The Trend Remains Down As Slowing is a Widely Accepted Fear Again

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): S&P 500 -330, DOW -31

The stock market looks to be in a liquidation pattern today, as the reward for being long this market continues to be limited by rather limited expectations for future world growth. While the market saw some fresh developments from the Euro zone financial front this morning, the bank stress tests results won't be made public until July 23rd and therefore the influence of the distribution of the stress test criterion isn't expected to be a major deal today. However, with the string of US data over the last month clearly pointing to fresh slowing, investors are likely to continue to dump holdings in the face of technical pressure. Even though the Nasdaq and S&P were found to be net spec short in the latest COT figures, the bounce yesterday was probably enough to balance those market and in turn clear the way for more declines ahead.

S&P 500: Despite the big range down reversal recovery action on Tuesday, the S&P looks to start the new trading session out on a weaker footing. Critical downside support is seen at 1011.00 this morning but a return to the recent lows is likely as the market doesn't look to have much in the way of a game-changer event directly ahead. In fact, news that BP was potentially poised to get some outside investment capital was mostly discounted this morning and that highlights a market that is focused on the negatives.

DOW: With the Mini Dow retaining a modest net spec long in the last COT report and the market bouncing yesterday that should clear the way for a return back to the sub 9,600 level. In fact, with the jobs market suspect again, the big cap stocks will have to rely on cost cutting and international business just to tread water. Therefore we see mostly risk and little reward for being long. Near term downside targeting is seen at 9,561 and then again down at 9,500, with the market not showing panic and anxiety, but investors in general expected to show a distinct lack of buying interest.

NASDAQ: After a very surprising rally attempt, the September Nasdaq appears to be back on the liquidation ropes again this morning. We see little in the way of support in the September Nasdaq until the 1709.00 level but we doubt that internal positive news flow for the equity is going to be enough to countervail a liquidation attitude in the marketplace. In fact, the market seems to be poised to turn the simple release of the Euro zone bank stress test criterion into a negative and that highlights a market that is looking for the negatives. As suggested before, we don't see panic and anxiety selling but we do see a continued down trend pattern.

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) 07/07/2010: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The outside day up is a positive signal. There could be more upside follow through since the market closed above the 2nd swing resistance. The next downside target is now at 987.25. The next area of resistance is around 1041.80 and 1057.65, while 1st support hits today at 1006.60 and below there at 987.25. 

S&P E-MINI (SEP) 07/07/2010: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The outside day up and close above the previous day's high is a positive signal. The market's close above the 2nd swing resistance number is a bullish indication. The next downside objective is 986.69. The next area of resistance is around 1042.12 and 1058.18, while 1st support hits today at 1006.38 and below there at 986.69.

NASDAQ (SEP) 07/07/2010: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The market's close below the 9-day moving average is an indication the short-term trend remains negative. A positive signal was given by the outside day up. Since the close was above the 2nd swing resistance number, the market's posture is bullish and could see more upside follow-through early in the session. The next downside objective is now at 1678.13. Some caution in pressing the downside is warranted with the RSI under 30. The next area of resistance is around 1762.75 and 1791.12, while 1st support hits today at 1706.25 and below there at 1678.13.

DOW (SEP) 07/07/2010: Momentum studies are declining, but have fallen to oversold levels. The market's close below the 9-day moving average is an indication the short-term trend remains negative. A positive signal was given by the outside day up. The market's close above the 2nd swing resistance number is a bullish indication. The next downside target is 9456. The next area of resistance is around 9822 and 9877, while 1st support hits today at 9612 and below there at 9456. 

MINI-RUSSELL 2000 (SEP) 07/07/2010: 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. A negative signal was given by the outside day down. The market is in a bearish position with the close below the 2nd swing support number. The next downside target is 566.5. The 9-day RSI under 30 indicates the market is approaching oversold levels. The next area of resistance is around 603.1 and 621.4, while 1st support hits today at 575.7 and below there at 566.5.

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