A Brief Respite From the Downward Pattern Mostly Off Potash Action

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): S&P 500 +610, DOW +44

The stock market is showing signs of opening just below the recovery highs forged last Friday. Apparently the merger/buy out tilt continues to provide a measure of support to stock prices but the markets are still contending with the threat of slowing in the global economy. News of eight US bank failures on Friday, along with ideas that the US economy is flirting with a double dip recession, is probably serving to keep some buyers on the sidelines despite the cheaper level of prices into last Friday's lows. In some measures, the stock market reached the lowest level since July 22nd late last week and a pattern of lower highs on the charts would seem to leave the bear camp confident in their bearish technical opinion. While it might not be a major impact on US equity prices, the Australian election resulted in gridlock and that might not be a positive development if the world economy is thought to be mired in a slow down and without distinct leadership capacity. On a positive note, the market saw talk that Potash might be in the sights of a Chinese investor group and that in turn could lend a more positive tone in the marketplace.

S&P 500: The S&P is showing a slight upward track in the early action today, with the talk of buy out activity seemingly making the outlook on the economy appear to be better than most would have expected. The Commitments of Traders Futures and Options report as of August 17th for S&P 500 Stock Index showed Non- Commercial traders were net short 29,311 contracts, an increase of 10,101 contracts. The Commercial traders were net long 23,667 contracts, an increase of 14,166 contracts. The Non-reportable traders were net long 5,644 contracts, a decrease of 4,065 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 23,667 contracts. The market appears to be set to waffle around both sides of the 1075.00 level, with a small measure of positive momentum present in the early trade. In order for the bull camp to maintain control over prices this morning, might require getting beyond the Chicago Fed National Activity index reading without rekindling the slowing mentality again.

DOW: While the September Mini Dow is showing slightly positive action this morning relative to the Friday closing value, the market will have to garner a lot of optimism from the prospect of a bidding war for a natural resource company to effectively snuff out the concern of slowing that was in place for most of last week. The Commitments of Traders Futures and Options report as of August 17th for Dow Jones Index $5 showed Non-Commercial traders were net long 18,325 contracts, an increase of 7,130 contracts. The Commercial traders were net short 22,554 contracts, an increase of 10,351 contracts. The Non-reportable traders were net long 4,229 contracts, an increase of 3,222 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 22,554 contracts. This represents an increase of 10,352 contracts in the net long position held by these traders. A critical bull/bear line in the September Mini Dow might be seen at 10,235, with somewhat critical support pegged down at 10,196.

NASDAQ: The September Nasdaq has forged a quasi gap up move on the charts this morning and that would seem to highlight a more bullish tilt than was in place for most of last week. As suggested already, it is possible that the markets will garner some support from talk of a bidding war for a global natural resource company, as that action distracts the market away from classic macro economic slowing mentality. Some players suggest that a bidding war in one segment can spark bidding in other unrelated market segments. The Commitments of Traders Futures and Options report as of August 17th for Nasdaq Mini showed Non-Commercial traders were net long 20,026 contracts, a decrease of 23,074 contracts. The Commercial traders were net short 11,179 contracts, a decrease of 31,042 contracts. The Non-reportable traders were net short 8,847 contracts, an increase of 7,967 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 11,179 contracts. Initial resistance is pegged at 1839.50 and then again up at 1842.25.

STOCKS TECHNICAL OUTLOOK:

Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report.

S&P 500 (SEP) 08/23/2010: Daily stochastics are trending lower but have declined into oversold territory. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market's close below the pivot swing number is a mildly negative setup. The next downside objective is now at 1055.48. The next area of resistance is around 1077.34 and 1083.67, while 1st support hits today at 1063.25 and below there at 1055.48.

S&P E-MINI (SEP) 08/23/2010: Momentum studies are declining, but have fallen to oversold levels. The market's short-term trend is negative as the close remains below the 9-day moving average. The market's close below the pivot swing number is a mildly negative setup. The next downside objective is now at 1055.32. The next area of resistance is around 1077.37 and 1083.81, while 1st support hits today at 1063.13 and below there at 1055.32. 

NASDAQ (SEP) 08/23/2010: Momentum studies are declining, but have fallen to oversold levels. A negative signal for trend short-term was given on a close under the 9-bar moving average. The daily closing price reversal up is a positive indicator that could support higher prices. The market has a slightly positive tilt with the close over the swing pivot. The next downside target is now at 1801.00. The next area of resistance is around 1836.00 and 1843.00, while 1st support hits today at 1815.00 and below there at 1801.00.

DOW (SEP) 08/23/2010: The major trend has turned down with the cross over back below the 60-day moving average. Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The market's close below the pivot swing number is a mildly negative setup. The next downside objective is now at 10107. The next area of resistance is around 10249 and 10310, while 1st support hits today at 10147 and below there at 10107. 

MINI-RUSSELL 2000 (SEP) 08/23/2010: Daily stochastics are trending lower but have declined into oversold territory. The close below the 9-day moving average is a negative short-term indicator for trend. The daily closing price reversal up is a positive indicator that could support higher prices. The market tilt is slightly negative with the close under the pivot. The next downside objective is now at 595.5. The next area of resistance is around 617.2 and 621.6, while 1st support hits today at 604.2 and below there at 595.5.

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