David Chojnacki S1F Market Technician
The indices opened flat, made a brief move to the upside, but then gradually deteriorated throughout the remainder of the session. We noted the formidable resistance area that the averages were bumping up against, so it was no surprise to see the indices sell off. At the close, the DJIA was off 0.5%, the S&P fell 0.6%, and the Nasdaq100, the weakest index, dropping 0.77%. Breadth was decidedly negative, 2.3 to 1, as selling was widespread on average volume. RSI's weakened and ROC(10)'s declined across the board. The Nasdaq100 ROC(10) is now in negative territory. The S&P and Nasdaq100 closed below key support. The Nasdaq100 is below its 50 and 200D-SMA's, and we saw the 50 cross below the 200(death cross). The S&P closed right near its 50D-SMA(1415.7). After just recently breaking out of a tight trading range, the indices are now right back within that range. The Nasdaq100 is still holding its 20D-SMA(2637), and is right at its 38% retracement level of 2653. It will now find the 50 and 200D-SMA's, 2670 and 2672 respectively, to provide near term resistance. Above here, expect the 2694-2700 area to provide formidable resistance. Support for the Nadsdaq100 can be found at 2650 and 2625, with 2625 the stronger level. The S&P closed just below the .61 Fibonacci retracement level of 1422, and more importantly dropped below key support area of 1420-1425. Support is now at 1409-10 and 1400 levels. Upside resistance will be found at 1425 and 1433-35 area. The VIX moved up 3.8% to close at 16.56, a significant move to the upside, but still remains fairly benign. We get CPI this morning, but so far the Street has been ho-humming recent economic reports and keying in on the fiscal negotiations. It appears that whatever deal we get by the end of the year is not going to fully address spending issues. If that's the case, then we go into next year looking much like 2012, with an easy Fed policy. The S&P up 12.8% for 2012. Futures are higher, early, versus fair value.
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CPI-8:30am Industrial Prod./Capacity Util.-9:15am
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