Yesterday’s close: Settled at 3008, down 0.50
Fundamentals: U.S benchmarks are set for a higher Quadruple Witching open, or ‘closing’ of the September futures and options contracts at the 8:30 am CT bell. On one side of the coin, the Federal Reserve satisfied the market’s demand for looser policy this week and the tape has responded by nearly posting record highs. On the other side, extremely strong technical resistance has capped this rally and Fed members themselves do not currently see the need for additional easing measures. All the while, there is a liquidity crisis and the overnight lending rate has soared as high as 10% this week forcing the Fed to again conduct repo operations today. We believe this market is ready to make a transition from Fed easing dependence to data dependence, whereas better data will fuel this market to fresh records; Bill Baruch discussed this with Bloomberg yesterday morning. However, is the developing liquidity crisis echoing the broken system permabears have been calling for and furthermore, is the equity market the one wearing blinders? We don’t need answers today, and this is where our Neutral and cautiously optimistic Bias has helped traders navigate the day to day gyrations; above support and pivot levels, the path of least resistance remains higher. We look forward to comments from NY Fed President Williams at 7:15 am CT and rate-cut dissenter Boston Fed President Rosengren at 10:20 am CT.
Technicals: For two sessions in a row, both the S&P and NQ have closed at but not out above major three-star resistance levels. Intraday, both indices tested but failed at their respective next levels of major three-star resistance; for the S&P this aligns with the record high at 3027.50-2032.50 and for the NQ this is 7960.25-7963.25. The lack of follow-through cannot go unnoticed nor can the tails left by not closing near those session highs which aligned with the aforementioned failure at resistance levels. Still, the higher open this morning continues to support a path of least resistance higher, however, traders must remain cautious until the next clear breakout. The overnight tape is working to build support at yesterday’s settlement, and this can act as another technical tailwind, but continued price action below 3008.50 and 7908-7918 today will lead to a consolidation lower and thus another tail failure. If price action breaks below 3000 in the S&P and below 7870-7893 in the NQ, we are likely to see additional waves of selling.
Resistance: 3008.50***, 3013.75*, 3027.25-3032.50***, 3044-3057.75***
Support: 3000*, 2991-2993**, 2975-2980.75***, 2957.25-2958.75**, 2938.50-2943.75***
Resistance: 7908.25-7918***, 7960.25-7963.25***, 8014.50-8037***, 8072***
Support: 7870-7893*, 7798.25-7805***, 7739-7761.50**, 7687**, 7580.75-7612.50***