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The market forged a big range down washout in the prior trading session and then failed to reject the lows and that would seem to leave the bears with control of the market. Unfortunately for the bull camp, favorable earnings have seemingly lost their capacity to lift prices and the flow of scheduled US data hasn’t been able to lift sentiment either. With US interest rate markets seemingly factoring in an incremental increase in US rates and the US offering a rather burdensome $44 billion in 2 Year note supply today, there could more troubled waters ahead for equities. While the Press suggested that fears for home builder shares spear headed the slide in stock prices yesterday, that could mean that the Case-Shiller home price survey this morning will be given significant attention. With Asian equity prices showing follow through weakness, that seems to have left the US market in a vulnerable posture this morning. However, we think that stock prices might get a temporary lift in the wake of the home price survey readings and perhaps off the Conference Board sentiment report that is due out later this morning, but we also think that the overall trend in stock prices is set to remain down off the theme that the recovery is either in question, or that the recovery is simply too slow.
S&P 500: In the event that Treasury prices hint at higher US rates later today, that in turn could foster a rise in the Dollar and a failure in commodity or natural resource shares, which could then press the S&P down to an even lower level. An eight month old up trend channel support line is seen down at 1052.95 today and that level rises to 1055.35 on Wednesday. With the big range down extension and lack of recovery from those lows in the prior trading session, we have to think that the market is poised for some additional downside work ahead. While we are not sure that the December S&P is destined to retest the 1050 level, we have to leave the near term trend with the bear camp today.
DOW: While the December Mini Dow has managed to bounce off the prior session’s lows in the early action today, the focus of too big to fail would seem to leave a negative connotation in place for the big cap sector. The Dow might be poised for a further slide down to the next even number level on the charts down at 9,750, with our pick for a two day coming low in the December contract seen closer to the 9,706 level. At least in the near term, the bias in the market is pointing down unless there is a headline development that serves to rekindle widespread hopes for a more robust recovery track.
NASDAQ: Critical up trend channel support is seen in the December Nasdaq at 1742.45 today, but we are not holding out hope that the market is going to make some form of major distinct bottom and begin to work higher this morning. We do think that the Nasdaq will see less selling than the upper end of the market, on broad market down days, but we don’t think that the Nasdaq will be able to lift the entire market back up. We think the trend is pointing down, but a rise back above 1753.50 today could signal that a temporary recovery pulse is in motion.
TODAY’S MARKET IDEAS: The market remains in a downside adjustment as the recovery is either too slow or perhaps even in question again.
