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Futures see red

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Stock futures are in the red this triple-witching Friday, as S&P futures (sp01z) fall 29 points to 955. NASDAQ futures (nd01z) are down 36 points to 1,132 and Dow futures (dj01z) are lower by 438 points to 7,900.

Bond YIELDS lower

Early trading in the bond pits have buyers in U.S. Treasuries, driving yields lower. In the past three trading sessions we were seeing some selling in the longer end of the 30-year and 10-year ($TYX.X and $TNX.X), but we are seeing some money come back at the recently found higher yields. I think this is actually a good sign right now as it gives some hint that market participants have confidence in the underlying Treasury bond. At the same time, the lower YIELDS we've been seeing in the shorter- end of the bond market indicate that there has been a lot of money flowing that direction. That hints of nervousness and seeking of safety. The 13-week Treasury Bill yield ($IRX.X) has dropped to 2.16% after trading at the 3.18% level prior to terrorist attacks here in the U.S.

Today is triple-witching

This morning's action is undoubtedly being helped in part by option expiration and final unwinding of positions. We'd expect a lot of volatility today and with the weekend ahead, we may actually see some market participant reluctant to commit money from the long side with stock futures in the red.

There will be some hesitance by investors near-term to commit further money on the long side until they get some type of hint on what actions the U.S. and its world partners will be taking overseas. Troops here in the U.S. are being deployed to the Middle East region and much of the world is watching.

Many investors make the mistake of tying stock prices to the strength of a country. Stock prices reflect the strength of an economy and not necessarily a country's resolve. Currency and debt instruments like bonds are a more accurate indicator of financial stability of a country and why traders and investors looking for "market opinion" as to confidence in the U.S. need to be watching the Treasury Bond market.

Levels to be watching

Here are some rolled down retracement levels that traders need to be assessing risk to for some of the major averages.

Yesterday's breaking of our "fitted" 38.2% retracement level in the Dow Industrials at 8,481 now brings into play the 7,471 level. Resistance levels now become 8,481 and 50% retracement of 9,105.

Wednesday's breaking of the 1,026 level of retracement on the S&P 500 (SPX.X) now brings into play the 938 level. Resistance comes at 1,026 and firm resistance at 1,081.

Wednesday's breaking of the 1,206 level in the NASDAQ-100 (NDX.X) has our next level of retracement at 945. Resistance at 1,206 and then above at 50% retracement of 1,368.

Fitted retracement on the NASDAQ Composite (COMPX) from 2,305 to 931 has current retracement support at 1,455, but that looks suspect this morning. This brings into play further retracement levels lower at 1,193. Throughout the day, we will be putting up charts of these indexes and retracement levels to try and help traders/investors with their hedge positions and trading strategies. Many of these charts have been discussed in recent intra-day update.

Jeff Bailey
Senior Market Technician

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