPX made the marginal new high on May 13 and sold off the very next day, it produced an old fashioned double top, otherwise known as the Trader Vic 2B top or the Linda Raschke Turtle Soup sell set up.
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
Charts have been posted to intelligentspeculator.com
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