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After a fairly impressive recovery effort in the prior trading session, stock prices this morning are showing some retrenchment. We think the realization that the TARP fund had declined to just $109 billion is at least partially behind the setback in prices and that lower adjustment was at least partially the result of news that the Obama Administration was taking some of the money for certain sectors of the US auto industry. The bear camp is counting on a negative impact from an extremely active US report flow this morning, while the bull camp is hopeful that either Mortgage Applications or pending home sales readings will provide something positive. Some news outlets were even suggesting that the G20 meeting was capable of yielding something positive right after they convene and that would be somewhat surprising, considering that several European heads of state were openly against the American stimulus and spending strategies. With debate already beginning in Congress on what is needed before more TARP funds are granted, it would seem like the US government is going to forced to go even deeper into debt. With at least two critical US data points due out prior to the NYSE opening today, we are inclined to take a large amount of direction from the actual NYSE opening action today.
S&P 500: Like the rest of the market, the June S&P is under a bit of pressure this morning, with the market taking note of news that Honda plans to reduce its North American output in the wake of poor US auto sales data. As suggested already, we think that the early bias will be reversed slightly in the face of a decent Mortgage application survey result and that the pending home sales reading might also serve to countervail some of the slack US data that is probably going to flow later today. We just don’t get the sense that the market is poised for hard down action ahead, especially if there is anything even slightly positive flowing from the G20 meeting late in the trading session today. It would be a little surprising to see something positive from the G20 this early given that the conference is only into the official opening later today. Initial support in the June S&P is seen at 775.70 today and that could be fairly solid support zone in the near term.
DOW: The June Mini Dow is bordering on critical support at the 7,500 level into the opening today. However, despite the attempt to rally in the prior trading session, off the general view that the US financial sector turmoil was coming under control, the Mini Dow has still forged a very distinct pattern of lower highs on the charts and with an avalanche of US data expected over the coming three trading sessions, we suspect that some investors are justified in pulling back to the sidelines. We think that the path of least resistance is pointing downward, unless the pending home sales and or Mortgage application survey readings provide some positive surprise early in the trade today.
NASDAQ: While the market is seeing some positive headlines from RIM overnight and there is hope that something positive will come from the G20 meeting, the Nasdaq would seem to be under a bit of early pressure from the rest of the market. In looking at the charts, the June Nasdaq would seem to have fairly solid support at the 1200 level, especially since the market has made and rejected several big spike down attempts down to that level over the last two weeks, and therefore one gets the sense that 1200 level is for the time being a really solid support zone for the market.
TODAY’S MARKET IDEAS: None.
