DJI, SP500, NDX

The DJI and NDX performing better than SPX. DJI and NDX trading above June highs but SPX trading back in April trading range. DJI and NDX need to drag SPX up or get dragged down by the broader index.

Accommodation

Talking heads miss Greenspan. They could always count on him to buckle under market pressure and give the market any accommodation. Bill Gross of Pimco cannot believe the Fed has not lowered rates despite his expertise on these matters. Jim Cramer's certitude about what the market needs comes from a career of being wired to the inside, surely Bernanke will listen to him. So far however, the Fed chairman is telling the market to 'trade it' knowing inflation is the big issue and interpret data released against that policy.

Spinning Out of the Turn

The market gave everyone a few spins today and when they rang the closing bell all one could say was that is was another great day for the transaction business. The bears had a great chance to put this market on the run when they got the DJI down over 100 and the SP500 and NQ100 making new session lows. But quickly the rally began and the short covering became a race. The chart crowd began chanting 'bottom, bottom" and all seemed lost to the bear. However, the market used up a great deal of energy today on this rally and the outcome is still in doubt.

Fed

Bernancke and other board members stick to the 'inflation threat theme'. Bears will try to a little wackage to see what is down there. Put it away if they can.

Support

Key support held this morning on the break. Support areas move up to 1464 Sept SP500 and 1958 Sept NQ. Models are rotational.
If the market is disappointed after the Fed announcement because there is no wink in the bulls direction, bears have enough strength to do damage. A serious break will bring out the usual whiners who want to be saved from themselves. Money is still cheap, so it is not the just the mechanics of a rate cut, it is more the perception that the power of the Fed is ready to help repeatedly if necessary. The bulls need to build on the price reversal of yesterday quickly.

Money's Worth

Show up and these market ranges provide opportunities that traders appreciate. No real selling showed up today and the short covering rally started in the second hour of the day session. The bulls again thwarted an attack while on the run and turned the market around a day before the Fed meeting. The trade will start again in earnest after the tomorrows Fed announcement.
Key technical areas will be 1462 in sept SP500 and 1453 in sept NQ100.
Models are rotational.

Circle the Wagons

This weeks scheduled Fed meeting comes at an interesting time for the markets. A continued shaking of the world trading cage may have to take place to get the Fed's attention. Handling the psychology of falling markets usually entails the Fed circling bank and big brokerage wagons around a central theme of liquidity for all. Defending the buy and hold crowd from the misfortunes of an environment created by large owners of debt will create some opportunities. Of course those opportunites will be for the meeting participants. Market tranquility, it is reasoned, will benefit everyone.
Comparisons to LTCM really do not matter much as the markets seek to regain a footing, though reviewing LTCM and the deals that were cut is interesting.
Last Sunday's post seems appropriate to start the trading week as it did last week.

Bear?

The SP500 and NQ100 could not hold the critical technical areas today. As mentioned last Friday's post, this was a battle week where the bulls could step forth and put the debt and fret stories to rest with a solid performance while risk was being adjusted. Some powerful rallies were launched only to be met today with big liquidation and now, short selling. The bulls have staked out a space on a ledge where it is hard maneuver. There remains a small foothold to climb back on, but a fearful downside move on Monday would leave this market in the bear's shadow.
Models are south.

Bottom or Top?

After the selling the market absorbed yesterday and the action today, the SP500, NQ100 and the DJI look prepared to build on two days of success. The bears may not be willing to give up just yet however. The test area will be the ability to stay above 1272 for the Sep SP500 futures, and 1968 in the Sep NQ futures. While closes can make a price look safe, the action lately puts any price in the potential trading range. The week has allowed the market to field some volatility and price action to levels where there was enough buying and diminishing liquidation to halt the break. The market has been tested, but visiting the lows again would be a problem.

No change in models.

Stir It Up

The market had a little of everything today. Overnight break followed by an overnight to morning rally. Volatile trade trying to make a bottom in order to prevent a raid on the remaining 2007 market gains. Traders love opportunities but even these markets provide no edges just ledges when you participate. There is no question the market is adjusting risk in various sectors and that process takes awhile. Analysis of the sub-prime problem has repeatedly emphized that it is the unknown debt problems that are creating the volatility. Actually, there is little that is not known to the large players but the ones in the right position are in no hurry to make a market for the suffering. Those holding the lousy positions will just have to trade out of them. The volatility is more a liquidity issue. No one will help you with that bad position, until they race you to an unpleasant price.
The market absorbed a bunch of selling today for the first positive technical action in weeks.
Models are rotational.