U.S. stocks have opened the week on defense. Traders are taking a cautious approach following the release of disappointing earnings reports from several blue-chip companies. The damage has been substantial, with the DJIA(-330), S&P 500 SPX (-31), and NASDAQ(-110) all trading in the red.

On a positive note, the Chicago FED National Activity Index (December) has come in above expectations at 0.27. This number is quite arbitrary, but does indicate strong economic activity for last month. A bit later on today, the Dallas FED will release its Manufacturing Business Index (January). While these reports are secondary market drivers, they may give us a hint at the FED Policy Statement scheduled for Wednesday.

U.S. Stocks Retreat On Open

Sentiment is negative today as FED week gets underway. March E-mini S&P 500 futures are showing the strain, falling toward daily downside support.

Here are the levels to watch for the remainder of the session:

• Resistance(1): Swing High, 2677.75
• Support(1): Bollinger MP, 2605.00
• Support(2): 38% Current Wave Retracement, 2586.50

Bottom Line: Today’s weak open isn’t a huge surprise as the coming FED announcement is likely to test the recent uptrend of January. In the event the March E-mini S&P 500 continues to fall, a long from downside support will come into play.

Until elected, I will have buy orders queued up from 2587.50. Using an initial stop loss at 2582.50, this trade produces 20 ticks on a standard 1:1 risk vs reward management plan.