Short Term Overbought Market Corrects in Face of a Slack Report Slate

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): S&P 500 -460, DOW -31

The equity market has apparently fallen back in a corrective mode in what appears to be partially a technical balancing move but it might also be the result of mixed opinions on the pace of the recovery. The market was helped yesterday by favorable tech sector news and without a fresh supportive headline issue today, the market looks to start the US session slightly off balance. While the Greece situation remains mostly under control, the trade did see concerns from Greece that they would not be able to pay such high rates for upcoming debt and that leaves the debt crisis as a key market force. With the US economic report flow today restricted to second and third tier private survey readings, the market is potentially vulnerable to fresh political wrangling on the health care and financial reform fronts. In either case, the prospect of additional uncertainty from Washington is a negative to the market, but perhaps not a major negative today. However, initial weakness in Europe and some noted weakness in the financial sector would seem to leave the bears with a slight edge into the early US Tuesday trade. 

S&P 500: The March S&P enters the trading session in a negative posture and like the Nasdaq, the market appears to lack solid close-in support because of the rather sharp compacted rally last Friday. Initial support is seen at 1132.50 and then again down at 1131.70. The S&P bulls have to hope that Cisco news at 10:00 cst. serves to provide a lift to the tech sector and that in turn manages to support the rest of the market. At least in the early action today, we have to give the edge to the bear camp, but it does not appear as if the bearish tilt will be accentuated by anxiety.

DOW: The March Mini Dow has started out the Tuesday session on a weaker bias and in the process has tested even number support on the charts at 10,500. With some weakness in financial issues overnight and the Greece Prime Minister visiting the US and complaining about excess speculation, it is possible that US financial shares will see ongoing selling pressure, which in turn should drag the rest of the market lower because of the lack of alternative news flow. Up trend channel support in the March Mini Dow today is seen at 10,389 today and that support rises up to 10,416 on Wednesday.

NASDAQ: Despite favorable forward views from Texas Instruments overnight, the Nasdaq is starting out on a slightly weaker footing today. In fact, TI was supposedly having trouble filing orders and that caused the shares of that company to fall in the overnight action. However, it is possible that a scheduled Cisco announcement at mid morning today could provide the market with a distinct lift, but it is also possible that the company's view of the importance of this offering is overly inflated. Unfortunately the March Nasdaq seems to have little in the way of close-in support on the charts because of the steep run up in prices last Friday. Therefore, very close-in support is seen at 1882, with additional support not seen until 1877.

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 (MAR) 03/09/2010: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. It is a mildly bullish indicator that the market closed over the pivot swing number. The near-term upside target is at 1142.97. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 1139.94 and 1142.97, while 1st support hits today at 1134.45 and below there at 1131.98.

S&P E-MINI (MAR) 03/09/2010: Momentum studies are trending higher but have entered overbought levels. 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 1142.87. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 1139.75 and 1142.87, while 1st support hits today at 1134.25 and below there at 1131.88. 

NASDAQ (MAR) 03/09/2010: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's short-term trend is positive on the close above the 9-day moving average. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside target is at 1899.93. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 1893.62 and 1899.93, while 1st support hits today at 1882.38 and below there at 1877.44.

DOW (MAR) 03/09/2010: A bearish signal was triggered on a crossover down in the daily stochastics. Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The close above the 9-day moving average is a positive short-term indicator for trend. The close over the pivot swing is a somewhat positive setup. The next downside target is 10444. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 10610 and 10689, while 1st support hits today at 10488 and below there at 10444.

MINI-RUSSELL 2000 (MAR) 03/09/2010: The market made a new contract high on the rally. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. 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 670.6. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 668.5 and 670.6, while 1st support hits today at 663.9 and below there at 661.3.

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