Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
With a modest range down extension and recovery seen in the prior trading session, the market gave off the impression of a classic bottoming effort. However, the width of the range and the subsequent recovery move doesn’t give off signs of a major bottom and or the beginning of a sustained up trend ahead. Apparently the stock market managed the recovery effort off value hunting buying of defensive type stocks and that in turn is a less than robust endorsement for the bull camp. Surprisingly a favorable ISM Non Manufacturing report from the US on Monday morning wasn’t given that much credence and therefore sentiment in the market remains off balance and suspect. Given the recovery bounce in the prior trading session, we can’t rule out a weak two to three day up count on the charts, but with the trend seemingly set to remain down and the next earning cycle looming just ahead, we suspect that attempts to recover are going to be short lived and unimpressive. In fact, interest in a US Treasury auction over the coming three trading sessions will be a very important measure of the risk appetites in the marketplace. We suspect that demand for interest bearing investments is set to rise and that interest in equities will remain poor. Therefore, traders should be looking to get short the stock market on a minor near term recovery bounce.
S&P 500: Down trend channel support in the September S&P is seen down at 866.70 today but the market appears to have tempered the patently bearish attitude that settled into thinking in the wake of the US Non Farm payroll report. With the June 30th Commitment of Traders with Options report for S&P 500 Stock Index showing the Non-commercial position to be net short 1,839 contracts, with the Non-reportable position net long 53,246 contracts, that made the “combined” spec and fund position net long 51,407 contracts as of early last week. Therefore, the S&P might have a slight initial upward bias today, we don’t get the sense that the market has finished off its downside work just yet.
DOW: Down trend channel resistance in the September Mini Dow is seen at 8,441 today and that level falls down to 8,419 on Wednesday. With the Dow at last week’s highs, sitting as much as 300 points above the current level and the June 30th Commitment of Traders with Options report for Dow Jones Index $5 showing the “combined” spec and fund position to still be net long 4,836 contracts as of early last week, we suspect that the positioning in the Mini Dow is very close to being leveled or even becoming slightly net spec short! The bottom of the Mid June through present down trend channel, in the September Mini Dow is seen at 8,003 today and that trend line support falls to 7,981 on Wednesday.
NASDAQ: With a series of closes forging what appears to be coiling pattern on the charts, we have to leave the path of least resistance in the Nasdaq pointing downward. In fact, with the market seemingly dumping tech sector stocks and in turn moving toward defensive stocks on Monday, it is possible that the Nasdaq will actually begin to lead the market on the downside. Critical support in the September Nasdaq is seen at 1434.50 today, but with the Administration seemingly floating ideas of a second stimulus package, there could be something to countervail what seems to be a generally bearish tilt toward stocks. The June 30th Commitment of Traders with Options report for Nasdaq Mini showed the Non-commercial position to be net long 31,280 contracts, with the Non-reportable position net long 7,075 contracts, and that made the “combined” spec and fund position net long 38,355 contracts as of early last week. Therefore, the Nasdaq remains somewhat vulnerable to long liquidation pressure.
TODAY’S MARKET IDEAS: While the market might show periodic strength we doubt that the June down trend pattern has run its course yet. Look to sell modest strength ahead.
