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Opening Print and S&P Levels to Watch

The Asian markets closed lower (Shanghai Comp. -2.05%) and Europe is trading modestly lower. Today is the first day of the long-awaited two-day Federal Open Market Committee meeting. While today will be prone to headline news, the real headlines do not start until Wednesday's FOMC meeting announcement, with forecasts at 1:00 CT and the Bernanke press conference at 1:30.

We were right about selling the early rally and a low-volume grind, but this time it was a downward grind. Don't listen to anyone; the real reason the ESZ (S&P e-mini futures) sold off was simple. All the buying associated with Larry Summers headlines was done Sunday night into Monday morning. By the time the S&P futures opened at 8:30 CT the buying was used up and what was left was all sell stops and sell programs. It was definitely a case of selling the news.

One by one the S&P is knocking down all the upside obstacles and making bad news into good. That is how it works. It's not just picking levels on your charts to buy and sell at. Learning the feel of the S&P can be just as important as a critical support or resistance level. Just two weeks ago the markets were worried about the Fed taper and Syria, and now the S&P has seen its largest weekly gain in eight months. There is definitely a psychological side to the markets at work.

Our view:

The S&P has closed higher 8 out of the first 10 trading days of September for a total gain of 66.5 handles and has rallied 78.75 handles from its 1625.00 low. It has been a nonstop buy fest, but it's all short covering. Based on that price action, one would think there is probably more selling around for today. We again lean to selling the early rally and buying weakness. The S&P futures may not close above the contract highs today, but we can't rule out that possibility on Wednesday afternoon. There is a congestion of buy stops building up above 1704 vs. the Dec e-mini S&P that runs to the 1712-1715 level.

As always, use stops and keep an eye on the 10-handle rule. Don't forget to catch MrTopStep on The Closing Print video found under the OptionsTV page (top bar) on Options Profits. We report directly from the SPX pits, wrapping up the day and positioning for trade tomorrow.

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