The Hightower Report

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The Treasury market was obviously caught assuming the worst for the economy, as a series of slightly better than expected scheduled data points served to knock down Treasury prices aggressively yesterday. With the equity markets also launching into a sharp short covering relief rally in the wake of the scheduled data flow from the US yesterday, that seemed to make the macro economic reversal even more significant in scope. However, the numbers released yesterday were 2nd and 3rd tier economic readings and the readings weren’t overly impressive. However, the bear camp can certainly suggest that Treasury prices at the highs Wednesday were factoring in a fairly broad based sustained slowdown. Clearly the ISM manufacturing report caused the greatest reaction as that report offered the most concrete evidence that the US economy retained some positive momentum. Given the reaction to the ISM readings yesterday, that should make the US Factory Orders figures today a fairly important release. In fact, the ISM figures were so far off the general consensus of expectations that the Treasury market seems to have seriously called into question the entrenched view of slowing that had served to lift Treasury prices over 8 full points in the month of August. Some of the sellers in Treasuries yesterday were probably exiting positions because the stronger than expected ISM readings served to reduce the odds of further easing by the Fed. However, the market will still be presented with a very significant amount of economic news over the coming two trading sessions and the tone of these numbers are likely to send nearby Treasury prices away from current price levels which are almost at the middle of the last two weeks trading range. The bear camp probably needs to see additional evidence of resiliency in the US economy to engineer more declines ahead, while the bull camp probably needs to see evidence that the US economic track is still somewhat suspect. The ultimate arbiter of the trend is still likely to be US Non farm payrolls on Friday and not the numbers today but some traders think the better than expected US numbers yesterday, set the market up to absorb weak US payroll readings Friday without as much upside momentum. In the near term, the market will probably see the weekly claims data as a slightly more important report today as there has been some doubt cast upon the double dip recession view and therefore all numbers look to be important to the trade again. While the Press attempted to play up the talk of a bond bubble in the wake of the sharp setback in Treasury prices yesterday it will still probably take a distinct pattern of somewhat favorable economic news to prompt a sustained rotation away from fixed income holdings and back to equities. While the slowing crowd was certainly dealt a blow with the better than expected readings yesterday, it would surprising to see the numbers suddenly turn positive and the fear of slowing completely tossed aside. However, with the recent high in bonds (August 25th) coming on a significant pulse up in trading volume and spike up in open interest, some traders are suggesting that prices were technically overextended. Not surprisingly, the market discounted a very sharp drop in August auto sales at GM yesterday and that reading probably makes the Factory orders report today slightly more important than the claims or productivity figures. With the slightly better than expected ISM readings yesterday and the last remarks from an outgoing Fed President, downplaying the expectation of direct easing from the Fed, the productivity readings this morning might carry less weight than normal.

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The Treasury markets reached another peak yesterday in the wake of a one/two punch of much weaker than expected US existing home sales figures and noted weakness in US equities. Recently the Treasury market wasn’t being presented with enough weakness in the equity markets to markedly degrade macro economic sentiment, but in the Tuesday trade, the market was presented with what seemed to be a roundly bullish overall environment. With the market also seeing a favorable US auction result in the trade yesterday and statements from the Fed suggesting the odds of a double dip recession were growing, there were a number of unrelated events that favored the bull camp. In looking ahead, the markets might be set to see a somewhat positive US Durable goods report, as the range of estimates for the Durables are mostly touting a “positive” reading. However, in the event that the durable goods report fails to meet most expectations, the trade could still come away from the report with ongoing concern toward overall growth in the US economy.

Since the Fed’s economic symposium doesn’t officially kick off until later this week that could reduce the flow of Fed dialogue today but we suspect that the market will be on the hunt for any statements from Fed officials in transit to the meeting. The market will be presented with another auction today of $36 billion in 5 Year notes and given the strong bid to cover ratio in other issues recently, many traders think the auction results will continue to be lightly supportive of Treasury prices.

While the Press was already touting the prospect of a Bond bubble in the headlines over the last several months, yields weren’t as low as they are now and the Notes and bonds weren’t “net Spec long” in the weekly Non Commercial and Non reportable COT positioning reports. With many US Treasury yields so low, that a minor pick up in inflation could present investors with a very minimal inflation adjusted return, the rational for snapping up US Treasuries could be called into question. However, as long as the fear of slowing and a double dip recession remains the focal point of the trade, Treasuries will probably stay in vogue.

