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The stock market is showing signs of pushing upward today but it would seem like the bullishness is the result of mechanical developments, as opposed to fundamental news on the recovery. Apparently strong pricing for an Asian IPO is providing the market with fresh residual support this morning. It would also seem like the market is embracing several smaller merger stories and that in turn has allowed the market to basically ignore or discount the somewhat slack economic data flows and the weakness in the US Dollar. In fact, the stock market would even seem to be garnering support from favorable action in the long end of the Treasury market, as a persistent decline in long term rates could dampen the concern of variable mortgage re-sets into the end of the year. With Treasury bond prices in the coming trading sessions, likely to reach the lowest levels since mid April, it is possible that falling yields for fixed income and interest bearing instruments is also prompting money to move into equities. We suspect that the stock market will take note of the US GDP reading that is due out this morning and that the market will also take note of a Fed speech. In the end, it would seem like end of period buying and anticipation of more merger news is serving to leave the bull camp with an edge.
S&P 500: At least in the early going today it would not seem like concern off the CIT group situation is undermining sentiment in the market, as the S&P looks to start out on a positive footing today. Perhaps the market was cheered by news that the IMF was lowering its global debt write down estimates. In short, the market seems to be embracing the positives and discounting the negatives. Critical support in the December S&P is seen at 1053.40, with the market obviously seeing even more significant support down at the even number level of 1050. We can’t discount the bull’s case early today, but later in the session we would consider the purchase of some short dated puts.
DOW: While the Mini Dow has managed to throw off the pattern of lower highs that settled into place at the end of last week, it could take a close above 9,775 in the December contract to foment ideas of a return to the year’s highs. In looking back at the mid September consolidation zone, it would appear that the December Mini Dow has a critical pivot zone of 9,720. Some might even suggest that continued consolidation around both sides of 9,750 could hint at an impending top, as that type of formation was present just ahead of the breaks seen in mid June and into the break at the end of August. For the action today we suspect that the bull camp is destined to control, but we would suggest that longs be prepared to bank profits and consider the purchase of a put into the Friday numbers.
NASDAQ: With a pattern of lower highs this week, the December Nasdaq appears to be coiling as if a major trend decision is directly ahead. Since the Nasdaq seems to be a lagging segment of the market on rallies, it might be the most logical pick for a short side play over the coming three trading sessions. However, because the trend is generally pointing upward, we would suggest that traders be aware of the end of month/end of quarter timing because that could leave the bulls with control today. However, the failure to hold above 1712 in the December Nasdaq could signal the beginning of a more noted corrective slide.
TODAY’S MARKET IDEAS: At least in the early going today the bull camp looks to retain control.
