A big range down early probe starts the shortened US trading week off on a weak footing. With some political turmoil in Japan overnight and renewed concern toward a key European banking giant also seen overnight, the market would seem to have a series of negatives facing the trade. In fact, in addition to the financial sector concerns overnight, there is also the prospect for brewing trouble in the US auto sector. With the concern toward the US auto sector apparently fomented by bad sales figures, the looming bridge loan submission deadline and the US Administration addressing the situation over the weekend, the market would seem to have plenty of reasons to fret over the situation again. While some might hope that the signing of the US stimulus bill will generate some bullishness, the amount of negative issues facing the market seems to be more than capable of controlling prices for now. While the S&P remains above the key January lows, a hard down opening in the Dow Jones Industrial Average could put the blue chip sector of the market on a track to retest the November lows.
S&P 500: The S&P is already testing the 800 level this morning with the next lower chart support seen down at 797. With the Asian markets down hard overnight, European shares under early pressure because of problems in the financial sector there and the actual signing of the stimulus package expected later today, there seems to be a flurry of negatives and only one positive in the headlines. In short, it would be a big surprise for the March S&P to be able to hold above the 797 level. The February 10th Commitment of Traders with Options report for S&P 500 Stock Index showed the Non-commercial position to be net short 20,898 contracts, with the Non-reportable position also net long 69,700 contracts, and that made the “combined” spec and fund position net long 48,802 contracts as of early last week. Therefore, the S&P seems to be technical vulnerable to more long liquidation ahead. Traders should expect a downside breakout on the charts early this week.
DOW: With another new low for the move overnight and the markets apparently facing classic slowing fears, renewed banking fears and perhaps even renewed US auto sector problems, the bear camp clearly hold the cards. With the February 10th Commitment of Traders with Options report for Dow Jones Index $5 showing the Non-commercial position to be net long 6,095 contracts, with the Non-reportable position also net long 2,848 contracts, that made the “combined” spec and fund position net long 8,943 contracts as of early last week. Therefore, the Mini Dow was still net spec long as of early last week and that would suggest the gains at the end of last week and early today probably haven’t put the market into an aggressively oversold condition yet. Near term downside targeting is seen down at 7,500 basis the March Mini Dow.
NASDAQ: While the Nasdaq has held up relatively better than the rest of the market, there would seem to be too many negatives this morning for the trade to stand up against a bearish tide. While the March Nasdaq sees initial support today at 1200, we suspect that the market is poised to fall back toward the February lows that sit just above 1150 in the March Nasdaq. However, the February 10th Commitment of Traders with Options report for Nasdaq Mini showed the Non-commercial position to be net short 4,234 contracts, with the Non-reportable position net short 23,031 contracts, that made the “combined” spec and fund position net short 27,265 contracts as of early last week. In other words, the Nasdaq would appear to be prone to becoming technically oversold on an upcoming washout.
TODAY’S MARKET IDEAS: None.