The market is back into an extremely negative posture this morning, with the trade back under the double negative burden of financial sector turmoil and classic macro economic slowing. In our opinion, the November lows were carved out under a similar combination of fears and for that reason the path of least resistance in the stock market is clearly pointing downward. It was going to be bad enough facing the dismal macro economic readings, but with the market now seeing the Big Banks coming back for more government funds, one gets the sense that we have fallen back into an environment of undefined duration. At least in the near term, the markets appear to be poised to slide back to the early December lows. In fact, given the scheduled data flow this morning, the bulls can only hope that the initial claims data somewhat countervails a potentially very damaging ongoing claims reading. In looking at the data flow beyond the initial and ongoing claims figures, it would seem like one can expect even more patently weak US data and that in turn should facilitate more selling pressure. Some traders are hoping that the ECB will cut interest rates even more aggressively than the -50 basis points expected, but even that move shouldn’t be expected to dramatically improve sentiment.
DOW: With the March Mini Dow reaching the lowest level since November 24th, it was clear that the Mini Dow was taking no chances with its view toward the economy. Clearly the Blue chip stocks were undermined by the much weaker than expected US retail sales report yesterday and it goes without saying that the rekindling of turmoil in the financial sector adds a whole additional burden to the marketplace. We see little in the way of solid support until the 7,932 level but some traders think that the rejection of the prior session’s low of 8,087 offers up some form of closer-in support.
NASDAQ: With Apple being hit overnight in the wake of renewed health concerns of its founder, and Microsoft rumored to be poised to make job cuts, the Nasdaq would seem to facing both internal and external pressure. While the Nasdaq was the “least” overbought of the key index products recently and the recent slide probably shifts the Nasdaq positioning toward a net spec short positioning, we doubt that classic technical considerations can diffuse the undertow of weakness coming from the rest of the market. Initial support today is seen at 1138.25 and a failure at that level targets a slide to 1117.
S&P 500: With another new low for the move this morning, it is clear that the bias in the stock market remains down. With several large banks apparently poised to ask for more TARP funds and the government apparently moving to vote on implementing those funds today, it is clear that financial sector concerns are set to combine with the scheduled data flow for a pretty dismal overall environment. Initial downside targeting is seen at 813.50 and in the event that Citigroup and Bank of America ask for a large amount of capital from the TARP program, the S&P could make a very quick slide to 800.