Beginning of a Correction?

The market seems to be taking a pause. All the major Asian and European markets are down 1%+ for the day. The future in the US is pointing to a lower start for the day after a long July 4 weekend. This could be the beginning of some kind of correction as the most critical data (ISM and empoloyment) released late last week did not suggest a rapid recovery as the market had expected. The ISM new orders fell back below 50 and employment picture in the US s struggling to improve. Most ominously, if we get another big negative number next week we could see all the employment growth since last recession vanish. In this cirumstance, employment is NOT the lagging indicator but a leading one. Whether the current decline in market will be more sustained depends on what happens to Q2 earnings and more specifically future prospects as company start releasing them this week. Alcoa starts the unofficial earnings season on July 8 (Wednesday) which ends un-officially with Wal-Mart on August 13.

For S&P500 the critical support levels are 888 (previous low, 200D mmv) and then 880. The resistance are 896, 900 and 905. For NASDAQ the support levels are 1,780 and 1,750. The resistance levels are 1,805 and 1,820. For DJIA the support levels are 8,100 and 8,000.

BEN is upgraded by JP Morgan. The stock exhibits up-trend and we'll see if it tests 68.25 which is previous low as well as 23.8% Fib retracement. Before that it might be just 69.00.

JPM broke through an important support at 32.75 on Friday but there is a stonger support at 32.00. To make the likelihood of a rebound more likely the past 3 down days have been on a relatively weak volume. Caution is the rule of the game howeve given that both the market and the stock exhibit a strong downtrend.

GLW is approaching a critical support level is at 15.00. Given strong news from the company and its end-users (Samsung) there is likelihood that there will be buying pressure. There is however a risk that the downturn might continue given that the recent declines have occured on strong volume.

For GS and MS the critical support levels are at 139.00 and 26.00 levels. If the prices approach that level, it will be time to get in.

CAT has broken important support at 32.00. There is likelihood that it will try to go above 32 but if that fails, will see it heading towards 29-30.

Defensive names like GIS, K and PEP look interesting. All are at interesting technical levels on hourly charts.