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Dennis Dick & Joel Elconin

Joel’s introduction to trading was in the Standard and Poor’s 500 Index futures pit at the Chicago Mercantile Exchange. Also, during his time at the CME, he was involved in Index Arbitrage as well...

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S&P Futures & Big 10 Analysis - Week of February 20

The market goes up like an escalator and down like an elevator, as exhibited by Wednesday's price action in AAPL.

However, an escalator provides only one exit and an elevator has several options. Unfortunately, it is much easier to get off at the top of an escalator then to get out at the top in the market.

That is why investors (especially ones nearing retirement or ones that need to set aside funds for a special purpose) should decide what floor they want to exit the elevator on. In other words, enter some sell stops, sell calls or buy puts to protect your gains. That way you can continue to participate on the upside and sleep better at night.

With that being said, this market is showing no quit in it. Making and closing on multi-year highs on Friday, ignited on the open by HUGE buy imbalances across the board. Of course, anything can happen on Sunday night and Monday during the thinly traded Globex sessions. Especially with that Greek thing still dominating the news. The 1359.75 close on Friday will be the key area next week.

If the market gaps down on Tuesday did we see a top? If the market gaps up, will it be further pain for the already squeezed shorts jumping bids to run for cover as the assault on Dow Jones 13,000 marches on?

Now that Apple (NASDAQ: AAPL) has reached 500 and beyond (526.29) and violently sold off what is next? For once, I have to agree with Cramer, until there is an earnings miss (with no guidance), or a product delay or defect, why be short this stock? The company only has 100 billion in cash (growing every day) and could either issue a special dividend or begin to pay one, and/or split the stock. Any of the above would be another crushing blow to anyone short this issue.

The only people I would advise to exit at 500 would be investors who loaded the boat and said “If Apple gets to 500, I am out”. Focus on the 526.29 high and the subsequent 486.63 low as lines in the sand until you get three closes either way. Sure I am giving a 40 point range to look at, but what the heck, it can easily move 30 points in a day.

Now that Warren Buffet is out of Exxon-Mobil (NYSE: XOM) what should you do? There is no doubt there has been some major institutional selling ahead of the 52 week high of 88.23 made last February 23rd (interestingly enough this is the last time the S&P futures visited 1350). With XOM at only 85.62 does that mean Warren has called the top? Well the longer it takes to get to 88.23, the more cautious I would get. However, in this current environment it is much more likely that it will go to 100 before you see the October lows of 67.03.

Chevron Corporation (NYSE: CVX) has been range bound since February 3rd (104.37-107.50). Testing the upper end of the range on Friday and retreating once again. Perhaps its fourth attempt will do the trick and nudge this issue back up to the 52 week high of 110.99. Expect minor resistance at 108.57 (January 26th high) as well as sellers at the whole numbers by the institutions.

On the downside, below 104.37 expect major support at the January 30th low of 102.08.

International Business Machines (NYSE: IBM) is stuck as well. Trading between 190.83-194.33 for the entire month. The fact that this stock has been unable to ride the coattails of the powerful AAPL and MSFT rallies, and make a new 52 week high above 194.90 is puzzling.

Certainly this range cannot persist forever. Above 194.90 expect a push towards towards 200 and below 190.83, minor support can be found at 188.22 and 184.75 with major support around 180.00.

On Thursday (up $1.23), Microsoft (NASDAQ: MSFT) had its best day since January 20th (up $1.49) which followed a better than expected earnings report. After reaching 31.55, MSFT pulled back (briefly) under 31.00 and closed the week at 31.25. Perhaps a slight pause, similar to the price action following the previous large up move is in order. Another close above 31.00 will be its third consecutive one and could set the stage for the next leg up to 32.10 (April 2008 level).

Has General Electric (NYSE: GE) finally cleared the 19.00 level making it ready to move higher and test 20.00. Based on Friday's price action, 19.28 close with a 19.35 high on Thursday, I think so. Of course, it will have to claw its way through 19.53 (July 22 high) first.

Another close above 19.00 would be its third consecutive one, although it did have a string of five closes above 19.00 earlier in the month that it failed to build on. This issue has held the range from 18.68-19.35 since mid-January and is poised to finally clear this major resistance. If not, look for GE to meander its way back down to the lower end of the range, again.

Do not ever give up on Procter and Gamble (NYSE: PG). After mediocre earnings, a slew of downgrades and major institutional selling, this issue is right back at 65.00. While recording an impressive string of 10 consecutive higher lows after reaching 62.36 on February 3rd. Of course, that cannot last forever and closing right above the low on Friday at 64.91 with a 64.90 low exhibits the first weakness in this stock since early February.

Major resistance stands at the double top from last week (65.40-65.54) and will be greeted with large sell orders if it can approach that level again this week. Nothing from the chart indicates that it is going back to 62.56 anytime soon. Nevertheless, use any of the 9 previous lows as minor support until that level comes into play.

AT&T (NYSE: T) did not disappoint the High Frequency Traders again this week by staying in its range 29.70-30.18 since February 2nd. Although it rallied above the weekly high of 30.15, it was not for long, and came no where close to closing above it. The bottom of the range inched up ever so slightly from 29.72 to 29.77. Perhaps a market meltdown or melt up, can provide a catalyst for T to finally move out of this range.

If you want to view textbook support, take a peek at the daily chart of Johnson & Johnson (NYSE: JNJ). Four attempts have been made on the 64.25 level to no avail. After reaching 65.28 on Friday's option expiration buying spree, JNJ failed to close above 65.00 for the seventh consecutive day.

Expect major resistance at the weekly high, and all the way through the rest of the 65 handle. If it can finally clear 66, the double top at 66.32 should bring in more sellers. On the downside, there is no such thing as a quadruple bottom, I mean quintuplet bottom.

Pfizer (NYSE: PFE), buoyed by favorable comments in last week's Barron's report, rallied, but then failed to pierce major resistance at 21.53. Influenced by a large buy imbalance on Friday's open, it touched 21.48, but was then in retreat for the remainder of the session. Think of that site Channelingstocks.com when you're trading PFE this week. Continuing to fade the 21.50 area and buying the 20.80 area remains the trade, until PFE can establish three closes on either side of those levels.

In closing, the song remains the same, slow grind north. Friday's strong close at multi-year highs sets the stage for continued upward momentum. However, if things turn sour, for whatever reason, do not head for the exits until the major, major support at 1330.35 (March futures) is taken out. As far as where the party ends, you tell me.

Disclaimer: All of the information, material, and/or content contained in this analysis including any numbers provided in this analysis are for informational purposes only. Premarketinfo.com and it's owners are NOT registered investment advisors, and cannot make buy or sell recommendations. Please consult your own independent financial advisor before making any investment decisions. We will not be held liable for any direct, indirect, or consequential damages arising out of the use of any information provided in our security analysis.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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