In looking ahead to the scheduled data today, it is possible that rather dire macro economic concerns might be tempered slightly, as a housing report today isn’t expected to be as “headline soft” as the Existing home sales figures were yesterday and the durables report is actually expected eek out a positive result. With the range up move yesterday seemingly factoring in some form of additional quantitative easing move by the US Fed, some traders are suggesting that the official word on QE/asset purchases from the upcoming Fed symposium might result in a temporary peak in Treasury prices off a buy the rumor/sell the fact market reaction. However, others in the bull camp suggest that weakening in the economy is likely to continue and that the next US payroll report is likely to confirm the slowing and that could allow prices to make even higher highs.

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The stock market enters the Wednesday trade somewhat oversold but generally seeing weakness from the Asian markets overnight. The trade was presented with a $39 billion BHP offer for Potash, but BHP tempered that offer impact with statements that they would not buy assets regardless of their price. The market might also garner some support from the prospect of a possible bidding war in the US tech sector. The market might also have garnered some lift from a better than expected German Ifo survey that was released overnight. With the added potential for a slightly positive US durable goods report later this morning, and hopes that the US Fed might shore up confidence in a “get together” later this week, it is possible that the bull camp will have some ammunition today to match up against the ongoing flow of double dip recession talk.

S&P 500: International equity markets seem to have regained some footing after general weakness was seen in Asian markets overnight. A favorable German Ifo reading and news of a possible buyout offer in the tech sector might be distracting the market from the double dip recession mentality, that seemed to be gripping the market in the prior trading session. While the markets might quickly return to double dip recession views, in the aftermath of the US Durable Goods report release later this morning, the trade is expecting to see a gain or a positive reading from the scheduled data. In short, one shouldn’t be surprised in the face of a bounce early this morning, but the real test of the bull camp could be the sustainability of the upside tilt. Our pick for a short covering target on the upside is 1055.00 basis the September S&P contract.

DOW: The September Mini Dow contract appears to have carved out a trading range above the even number 10,000 level in the overnight action. Renewed buyout news was seen from a couple different areas of the market overnight and some traders think that type of news might serve to underpin market sentiment today. Expectations for Durables and new home sales generally expect “positive” readings later this morning, but investors should be expected to remain on edge in the face of any scheduled US number release. We would expect the market to show some positive action in the face of the scheduled numbers this morning but we would also expect that optimism to wear off rather quickly and the fear of future slowing to return before the close. In conclusion, a short covering bounce is possible, but we are not sure that the market can expect to fully throw off the bearish tilt unless the numbers are much better than expected this morning.

NASDAQ: News of a possible bidding war for a tech sector asset might provide the Nasdaq with some support today, especially since the market also saw a fresh bid from BHP for Potash. As in the upper end of the market, the Nasdaq bulls really need to see scheduled US data that counters the double dip recession track somewhat, as the slowing fears appear to have become even more entrenched in the face of the massive decline in existing home sales on Tuesday morning. We continue to think that the September Nasdaq is poised for a retest of the 1750 level but the market might see a temporary bounce this morning before resuming the downside track in prices.

TODAY’S MARKET IDEAS: The market can bounce but we seriously doubt the bull camp can engineer anything beyond a temporary technical balancing on the upside. In order to stop the down trend pattern would seem to require a game changing development and without a much stronger than expected Durable goods report result later this morning, we aren’t sure where the market will get something that dramatically improves and entrenches positive macro economic sentiment.

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Fears of softening domestic growth in China and the lack of a positive reaction to the FOMC meeting in the US leaves international stock markets under some pressure overnight. Shanghai stocks were up slightly but Hong Kong was down. The market seemed to “need” good reasons to see a continued uptrend above 3 1/2 month highs but economic data remains sluggish and traders see a slower growth pace out of China as a concern. Tuesday morning’s flow of U.S. economic data did little to relieve the negative tone. In fact, U.S. 2nd quarter productivity showed the first decline in six quarters to post results that were below expectations. Both June Wholesale Inventories and Sales figures came in below expectations and served to add to the already fragile sentiment. The post FOMC meeting comments made note of the recent slowdown in economic data, and that the Fed would use proceeds from maturing mortgage securities to purchase longer term treasuries in an effort to support the economy. While stocks saw a rally on the decision, the market failed to move higher. Many traders see quantitative easing as “pushing on a string” as weak demand for credit has helped keep economic numbers sloppy even with low interest rates and plenty of liquidity. Perhaps news that the House passed the $26 billion state bail-out package helped to add to the bearish tone for the market as funding is coming from increased taxes on multinational companies. US Trade data will be monitored today.

