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!
While the market is mostly devoid of anxiety toward the economy, it does seem as if disappointment is widespread again this morning and that the bears have the capacity to control prices for now. While the international equity market weakness was supposedly the result of slack US numbers at the end of last week, one has difficulty explaining the 20 point downside extension in the S&P into the opening this morning. In fact, suggesting that the sharp correction is the result of stock prices running too far ahead of reality, doesn’t seem to justify the aggressiveness of the current washout. With the recent round of COT reports showing the Nasdaq to be the most vulnerable to long liquidation, we suspect that the upper end of the market will hold up relatively better than the smaller cap stocks. However, in addition to the negative US numbers from last week, the market is also being undermined by a failed reaction to solid Japanese GDP readings last Friday, a weak private UK home price survey and downbeat macro economic expectations from China. Therefore the path of least resistance is pointing downward this morning and the downdraft in prices could last for at least several sessions.
S&P 500: With a big range down extension in the early going today, it would seem like the bear camp comes into the new week with full control over prices. However, with the August 11th Commitment of Traders with Options report for S&P 500 Stock Index showing the Non-commercial position to be net short 9,802 contracts, with the Non-reportable position net long 40,876 contracts, that made the “combined” spec and fund position net long only 31,074 contracts as of early last week. With the S&P this morning already 10 points below the level where the COT report was measured and the net spec long only a nominal net spec long amount, we suspect that the correction could easily run its course early this week. We see a near term downside targeting of 978.60 in the September S&P, but an even lower bottoming might be seen down at 973.80 in the event that current slowing fears are fanned by the upcoming headlines.
DOW: The September Mini Dow is poised for a further slide as the economic outlook if currently negative and the momentum from the sell off is likely to force some follow through selling. However, with the August 11th Commitment of Traders with Options report for Dow Jones Index $5 showing the Non-commercial position to be net long only 4,843 contracts, with the Non-reportable position net short 7,157 contracts, that made the “combined” spec and fund position net short 2,314 contracts as of early last week. In other words, with a sharp downside adjustment in prices early this week, it is possible that the Mini Dow will become oversold quickly and that could reduce the duration of the slide in prices. Near term downside targeting in the September Mini Dow is seen at 9,038 and perhaps even 9,000 if the scheduled US data today adds to the recovery doubts.
NASDAQ: With the August 11th Commitment of Traders with Options report for Nasdaq Mini showing the Non-commercial position to be net long 50,408 contracts, with the Non-reportable position net long 9,074 contracts, that made the “combined” spec and fund position net long 59,482 contracts as of early last week. Therefore, relatively speaking, the Nasdaq would seem to be more vulnerable to technically orientated long liquidation pressure than either the Mini Dow or the S&P. With the market expected to show some downside momentum, we would not be surprised to see the September Nasdaq fall to the next critical support point of 1572 and perhaps even lower if the market shows a break in excess of the typical 2-3 day slide that is normally seen in a classic technical balancing of prices.
TODAY’S MARKET IDEAS: An overbought condition has been exaggerated by a string of disappointing second and third tier data.
