The Positives Just Barely Outnumber the Negatives This Morning

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): S&P 500 -30, DOW +1

While some market measures managed to forge a higher high initially this morning on the charts, we don't get the sense that the market is moving to price in an improved economic condition. In fact, a stop gap investment prospect for BP and relief rally gains in banking sector stocks are hardly cause for fresh optimism toward the global economy. However, the market might view favorable UK manufacturing data for May and mostly up beat IMF comments as a positive this morning and that could give the bull camp a further temporary lift. However, the bull camp still needs something positive on the future pace of the economy to maintain control over prices. In the mean time, the bull camp might retain a slight edge, but the bull case will have to be fed with favorable events and a lack of discouraging US scheduled data flows. While it might be premature BP has suggested that the leaking well might be fixed as early as July 27th, but they stressed that was the best case timing. Therefore, hope that the Gulf nightmare might be contained could be another factor that is serving to lift stock prices.

S&P 500: With the overnight high, the September S&P has managed to run into the underside of a consolidation zone that was forged throughout May and June. Therefore we see initial resistance today at 1079.00, with closein key support pegged at 1054.90. Therefore we see no reason to reverse the short covering bias just yet, but there also doesn't seem to be justification for fresh outright buying to continue unabatedly. The bear camp might be correct in describing this week's action, as a rally within a bear trend.

DOW: While the September Mini Dow managed to regain the somewhat important 10,000 level early this morning, we wish the market had a tangible fundamental issue to justify the recent upside action. Instead it appears that investors were simply too bearish toward energy sector stocks and bank stocks and that action is being reversed. We still think it will take something fresh and positive for this market to continue to engineer more gains, but perhaps the market is sensing some stimulus coming from Washington next week and that could be cause for a run to the next resistance zone on the charts of 10,100. 

NASDAQ: While the Nasdaq has managed a fresh new high for the move overnight, the market could have a fairly significant amount of overhead resistance seen up at the even number 1800.00 level. There are suggestions that the EU stress tests weren't particularly aggressive and that might be cause to further bid up bank or financial sector stocks. Critical support in the September Nasdaq is seen at 1,776.75. The question is whether the market will be able to shift its attention toward the upcoming earnings cycle and away from classic economic analysis. After a further short covering rally, we expect the September Nasdaq to run out of buying fuel and that could lead a temporary peak just above the 1800.00 level.

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) 07/08/2010: The daily stochastics gave a bullish indicator with a crossover up. Daily stochastics are showing positive momentum from oversold levels, which should reinforce a move higher if near term resistance is taken out. The market's short-term trend is positive on the close above the 9-day moving average. 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 upside target is 1091.79. The next area of resistance is around 1080.89 and 1091.79, while 1st support hits today at 1037.70 and below there at 1005.40.

S&P E-MINI (SEP) 07/08/2010: The crossover up in the daily stochastics is a bullish signal. Daily momentum studies are on the rise from low levels and should accelerate a move higher on a push through the 1st swing resistance. The market's close above the 9-day moving average suggests the short-term trend remains positive. 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 near-term upside objective is at 1092.12. The next area of resistance is around 1081.00 and 1092.12, while 1st support hits today at 1037.50 and below there at 1005.13.

NASDAQ (SEP) 07/08/2010: The daily stochastics gave a bullish indicator with a crossover up. Rising from oversold levels, daily momentum studies would support higher prices, especially on a close above resistance. A positive signal for trend short-term was given on a close over the 9-bar moving average. With the close over the 1st swing resistance number, the market is in a moderately positive position. The next upside target is 1840.37. Consider buying pull-backs since daily studies are bullish. The next area of resistance is around 1823.25 and 1840.37, while 1st support hits today at 1755.75 and below there at 1705.38.

DOW (SEP) 07/08/2010: Daily stochastics are trending lower but have declined into oversold territory. The market's close below the 9-day moving average is an indication the short-term trend remains negative. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside objective is now at 9595. The next area of resistance is around 9735 and 9755, while 1st support hits today at 9655 and below there at 9595.

MINI-RUSSELL 2000 (SEP) 07/08/2010: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. A positive signal for trend short-term was given on a close over the 9-bar moving average. The upside closing price reversal on the daily chart is somewhat bullish. A positive setup occurred with the close over the 1st swing resistance. The next downside objective is now at 576.5. The next area of resistance is around 625.9 and 633.6, while 1st support hits today at 597.3 and below there at 576.5. 

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