At Least in the Early Action Today the Bull Camp Looks to Have Control

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): S&P 500 +640, DOW +49

All one has to acknowledge this morning is the fact that the S&P has managed the highest trade since June 14th. One could suggest that Alcoa earnings are providing the boost to prices, or one might suggest that optimism toward a potential capping of the Gulf oil well might be contributing to the bullish sentiment seen over the last 16 hours. The Alcoa earnings wouldn't seem to be an overly positive result, but apparently sentiment was improved by the bellwether release. Since the markets were able to discount concern by weakness in Chinese stocks overnight and they were also able to ignore a slightly weaker than expected German ZEW reading this morning, the trade might be poised for a range up extension. With the vulnerability seen in the markets yesterday morning, it is possible that part of the early gains today are the result of some technical short covering by those expecting the markets to roll over down yesterday. 

S&P 500: With the overnight rise above the 1080 level we suspect that the market is seeing a measure of short covering from those who pressed the short side on Monday morning. The next resistance zone on the September S&P charts isn't seen until the 1090.70 level. Apparently the stock market isn't overly concerned about the downgrade of Portugal debt overnight perhaps because US earnings news has temporarily distracted the market from European travails. The trend in the S&P might remain up as long as the September S&P manages to hold above the 1077.20 level.

DOW: The Mini Dow comes into the early action today trading at the highest level since June 24th and seemingly without much in the way of resistance until the 10,268 level. With the market managing to shake off a bad technical trade yesterday morning and also managing to shrug off what could have been a rekindling of the European debt crisis, it would seem like the bull camp has regained a foothold in the marketplace. At this point, it would not be a positive to see the September Mini Dow fail to hold above the 10,200 level and anything positive from the Gulf front today could mean that the Mini Dow is capable of a return to the 10,400 level.

NASDAQ: The September Nasdaq is catching a lift off the initial favorable start to the US earnings cycle. In addition to the initial resistance seen at the 1850 level on the charts, the September Nasdaq might not have much in the way of solid resistance until the down trend channel line (drawn off the April and June highs) up at 1897. The down trend channel resistance line falls to 1894 on Wednesday. We do think that the Nasdaq will continue to lag behind the rest of the market on the upside, unless there is a really positive tech sector earnings report to give tech sector investors an added bullish jolt. 

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) 07/13/2010: The market now above the 40-day moving average suggests the longer-term trend has turned up. Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. The market's close above the 9-day moving average suggests the short-term trend remains positive. It is a mildly bullish indicator that the market closed over the pivot swing number. The next upside objective is 1085.75. The next area of resistance is around 1082.50 and 1085.75, while 1st support hits today at 1070.70 and below there at 1062.15.

S&P E-MINI (SEP) 07/13/2010: The major trend could be turning up with the close back above the 40-day moving average. Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The market's close above the 9-day moving average suggests the short-term trend remains positive. It is a mildly bullish indicator that the market closed over the pivot swing number. The near-term upside objective is at 1085.68. The next area of resistance is around 1082.37 and 1085.68, while 1st support hits today at 1070.63 and below there at 1062.19.

NASDAQ (SEP) 07/13/2010: Momentum studies are rising from mid-range, which could accelerate a move higher if resistance levels are penetrated. The intermediate trend could be turning up with the close back above the 18- day moving average. The close over the pivot swing is a somewhat positive setup. The near-term upside target is at 1846.87. The next area of resistance is around 1834.75 and 1846.87, while 1st support hits today at 1805.75 and below there at 1788.88.

DOW (SEP) 07/13/2010: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The market's short-term trend is positive on the close above the 9-day moving average. The close over the pivot swing is a somewhat positive setup. The near-term upside objective is at 10159. The next area of resistance is around 10142 and 10159, while 1st support hits today at 10094 and below there at 10062.

MINI-RUSSELL 2000 (SEP) 07/13/2010: Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. The close above the 9-day moving average is a positive short-term indicator for trend. The daily closing price reversal down is a negative indicator for prices. The market's close below the pivot swing number is a mildly negative setup. The near-term upside target is at 637.7. The next area of resistance is around 629.6 and 637.7, while 1st support hits today at 614.0 and below there at 606.4.

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