S&P 500: The market spent part of seven trading sessions in a fairly tight consolidation and a surge higher in the US dollar and sluggish growth news from China are seen as negative forces and the market failed to find good reasons to attract new investors. Look for selling resistance today at 1108.50 and 1111.40 for September S&P with 1088.80 and 1082.40 as downside objectives.

DOW: Moving below yesterday’s lows in overnight action could show the sensitivity of the market to the global economic tone. September e-mini Dow futures even took out Friday’s lows overnight. The technical action looks weak and the market looks vulnerable to give back a portion of the solid gains seen since the July lows. Selling resistance for the September e-mini Dow is at 10,550 with 10,403 and 10,315 as next support.

NASDAQ: There were a number of company downgrades from major Wall Street banks, with the most notable a downgraded of Intel’s 2010 growth outlook, and that seemed one of the catalysts that weighed on the tech sector. A build up in PC components at various Asian locations was also seen as a concern and Advanced Micro Devices was also cut from “overweight” to “equal weight” from another bank. Failure to move over Monday’s highs and penetration of the July-August uptrend channel turns the technical picture bearish for September NASDAQ. The market should encounter stiff resistance near 1880.00 today with 1833.60 as downside target.

TODAY’S MARKET IDEAS: The market needed reasons to attract new buyers but economic news is turning a bit more negative and some long liquidation selling appears likely over the short-term. The market may face a period of uncertainty regarding policy, taxes and employment and uncertainty normally sparks selling.

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DOLLAR: The Dollar has made a strong rally overnight, recovering all of the post-FOMC losses and reaching a new high for this rebound rally. An initial knee-jerk reaction towards the Fed’s actions has been replaced by a more pessimistic attitude for global economic prospects. The Dollar has been able to find some safe-haven support, particularly after a Chinese government planning agency stated their expectations for the US recovery to continue while casting doubt on the Euro zone and Japan. With the global selloff in equities during overnight hours, this current Dollar strength may be extended well into today’s trading. If sentiment continues to deteriorate, the market may be at a turning point for the Dollar’s longer-term direction. For now, look for the Dollar to find resistance near the 82.00 level as this rally gains more momentum.

EURO: The September Euro has come under heavy pressure over the past few hours, and has fallen further away from the recent highs for the move. With the Fed already dampening sentiment for the global markets, today’s statements from the Chinese towards the Euro zone are in sharp contrast to the optimism from earlier in the month. With risk concerns becoming more of a factor as the week goes on, this current plunge is likely to gain further momentum. The September Euro should find support near the 1.2980 level, but a further acceleration to the downside may occur if the markets cannot shake today’s negative tone.

YEN: Today’s flare up in risk has helped the September Yen to approach new 15-year highs, in spite of recent weak Japanese economic data. With authorities in Japan appearing to be more tolerant of recent Yen strength, there may be a test of those highs soon if the global move out of equities picks up steam. Look for the September Yen to find resistance at the 117.90 level, but a move beyond that area may need further deterioration from other markets.

SWISS: The September Swiss has not able to benefit from heightened risk concerns with the markets, giving back a good portion of yesterday’s late recovery. With other problem areas taking the market’s attention, relatively good economic condition in Switzerland may help to support the September Swiss during this market turbulence. The September Swiss is likely to find support near the 94.60 level, but any strong move back towards the highs may require a major improvement with global sentiment.

POUND: Yesterday’s late revival of the September Pound has been reversed this morning, as elevated market risk has derailed the longer-term rally. A report from the Bank of England which projects low inflation levels going forward has added to the pressure, and sent the September Pound diving to new lows. Look for the September Pound to test support near the 1.5660 this morning, but will need a vast turnaround in sentiment in order to reverse this selloff.

CANADIAN DOLLAR: The revival of risk concerns with the market continues to plague the Sept Canadian, which has returned towards yesterday’s lows over the last few hours. There may be little chance that the Sept Canadian can turn this downmove around as long as global equity markets are under pressure, but the generally positive view towards the Canadian economy may be enough to keep this slide from getting out of hand. Look for the Sept Canadian to find support near the 96.18 level during today’s session.

TODAY’S MARKET IDEAS: The Dollar will continue to gain ground, as long as sentiment for global markets remains weak. The September Yen will also benefit from risk aversion support, but look for the September Swiss to make a turnaround if risk concerns can be dampened over the next few hours.

