Expect Investors to Migrate Toward the Sidelines Off Risk & Low Reward

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): S&P 500 -410, DOW -40

The market is facing the worst August market performance since 2001 and that combined with lingering concerns of a double dip recession has forced many investors to the sidelines. While a flurry of Central banks either offered up additional stimulus or they floated the promise of extra stimulus, those actions only seemed to confirm the slowing fear in the marketplace. While the US President has supposedly directed his economic team to work hard on the problem, the trade is doubtful the government has the capacity to alter the pattern of slowing. In fact, the President almost seemed take the stance that the US took a decade to get into its current mess and therefore it would take longer than anyone wants to get beyond the current turmoil. At least in the short term, the markets are likely to take a large measure of direction from the scheduled numbers and without something positive from those reports, it isn't clear whether residual merger and buyout information will be able to support equity prices.

S&P 500: While the September S&P technically failed to make a fresh new low for the move overnight, prices are within relative proximity to the recent lows in the early action today. The September S&P has a series of lows around 1038.00, 1037.80 and overnight at 1037.50 and that appears to be some form of consolidation zone. In short, investors appear to be fearful of more evidence of slowing and without something positive from the scheduled numbers one has to wonder where the bull camp will find news to help their cause. Talk that Dell might pull out of the bidding war for 3Par, could also tamp down the support recently being garnered from the buyout front over the last few trading sessions. Near term downside targeting in the September S&P is seen at 1025.00 with a full return to the early July lows, possible in the event that US economic readings continue to soften.

DOW: With the September Mini Dow managing a fresh new low for the move early this morning and in the process reaching the lowest level since July 7th, the bear camp would seem to have a bit of an early edge. At least in the early action today, the market doesn't seem to be getting as much merger and buyout information and the flow of international economic news this morning is seemingly less conclusive than the news seen on Monday morning. The blue chip stocks are likely to take quite a bit of their direction today from scheduled data flows, with the Consumer Confidence report potentially a really important forward looking measure for the stock trade. Some players are suggesting that end of month book squaring could exaggerate trends today and with a slightly weaker opening expected, it is possible that the bears think they have the technical edge. Near term downside targeting in the September Mini Dow is seen at 9,869 but perhaps not until the 9,750 level in the lead up to the monthly payroll report on Friday.

NASDAQ: The Nasdaq just hasn't benefited from an ongoing buyout effort in the tech sector and that suggests that the tech laden Nasdaq remains focused on the direction of the overall economy. With the President yesterday seemingly giving credence to the slow down and in some ways suggesting the road to repair will be very long, it is not surprising to see some additional investors bail out and move to the sidelines. Therefore the scheduled numbers look to have a noted impact on prices again today and perhaps for the remainder of the week. In fact, the trade and Press are already touting the typical weak performance of the equity market for the upcoming month of September and therefore sentiment looks pretty negative to start the last trading day of August. Near term downside targeting is seen at 1743.00 but a return to the early July lows of 1700 can't be ruled out in the face of patently weak US scheduled data flows.

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) 08/31/2010: A crossover down in the daily stochastics is a bearish signal. Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. The close below the 9-day moving average is a negative short-term indicator for trend. The daily closing price reversal down puts the market on the defensive. The market setup is somewhat negative with the close under the 1st swing support. The next downside objective is 1024.13. The next area of resistance is around 1058.85 and 1079.52, while 1st support hits today at 1031.15 and below there at 1024.13.

S&P E-MINI (SEP) 08/31/2010: A crossover down in the daily stochastics is a bearish signal. Momentum studies are declining, but have fallen to oversold levels. The close below the 9-day moving average is a negative shortterm indicator for trend. The daily closing price reversal down puts the market on the defensive. The close below the 1st swing support could weigh on the market. The next downside objective is 1023.69. The next area of resistance is around 1059.37 and 1080.18, while 1st support hits today at 1031.13 and below there at 1023.69. 

NASDAQ (SEP) 08/31/2010: The daily stochastics have crossed over down which is a bearish indication. 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 downside closing price reversal on the daily chart is somewhat negative. It is a slightly negative indicator that the close was under the swing pivot. The next downside objective is now at 1740.57. The next area of resistance is around 1788.12 and 1815.06, while 1st support hits today at 1750.88 and below there at 1740.57.

DOW (SEP) 08/31/2010: The daily stochastics gave a bullish indicator with a crossover up. The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. The market's shortterm trend is negative as the close remains below the 9-day moving average. The daily closing price reversal down is a negative indicator for prices. The close over the pivot swing is a somewhat positive setup. The next upside objective is 10239. The next area of resistance is around 10158 and 10239, while 1st support hits today at 10050 and below there at 10022. 

MINI-RUSSELL 2000 (SEP) 08/31/2010: Rising from oversold levels, daily momentum studies would support higher prices, especially on a close above resistance. The market's short-term trend is negative as the close remains below the 9-day moving average. The market could take on a defensive posture with the daily closing price reversal down. The market's close below the 1st swing support number suggests a moderately negative setup for today. The next upside target is 630.8. The next area of resistance is around 613.0 and 630.8, while 1st support hits today at 589.1 and below there at 582.8.

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