The Bulls Have to See the Euro Zone Repayment Without a Hitch

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): S&P 500 -100, DOW +0

The stock market looks set to start the Thursday session under a bit of pressure because of news of a slack Chinese PMI reading and also because of lingering uncertainty off the Euro zone repayment issue. With a fresh new low for the move overnight and the lack of a bounce off the lows in the prior trading session, one has to leave the technical bias pointing downward today. In fact, we have to fear the US scheduled data flows again today, especially after a Fed member yesterday was forced to deny the US recovery was faltering. With the US President also suggesting that the US economy was still growing earlier this week, our doubt on the economy is increased even further. Certainly the market could bounce if the euro zone payment issue passes without trouble, but the market might not be able to totally shed the fear of slowing without some distinct surprises from the data on Friday.  

S&P 500: The S&P has probably become more oversold over the last 24 hours of trade and there are some signs that the overnight low of 1016.00 is temporarily overdone. However, seeing the Euro zone repayment situation pass without rekindling a full blown Euro zone debt crisis event is only half the problem for the bull camp, as the trade will probably continue to face disappointing US numbers and it also has to be worried about the US Non farm payroll report on Friday morning. We see a solid line in the sand down at the 1013.70 level in the September contract, the failure to hold that prior low would seem to set the stage for a even bigger slide down to the 1000.00 level.

DOW: While the September Mini Dow managed to avoid making a lower low this morning on the charts and the market is obviously oversold technically, the bull camp will have to weave its way around a number of negative items today to effectively alter the down trend bias. However, in the event that the September Mini Dow manages a rise back above the 9,732 level, that could shift some technical signals back in favor of the bull camp. We wouldn't play for a bottom today we would instead assume that the trend is down, unless proven otherwise by a move back above the Wednesday low of 9,750.

NASDAQ: The Nasdaq has managed a lower low in the early going today and the bear camp looks to be poised to press prices down to the lowest level since November of last year. However, the 1731 area is possibly an area of importance, as that level managed to support the market and usher in a recovery back in early February. As suggested before, those looking to pick a bottom should restrict those attempts to very cheap near to expiration call plays, as the trend is down and the flow of numbers recently has been anything but bullish. 

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) 07/01/2010: The downside crossover of the 9 and 18 bar moving average is a negative signal. Daily stochastics declining into oversold territory suggest the selling may be drying up soon. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. The next downside objective is now at 1008.20. The market is approaching oversold levels on an RSI reading under 30. The next area of resistance is around 1035.60 and 1050.60, while 1st support hits today at 1014.40 and below there at 1008.20.

S&P E-MINI (SEP) 07/01/2010: The downside crossover (9 below 18) of the moving averages suggests a developing short-term downtrend. 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 tilt is slightly negative with the close under the pivot. The next downside target is now at 1007.63. With a reading under 30, the 9-day RSI is approaching oversold levels. The next area of resistance is around 1035.25 and 1050.62, while 1st support hits today at 1013.75 and below there at 1007.63.

NASDAQ (SEP) 07/01/2010: Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. The market's short-term trend is negative as the close remains below the 9- day moving average. The market tilt is slightly negative with the close under the pivot. The next downside target is 1701.82. The 9-day RSI under 30 indicates the market is approaching oversold levels. The next area of resistance is around 1756.62 and 1788.31, while 1st support hits today at 1713.38 and below there at 1701.82. 

DOW (SEP) 07/01/2010: Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. The market's short-term trend is negative as the close remains below the 9- day moving average. It is a slightly negative indicator that the close was under the swing pivot. The next downside objective is 9720. Some caution in pressing the downside is warranted with the RSI under 30. The next area of resistance is around 9826 and 9889, while 1st support hits today at 9742 and below there at 9720. 

MINI-RUSSELL 2000 (SEP) 07/01/2010: The downside crossover of the 9 and 18 bar moving average is a negative signal. 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 tilt is slightly negative with the close under the pivot. The next downside target is now at 592.9. The 9-day RSI under 30 indicates the market is approaching oversold levels. The next area of resistance is around 614.5 and 627.0, while 1st support hits today at 597.5 and below there at 592.9.

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