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The stock market has started the Wednesday session out on a weaker footing and in some measures that has resulted in a fresh new low for the move. The US Treasury market continues to price in moderate concern of deflationary slowing and at times the trade is openly tossing around the double dip recession moniker. While the stock market has the capacity to benefit from talk of an extension of quantitative easing, that revelation also seems to have coincided with this weeks high and reversal from the highs. The market did see evidence of a successful “static kill” on the Gulf spill overnight and the market also saw a slight rise in UK regional house price measures, but that news hardly looks to erase the fear of slowing that continues to dominate the US landscape. While the magnitude of US monthly job losses don’t appear to be significant, the equity market has recently been in the vicinity of three month highs and therefore the market appears to be “expensive”.

S&P 500: The bear camp will suggest the S&P is presenting a pattern of lower highs and lower lows, while the bull camp will claim that the market recently became short term overbought and that recent losses were merely technical balancing. However, there doesn’t appear to be much in the way of panic in the current market, as the fears of slowing aren’t fostering high levels of anxiety. Near term downside targeting is seen at 1110.90 and perhaps not until 1109.50.

DOW: While the September Mini Dow didn’t seem to be under noted and aggressive early pressure, prices were hovering around the prior session’s lows in the early going. Given the big range up action seen on the first trading day of August and the temporary high forged last week, the September Mini Dow seems to be facing a decision on holding recent levels, or moving back down to levels that were seen into the end of July. Fortunately for the bull camp, the global equity markets saw record profits at a Pacific based airline, favorable UK House price readings and a rise in Euro zone private sector growth readings. Therefore there are countervailing issues capable of distracting the trade away from the evidence of slowing in the US economy. However, recent action in the market suggests that some longs are banking profits and others are reducing holdings because of the slack economic outlook. Near term downside targeting is seen at 10,527 but a further erosion in prices could be expected into the US Non Farm payroll release later this week.

NASDAQ: The September Nasdaq is showing some initial weakness today but prices have yet to return to the prior session’s lows. Since the Nasdaq appeared to lag behind the rest of the market on the July and August rally, that action might serve to cushion the Nasdaq against broad based profit taking selling. The Indian stock market managed to reach the highest level since February of 2008 overnight but yet that type of optimism looks to be lost on the US market today because of its current track of slowing fears. Near term downside targeting in the September Nasdaq is seen at 1878.00 and perhaps not until 1869.25.

TODAY’S MARKET IDEAS: A lack of optimism toward the economy seems to be providing the bear camp with control over prices. Expect a consistent downside track in prices without much anxiety.

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The Treasury bond market looks set to start the US trade at the top of the recent consolidation and seemingly poised to probe higher levels. In the wake of the scheduled US data flow on Tuesday, the Treasury market has the justification to price in its concern for the US economy. With Pending home sales falling to a fresh record low reading, the trade actually saw evidence that hints at something more than a listless economic track. In other words, talk of a double dip recession enters the equation again and that in turn probably increases the focus on the scheduled data due out later today.

With the market swirling talk of renewed quantitative easing from the US Fed earlier this week that has also created a mostly bullish environment for bonds and notes. While initial expectations of a 50,000 to 75,000 Non Farm payroll loss on Friday morning, on its face, doesn’t seem to signal a huge contraction in the economy, for many that type of reading could confirm that the US economy is moving in the wrong direction. However, given the noted weakness in the US Dollar and the relative proximity to all time highs in Bonds and Notes, it is possible that Treasuries might have a marginally weaker Friday reading already factored into the equation.

At least in the near term, the Treasury market doesn’t seem to be overly concerned with oversupply or creditworthiness issues, but that might be the only angle the bear camp can hope to play up in the current environment. There will be a quarterly refunding announcement this morning, but it just doesn’t appear like the trade is poised to foment and embrace fears of rising supply. One would think that a slow economy would be producing reduced tax inflows to the US government and that in turn would manifest larger borrowing needs, but the US government is masterful in disguising its borrowing needs with accounting methods that would be considered illegal in the private sector. In other words, downside action in bonds and notes might be difficult to engineer in the near term, especially given the pattern of recent US data flows and a choppy to weaker global equity market track.

The bulls will suggest that bonds deserve to move back to and perhaps above the old highs, because of the additive influence of quantitative easing expectations from the Fed and with the renewed deflation fears in the marketplace it would appear that the bull camp has a pretty solid case. Initial resistance is seen up at the old high close of 128-27 and then again up at 129-07 in September bonds. Similar resistance in September Notes is seen at 124-08, which is the old high.

