Not Enough Reward For the Amount of Risk Facing the Longs

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): S&P 500 -1190, DOW -105

The stock market has forged a fresh downside breakout on the charts overnight and the slide looks to be the result of a series of unrelated negatives. While the Shanghai equity market was supposedly down off investors liquidating shares to build cash for an upcoming Chinese AG Bank IPO, it is also possible that a downward revision in a Chinese Consumer Confidence reading for April, from the Conference Board, added to  the selling pressure overnight. When one adds into the equation concern for an upcoming repayment of 442billion Euros to the European central bank from European Banks, there would appear to be plenty of negative issues operating in the headlines. If the Case-Shiller home price survey were to come in up as anticipated by some sources, that could temper the negative attitude, but we doubt that report will be able to fully alter the existing negative track in equity prices. In fact, the Euro debt repayment issue could hang over the market for the next several sessions, as that money isn't due in un il Thursday. With the breakdown on the charts, it is possible that prices are headed for a retest of the early June lows, down at 1037.50 in the September S&P. S&P 500: A big range down extension overnight gives the bear camp the edge in the Tuesday US trade action. An initial objective is seen down at the 1050.00 level, with secondary support not seen until the 1043.70 level. While we give the short term trend to the bear camp this morning, we don't detect high anxiety and panic liquidation interest in the market. Nonetheless it would appear that the bear camp is set to retain the edge unless the ECB manages to downplay the repayment concerns and the US numbers really surprise with some much better than expected readings.

DOW: The September Mini Dow has also forged a downside breakout on the charts and that could leave little in the way of support until the 9,888 level and perhaps not until the 9,750 level. With a broad based fear of slowing, some financial anxiety toward Europe and lingering uncertainty over the impact of the Gulf oil spill, longs are confronted with what appears to be a limited reward for a fairly significant risk. However, we still don't detect panic and anxiety in the marketplace, just a lack of economic optimism and that could serve to make the 9,750 consolidation low zone a fairly solid support level for the Mini Dow.

NASDAQ: The Nasdaq has managed to reach the lowest level since June 10th this morning in the wake of the overnight slide in international equity prices. Apparently a generally positive buzz toward tech sector issues and hopes for favorable upcoming earnings news is temporarily lost in a downward adjustment in big picture sentiment. While the September Nasdaq might find some support from the even number 1800 level, we see little in the way of really solid support on the charts until the 1789.50 level. The early June low in the September Nasdaq is the next lower support zone down at 1772.50.

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) 06/29/2010: Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. 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. The market's close below the pivot swing number is a mildly negative setup. The next downside objective is now at 1059.65. The next area of resistance is around 1077.10 and 1084.45, while 1st support hits today at 1064.70 and below there at 1059.65.

S&P E-MINI (SEP) 06/29/2010: Declining momentum studies in the neutral zone will tend to reinforce lower price action. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The downside closing price reversal on the daily chart is somewhat negative. The market's close below the pivot swing number is a mildly negative setup. The next downside objective is now at 1058.82. The next area of resistance is around 1077.62 and 1085.31, while 1st support hits today at 1064.38 and below there at 1058.82.  

NASDAQ (SEP) 06/29/2010: Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market's close below the pivot swing number is a mildly negative setup. The next downside target is now at 1804.75. The next area of resistance is around 1851.50 and 1866.75, while 1st support hits today at 1820.50 and below there at 1804.75.

DOW (SEP) 06/29/2010: Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. 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 target is now at 10049. The next area of resistance is around 10125 and 10158, while 1st support hits today at 10071 and below there at 10049.

MINI-RUSSELL 2000 (SEP) 06/29/2010: Declining momentum studies in the neutral zone will tend to reinforce lower price action. 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. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside objective is now at 627.5. The next area of resistance is around 646.7 and 654.4, while 1st support hits today at 633.3 and below there at 627.5.

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