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Debt Ceiling Debate Holds Bulls Back

|Includes: Apple Inc. (AAPL)

Debt Ceiling Debate Holds Bulls Back

9:00am (EST)

The market held much of its opening pop on Monday despite the turmoil and chaos in Washington but hard comments by President Obama in the afternoon put a cap on the action as the indexes fell off their highs. The Head Zombie warned Republicans, again, that he will not negotiate over an extension of the debt ceiling as the budget battle heats up with a deadline that is rapidly approaching Congress by month's end.

The bulls got the win but Tech wasn't much help as Apple (AAPL, $450.12, down $14.78) also weighed on the Nasdaq. We mentioned in our Weekly Wrap and Daily there was further risk down to $450-$440:

"The 50-day MA at $463 was tested on Thursday and Friday and a close below this level would be bearish for a test down to $450-$440. A rebound past $475 would take some of the pressure off shares." (NYSE:END)

Shares of Apple traded to a low of $447 on Monday. We are wondering if Carl bought more at these "no-brainer" levels.

The Dow gained 118 points, or 0.8%, to finish at 15,494. The blue-chips traded to a high of 15,549 and came within shouting distance of our 15,600 target. Support is trying to move up from 15,200 to 15,350-15,400 and the next 200-point swing will be crucial in deciding the next trend.

The S&P 500 added 9 points, or 0.6%, to settle at 1,697. The index made a run past 1,700 to 1,704.95 but the close below resistance keeps 1,675-1,650 in play. The all-time high is 1,710 and a close above this level should trigger 1,725.

The Nasdaq slipped 4 points, or 0.1%, to close at 3,717. Tech reached a peak of 3,756 before falling to a low of 3,712. The bulls pushed our 3,750 target but were unable to hold this level and the close below 3,725 keeps 3,700 in the mix. Our yearend target for the Nasdaq has been 3,800 since early February. A stronger Apple will help Tech get there but it's going to be an uphill battle over the near-term.

The Russell 2000 advanced 2 points, or 0.2%, to end at 1,056. The small-caps kissed 1,065 and set an all-time high in the process but failed to hold 1,060. Support at 1,050 is still sketchy and a close below 1,040 would suggest the highs are in.

The S&P 500 Volatility Index ($VIX, 14.38, up 0.22) closed higher after testing a low of 13.87. We have said the bulls needed to get below 13.50 and they nearly did before the VIX went out at session highs. A close above 15 would be detrimental to the current rally and a strong hint an elevator drop is possible.

We have updated our Watch List with more possible juicy trades. Some of them could become official recommendations as early as today.

As we head to press, futures look like this: Dow (+3); S&P 500 (-1); Nasdaq 100 (+1).