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DOLLAR: The Dollar appears to be coming out of a volatile overnight session with some strength, and has been grinding higher. US equities have been weak, and the positive vibe out of the Euro zone may be eroding with a rumor that at least one German bank might fail the stress tests. There is one US economic number today to digest, but Housing Starts have been a chronic sore spot for the US economy and that may add to the darkening tone for the markets. While there may not be enough on today’s plate to change the direction of the overall trend for the Dollar, it appears now that new lows may be off the table for now. Look for the Dollar to find resistance up near the 83.05 level, but any further upside move from there, may require some solidly negative news outside of the US to sustain an upside thrust.

EURO: Today’s well-received debt auctions from Spain and Greece helped to send the Sept Euro up to a new high for the move, but a change in direction has sent prices back below the 1.30 in a hurry and that action seemed to be the result of weakening global equity prices. Talk that a German real estate bank might fail the EU’s stress test may be applying some pressure to the Euro, although the actual results will not be released until Friday. Whether this change in sentiment will be enough to fully derail the current longer-term rally attempt in the Euro remains to be seen, but weakening equity prices on both sides of the Atlantic are not helping the Sept Euro’s cause. Look for a further pullback for the Sept Euro down to the 1.2870 level, but the longer-term rally may have enough underlying support to withstand today’s temporary pressure.

YEN: In spite of the elevated risk concerns out of Europe this morning, there has not been much benefit to the Sept Yen so far. With prices already at high levels from the recent sharp rally, there may be signs that the current move may be topping out. While the Sept Yen will likely move back into positive territory from safe-haven support, prices will likely find resistance around the 115.70 area, as the upside momentum appears to be leveling off.

SWISS: While Swiss Trade numbers today indicated a larger surplus than expected, the Sept Swiss has been unable to gain ground due to the carryover pressure from fresh Euro zone problems. There may be some cause for concern, as profit-taking may become heavy if the 94.75 level is taken out today. The Sept Swiss should hold that area today, but there is a distinct possibility of getting swept up in a European liquidation sell off.

POUND: The Sept Pound has been consistently drifting further away from the recent highs, with today’s UK Public Sector borrowing numbers adding an additional negative tone to the market.
The longer-term up trend should remain intact, but there are concerns that pressure on the Euro zone may eventually entangle the Sept Pound in any extended sell off. The Sept Pound may continue to descend towards the 1.5140 level this morning, but it should find support down at those levels.

CANADIAN DOLLAR: Although the elevated risk concerns have taken prices off of their highs, the Sept Canadian has been able to hold its ground, as the market prepares for this morning’s Bank of Canada meeting. There is a general consensus that Canadian interest rates will move higher today, so anything short of that will obviously be a problem. Look for the Sept Canadian to hold the 94.50 support level before the BOC meeting, then we expect the September Canadian to move back above the 95.00 level when and if the rate hike is announced.

TODAY’S MARKET IDEAS: The Dollar should hold this current strength during the course of today’s trading, as risk concerns may provide ongoing support during today’s session. The Sept Swiss is likely to have the best chance of regaining positive territory, and look for the Sept Canadian to see a post-rate hike rally.

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The Treasury market surprisingly showed some weakness yesterday in the face of news that the US planned to undertake more deficit spending to pay for an extension of unemployment insurance. Congress was divided over cutting from the existing budget and simply adding the spending on to the overall debt tally. The GOP was apparently for the extension, but wanted the spending paid for with offsetting budget cuts. In the end, the Treasury market saw the prospect for more debt supply ahead as Congress was expected to pass the measure soon. It is also possible that part of the weakness in the prior trading session was the result of comments from a Chinese economist that China should reduce its exposure to US debt and part of the setback might simply have been the result of a better than expected NYSE stock market opening on Monday morning.

In the end, the market saw a decline in the NAHB Index and the softest reading in that report since the fall of 2009 and that kept the string of softer than expected economic readings intact. With the US housing starts and permits data due out today and the general expectations calling for weakness in those readings, we have to think that the Monday lows and the early morning lows today, are going to be solid support from which the Treasury market will attempt to work higher from.

We do think that this market is prone to becoming overbought and perhaps prone to temporary lapses of buying interest, especially if the Dollar fails again, as that action could chase away some foreign investors. In fact, part of the weakness in the prior trading session might have come from the combination of suspicions that US Treasuries were losing their flight to quality status. However, in the event that the housing permits come in weaker than expectations that could clearly rekindle the talk of a double dip recession and since the semi annual Fed testimony doesn’t start until Wednesday, that could give the double dip crowd 24 hours to lift Treasury prices.

