STOCKS: Look For Selling to Exhaust With a Close Back Above 1852.85

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Chart-595The E-Mini S&P has forged another big range down washout on its charts and that has added to the anxiety that has been in place since the beginning of 2016. While there doesn’t appear to definitive Chinese developments behind the slide today, the combination of another lower low in crude oil and residual Chinese economic fears has left the sellers with the upper hand. Investors are also discouraged by evidence of slack retail sales data from the US as evidenced by news that Tiffany & Co lowered 2016 guidance yesterday after disappointing holiday sales.

Another issue undermining market views is an IBM forecast calling for weak 2016 earnings. In short there doesn’t appear to be a significant “event” pressing prices lower but the bear camp has clear control. US corporate earnings of interest are expected from Goldman Sachs and Northern Trust ahead of the Wall Street opening, with the Xilinx, Kinder Morgan and F5 Networks reporting after the close of business.

S&P 500: The S&P appears to be poised to slide back to the August 2015 lows of 1824.25 and it could take a recovery and close back above the mid-point of the initial range to suggest a possible reversal in the days ahead. The early mid-point of the range today is 1852.85 and it would take a close at or above that level to begin to tamp down anxiety. For the near term the track in crude oil will remain a proxy for global economic sentiment and equities are likely to trade in lockstep with crude oil. Initial resistance is seen at 1843 and there is little support until 1824.

Other US Indexes: The Mini-Dow remains under noted pressure as oil sector stocks and cyclicals continue to take the legs out from under the large cap stocks. Initial resistance in the March Mini-Dow is seen up at 15,636 and initial support is seen at 15,547. There should be no respite unless US housing starts and building permits weigh in with positive results. The Mini-Nasdaq is also under persistent pressure with an initial pivot point resistance on the charts seen up at 4068.25 and there is little in the way of support seen until the 4040 level.

TODAY’S MARKET IDEAS: While we think the selling associated with the slide in crude oil is foolhardy, the bear camp has little competition from economic headline flow and therefore the beating will continue until moral improves. Potential moral improvement forces include dovish suggestions from the Fed’s Yellen, a geopolitical event that alters the direction of oil prices and lastly a double barrel stimulus move by China.

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