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The extremely choppy action in the stock market seems to be suggesting that the bull camp is losing the battle. In addition to several impressive rally failures since the middle of last week, the trade doesn’t seem to be getting definitive support from numbers that were in many ways stellar. However, international economic readings overnight were very discouraging again and that seems to have turned up the macro economic selling pressure on stock prices. Even in the face of a fresh buyout story this morning, the general bias of the early US trade is negative. While some players might be fretting over the prospect of a change in the FOMC statement on Wednesday afternoon we think the market is destined to sell the rumor and then be forced to buy the fact on Wednesday afternoon. In fact, with recent calls for the US to move away from the ultra low rate structure and the recent move to raise rates in Australia, the issue of a change in the US FOMC statement is certainly on the markets radar. The market should see some support off the anticipated rise in US Factory Orders later this morning, but as in the trade yesterday, favorable numbers were unable to put the bull camp back in control.
S&P 500: With a series of lower highs on the charts and the S&P fresh off a series of failed rally attempts, one has to give the bear camp the edge. Using the June through July washout (which was mostly off fears of a failed recovery theme) we would not be surprised to see a similar washout in the S&P in the days ahead. The summer washout was roughly 84 points and that would give us a near term downside target in the December S&P of 1015. We see initial support at 1019.60 and until there is a close back above 1043.50, we have to leave the trend pointing downward.
DOW: While the December Mini Dow hasn’t made a fresh new low for the move in the overnight action, the bias on the charts appears to be negative again today. In addition to ongoing suspicions of a faltering US recovery, the trade also saw a series of very discouraging economic readings overnight and that in conjunction with a rate hike in Australia seems to leave the bear camp with the edge. A normal retracement of the July through October rally would seem to give a downside target in the December Mini Dow of 9,272, but we suspect that the market will find initial support at the 9,500 level.
NASDAQ: When the market fails to sustain rallies in the wake of a clean sweep of favorable scheduled US economic data, it is clear that the bear camp retains an edge. While the December Nasdaq would seem to have solid support around the 1650 level, there is an old gap area down at 1645 to 1633.25 that might be filled in the coming trading sessions. Apparently there are some concerns that the US might make a slight change to their rate statement and that is apparently combining with residual economic recovery doubt, for a moderately bearish market condition. At least in the near term, the trend is down and it could take something more than a favorable Factory Orders report to turn off the selling.
TODAY’S MARKET IDEAS: The bears control as better than expected economic readings are not providing the market with confidence.