The Permits number could be the key figure in the release schedule today, as that reading tends to be a leading indicator and therefore a bigger than expected decline in permits could be justification for Treasury bond prices to quickly return to their early July highs. Countervailing the upward tilt in Treasury prices is a sense that the European stress tests results at the end of the week are likely to see most financial entities pass. There are some concerns that a European real estate bank might fail the stress test but there are funds available to plug the holes for those in need of cash. In short, the bias is up with close-in support in September Bonds seen at 127-13, with similar support in September Notes seen at 122-29.

As suggested before, there might not be much in the way of resistance this morning if the housing data is softer than expected, but first resistance in September bonds is pegged at 128-13, with resistance in September Notes pegged at 123-13. The bear’s biggest risk today comes in the direct aftermath of the Housing Permits release, but the equity markets and the currency markets don’t seem to be overly sensitive to potential flight to quality issues within the Euro zone today.

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The stock market enters the Tuesday trade somewhat weak and poised for a move below the prior session’s lows. With the market also managing another new low for the move in the prior trading session, it is clear that the flow of earnings reports is not fully countervailing investor’s fears of slowing in the US economy. We think the market was hopeful that some form of fresh stimulus might be forth coming from Washington but instead the focus is on extending unemployment benefits. In an election year, votes apparently dominate over constructive thinking and therefore the only thing expected from Washington is more inefficient deficit spending. With IBM earnings failing to inspire the bull camp overnight and the trade already bracing for negative news from a US Housing starts and permits report the bear camp should be fairly confident. The bulls really need to see something positive from Goldman earnings or the erosion on the charts will continue to unfold. While upcoming earnings reports could prompt periodic support to stock prices, we seriously doubt the fears of a double dip recession are going to be put down until the Chairman of the Fed attempts some positive cheerleading on Wednesday. Fortunately for the bull camp, we still don’t detect a high level of anxiety in the marketplace, but we also don’t detect much in the way of optimism and that should allow the trend to remain down.

Earnings Reports Today
07/20 Apple, Inc. (AAPL)
07/20 Gilead Sciences, Inc. (GILD)
07/20 Linear Technology (LLTC)
07/20 Allscripts-Misys Healthcare Solutions Inc (MDRX) after close
07/20 Altera Corp. (ALTR) after close
07/20 Seagate Technology (STX) after close
07/20 Yahoo, Inc. (YHOO) after close
07/20 Biogen Idec, Inc. (BIIB) before open
07/20 Goldman Sachs Group, Inc. (GS) before open
07/20 Johnson and Johnson (JNJ) before open
07/20 PepsiCo, Inc. (PEP) before open
07/20 TD Ameritrade Holding Corporation (AMTD) before open

S&P 500: The September S&P in the early action managed to forge another new low for the move and that would seem to suggest that the bear camp saw the earnings reports released after Monday’s close as bearish. Failing to get a lift off IBM earnings has to disappoint a large portion of the market as that company is usually a key bellwether issue. Technically the S&P appears to be poised for a slide to 1040.00 and perhaps even down to 1037.50. Somewhat surprisingly, the markets have continued to shake off potentially unnerving Euro zone events and that suggests that classic slowing fears in the US are the main focal point of many traders.

DOW: Seeing the IBM earnings come and go without a definitive lift in equities prices probably emboldens the bear camp. In fact, with another new low for the move seen overnight in the September Mini Dow, we have to give the bear camp a distinct edge, especially into the US scheduled data flows later this morning. Ultimately we see a downside target in the September Mini Dow down at 9,800 but a higher low around 9,930 could be seen if the housing numbers are mixed or countervailing later this morning. Until the Fed Chairman takes the stand in his semi annual testimony to Congress tomorrow, the headlines are likely to favor the bear camp.

NASDAQ: The Nasdaq appears to have found some value on the charts as it managed to reject a fresh new low for the move in the prior trading session. While IBM earnings didn’t seem to help the broad market overnight, it is possible that some tech sector shares found some supportive information in that earnings report. However, the inability to hold above the 1800 level early this morning could be a key bearish technical signal for many traders. News of slack sales from Texas instruments overnight would seem to give the bear camp an added fundamental edge this morning, especially since general expectations are calling for some type of decline in US housing numbers later this morning. Ultimately we see a downside target in the September Nasdaq down at 1772.00.

TODAY’S MARKET IDEAS: We don’t expect to see aggressive downside action but we do expect prices to consistently work lower again today.