After the markets dropped sharply on Monday (as we noted on 4/19/09 may happen this week), the markets triggered a sell signal early Tuesday morning. As we noted on 4/4/09, the equity indices may be a bit choppy during the current earnings season and they are proving to be just that as today the markets were making new highs and then selling off in the last hour to make new lows.
Since bottoming on 3/6/09, the market is more than due for a bit of consolidation. We believe it is in the process of consolidating at this time, thus choppy non-directional day to day trading is to be expected, especially as these markets have become so headline sensitive. It almost appears that market participants are taking very short term positions and may be jockeying for position on both sides of the market.
For the DJ futures contract (basis the June contract), if the market continues to head south and takes out the lows of April 21st, the next major support level would be 7570 to 7420. There is probability the market could fall to 7150 to 7200, if the 7420 area is not held.
If the DJ contract should move sideways from here, then currently we would need to see the contract rally above 8100 before we could be convinced this market is ready for the next up leg. If so, 8300 to 8450 and then onto 8600 would be our next resistance to the upside.
S&P500 futures contract (basis June) has found support in the 830 price range. Just like the DJ contract, the S&P contract also gave us a sell signal on 4/21/09. If the market breaks the low of 4/20/09, the next major support would be 803 (testing the lows of 4/8/09) to 786.
Stay tuned as this yo-yo market (not to be confused with the great musician Yo Yo Ma) continues its saga.
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