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The stock market is expected to be locked into a choppy two sided trade today as the flow of scheduled data is expected to provide periodic selling interest, but the markets also look to have to weather partially undermining corporate earnings reports again. The market is hopeful that the White House will step up its promotion of the upcoming stimulus package and for the time being that expectation at least is a partial offset of the constant flow of negative headline stories on the economy. Perhaps seeing the Treasury Secretary nominee confirmed will provide a positive lift to the market, but first the market will have to get beyond another reading from the housing front in the form of US existing home sales data morning. Unlike the Treasury market which appears to be poised to embrace a negative track, the stock market might be able to put an occasional positive spin on things in the wake of offerings from Washington. Therefore, we suspect that the market might be initially locked within the prior week’s trading range.
DOW: Critical support in the March Mini Dow is seen at 7,888, with solid resistance seen up at 8,108 but one has to concede to the fact that the market has maintained a pattern of lower highs on the charts. With the January 20th Commitment of Traders with Options report for Dow Jones Index $5 showing the Non-commercial position to be net long 8,884 contracts, with the Non-reportable position net short 645 contracts, that made the “combined” spec and fund position net long 8,239 contracts as of early last week. With the Mini Dow technically trading above the level where the COT report was measured, one could suggest that the Mini Dow spec long has actually increased and therefore more technically orientated long liquidation is possibly due in the coming trading sessions.
NASDAQ: Critical support in the March Nasdaq is seen down at 1146, with initial resistance seen up at 1185. In fact, the January 20th Commitment of Traders with Options report for Nasdaq Mini showed the Non-commercial position to be net short 15,844 contracts, with the Non-reportable position net short 35,377 contracts, that made the “combined” spec and fund position net short 51,221 contracts as of early last week. With the Nasdaq sitting above the level where the COT report was measured, the net spec short position might be overstated a bit. Nonetheless the Nasdaq would appear to be somewhat prone to developing into an oversold technical condition, but in the end the technicals don’t appear to so oversold that the downside tilt will be ruled out.
S&P 500: Critical support in the March S&P is seen at 810.90, with initial resistance seen up at 835.90. Apparently the market seems to have carved out a fairly solid consolidation support zone around the 800 level and that level could be an extremely important pivot point on a closing basis over the coming two weeks of trade. At least initially the market seems to be capable of discounting another round of negative scheduled US data points, with the market instead seemingly holding out hope for some movement from Washington in the stimulus front. It is also possible that a key buy out in the drug sector and anticipation of progress on the stimulus program will keep the markets attention away from the economic negatives. However, the January 20th Commitment of Traders with Options report for S&P 500 Stock Index showed the Non-commercial position to be net short 3,781 contracts, with the Non-reportable position net long 61,913 contracts, and that made the “combined” spec and fund position net long 58,132 contracts in the S&P as of early last week. Therefore the S&P is the most overbought of the major traded index markets and a return to the 850 level would obviously pump up the spec long in the S&P to a more vulnerable level.
