David Chojnacki S1F Market Technician
With poor Initial Claims data before the bell, the Market was set for an open to the downside. The weakness persisted throughout the session and the indices closed near their lows of the day. At the close, the DJIA was down .88%, the S&P off .8%, and the Nasdaq100 giving up .77%. Breadth was decidedly negative, 2.3 to 1, on below average volume. RSI's pared some of their recent loftiness, and the Nasdaq100 dropped to 64.3 bringing it below 70, where we begin to look at an over-bought condition. ROC(10's) declined and went negative for the DJIA and S&P. The DJIA and S&P MACD's remain below signal. Near term technicals have weakened and we are getting a normal consolidation after the recent run-up. Once again the trade was fairly narrow and we remained within technical levels. For the near term, we are watching 1400-1395 as support for the S&P, with 1411 providing upside resistance. Above 1411 we see near term bias to the upside. The wider range for the S&P is 1375 and 1425. The Nasdaq100 traded right down to the mid-point of the bull-candle established last Thursday, which is 2755. We will watch to see if it can hold this level in today's session. Below this level near term bias is to the downside. There is support below at 2725, and upside resistance remains the spring closing high of 2784. The VIX is bouncing off the recent lows and moving up almost 19% in the last four sessions. The VIX closed up 5.6% in yesterday's session to 15.96. We expect volatility to increase, with the events scheduled for the next two weeks. Tropical storm Isaac expected to become a hurricane and likely path is into the central gulf. This would impact oil and gas facilities. Futures are slightly weaker this morning versus fair value.
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