Three events on Thursday are making us cautious about the S&P500, the large-cap index for US equities. The connections between them are tenuous, but they’re all pointing in the same direction, and all three have to be characterized as bad news.

First is the speech Thursday night my Janet Yellen, the Fed Chair. The second is the return of the DAX, the German equivalent of the Dow, to lows it has not seen for two years. And the third is Caterpillar’s decision to cut 10,000 jobs, most of them this year.

The Fed first. There was nothing very remarkable about Yellen’s remarks Thursday evening. There is not much the Fed can say at this stage that is both true and important; we’re starting to think no rate hike before 2017, which reduces the significance of Fed most statements. So yet another series of vague hints about monetary policy didn’t capture much attention.

But at the end of her remarks Ms. Yellen left the stage with difficulty and was immediately taken for medical treatment. There were subsequent statements that it was just fatigue – what else would they say? – but the prospect of the Fed faltering was enough to send the market into brief paroxysms.

Then there was the DAX, which traded down to two-year lows yesterday, in part because of the collapse of Volkswagen stock. In Germany about one in every seven jobs is related to the automotive sector.  Cars drive the German economy and the German economy drives Europe. Both are now a little more shaky than they were last week, and the repercussions will be felt here too.

And then there is Caterpillar, which is pretty much the most important non-military manufacturing company in the US. By the end of this year Caterpillar’s sales and revenue will have been declining for four years, for the first time in the company’s 90-year history.  CAT responded yesterday by announcing plans to cut 10,000 jobs and reduce operating costs by $1.5 billion a year.

Caterpillar makes equipment primarily for the mining, railroad, construction and oil and gas industries. They clearly don’t expect those sectors to make any kind of quick turnaround and start buying equipment again. The implications for the alleged “economic recovery” in the US are not good – and not good for US stocks either.

Today

There are only four more trading days before the end of the month and the end of the quarter. Compensation levels for the 2-and-20 crowd depend on the end-of-quarter settlement, and there has been some re-balancing of portfolios this week. That is largely completed now.

The Bulls and Bears will be fighting up to 1950 and down to 1900 for today’s option expiration. 1925-30 will be the option mean line.  We are expecting a little bounce. But we are mainly focusing on the resistance levels to go short.

Major support levels: 1900-03.50, 1975-80, 1850-45;
major resistance levels: 1998.75-95.50, 2012.50-2013.50 2032-2035

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Chart: S&P500 mini futures (ESZ5)  Sept. 24, 2015

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