DAILY TRADING ADVISORY 31-July-2009
Initial claims at 584K, Continuing Claims slightly lower and GE upgrade gave way to a strong rally
ECONOMIC DATA
8:30 AM GDP- adv.
8:30 AM Core PCE
8:30 AM Chain Deflator-adv.
8:30 AM Employment Cost Index
9:45 AM Chicago PMI
YESTERDAY’S MARKET
Markets rallied during the night giving way to a strong opening, the E-mini SP started the session at 984.00 and after pulling back to 982.00 it bounced to 985.25. Unable to push above the Globex highs, the index pulled back to 981.00 from where it rallied to 986.25, once that level get exceeded, the index rallied to 991.00. After a small pullback to 988.75 the markets spike, the SP reached 992.50 and the NQ 1629.25. As shorts continued to cover, the SP reached 994.00. After holding near the highs and with some signs of toping, the SP pulled back to 987.00. The SP slowly bounced and reached 892.00 just to pullback once more but holding the sideways pattern. After a few attempts to break above the 992.50 and during the last hour of the session the profit taking move pushed the index down to 986.00 from where the index bounced a couple of points just to get sold reaching 982.25. A bounce attempt failed and the index closed at the early lows, for the day, the SP closed higher by 7.00 points at 982.00, the Nasdaq added 6.25 points and settled at 1607.00 and the Russell closed higher by 7.30 points at 554.90. The Dow closed up by 83 points at 9154.
.
MARKET COMMENTARY AND OUTLOOK
Yesterday I wrote: “Monday the market closed slightly higher and at the highs, giving way to some short term exhaustion, Tuesday and Wednesday, the indexes stood under pressure, they failed to trade settlement, a bearish sign, but the selling pressure failed to gain the necessary momentum, the opposite, some buying was seen on the pullbacks. The 3-4 session pullbacks that I wrote about is taking place in perfect order, markets are struggling to push down, HOWEVER, the SP is trading against Monday’s high and all the time that that level does not get exceeded, there is chance of a stronger correction. The Nasdaq, the stronger of all the indexes, have found strong resistance at the 1600.00-1608.00 band. So the markets are at an important point, or they continue with this rally, or they start to trade down calling a short term top. For the rally to resume, markets may avoid a wide range negative session, which will look problematic for the bulls, if it happens, it could be followed by a failed rally and a new low, and then the rally may be over. On the other side of the coin, this narrow range sessions will have to get resolved with a wide range session, and if the indexes break higher, then the way will be open for the SP to test the 1000.00 area and higher. The conclusion is that despite the toping signs, the uptrend remains intact and in a strong position..”
Markets opened with a strong gap, pushed higher and sold off into the last hour of the session closing ina short term downtrend.
During the last few sessions I have mentioned that one of the ways in which a move could get exhausted is by a wide opening gap in the same direction of the trend that gets reversed during the same trading session, despite that the markets did not closed on the red, this scenario has the chances to be valid. On the other side, the strong rally may get consolidated an another attempt to reach yesterday’s highs may be seen, so under this circumstances, if the opening is quite we could see some back and forth action as the markets work yesterday’s move.
Taking into account that it is end of month, yesterday’s sell off may continue giving way to some ptrofit taking, the same happened during the end of last month. So the resistance areas, the previous highs around 985.00-976.50 will be important for today’s trading session, I can consider that all the time that the SP is trading below that level we could see some additional downside move. The best case that I can see for this end of month, and with all the economic numbers to get released before the opening is a narrow range session where the markets close around yesterday’s levels.
It is very important to point that a possible top has been posted, but once more, only a correction that exceeds more than four trading session or a wide downside session that fail the next day to trade above the previous close will be a clear indicator that the rally is over.
TODAY’S SESSION
There is resistance at 984.00-986.00 on the SP, 1610.00-1612.00 on the Nasdaq and 556.80-558.20 on the Russell, nothing good happens all the time that the markets are trading below these levels, if they fail there, the profit taking, end of month may continue, but once they get exceeded the indexes may be able to reach 988.50-990.00 on the SP, 1616.00-1617.50 on the Nasdaq and 560.60-562.90 on the Russell, above them a visit to yesterday’s high may be seen.
There is support at 980.00-978.00 on the SP, 1602.50-1600.00 on the on the Nasdaq and 556.80-558.20 on the Russell. Breaking below them could accelerate the downtrend, the next support areas are at 974.00-973.00 on the SP, 1588.00-1586.00 on the Nasdaq and 551.20-549.80 on the Russell. If those fail, then the KEY levels on the SP at 971.00-969.50 may get tested. GOOD LUCK.
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TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS |
|||
|
S&P |
NASDAQ |
RUSSELL |
|
|
Resistance 4 |
998.25-999.00 |
1635.50-1636.00 |
570.40-571.30 |
|
Resistance 3 |
993.00-993.50 |
1624.00-1626.00 |
564.20-566.10 |
|
Resistance 2 |
988.50-990.00 |
1616.00-1617.50 |
560.60-562.90 |
|
Resistance 1 |
984.00-986.00 |
1610.00-1612.00 |
556.80-558.20 |
|
PIVOT |
983.25 |
1612.50 |
555.30 |
|
Support 1 |
980.00-978.00 |
1602.50-1600.00 |
554.00-552.60 |
|
Support 2 |
974.00-973.00 |
1596.00-1594.00 |
551.20-549.80 |
|
Support 3 |
971.00-969.50 |
1588.00-1586.00 |
547.10-546.20 |
|
Support 4 |
965.00-963.00 |
1579.00-1578.00 |
541.80-540.20 |
|
S&P |
NASDAQ |
RUSSELL |
|
FIBONACCI |
FIBONACCI |
FIBONACCI |
|
1081.13 |
1772.25 |
627.0 |
|
1047.67 |
1718.39 |
602.3 |
|
1027.17 |
1685.39 |
587.2 |
|
1014.50 |
1665.00 |
577.9 |
|
1006.67 |
1652.39 |
572.1 |
|
994.00 |
1632.00 |
562.8 |
|
986.17 |
1619.39 |
557.0 |
|
983.75 |
1615.50 |
555.3 |
|
981.33 |
1611.61 |
553.5 |
|
973.50 |
1599.00 |
547.7 |
|
960.83 |
1578.61 |
538.4 |
|
953.00 |
1566.00 |
532.6 |
|
940.33 |
1545.61 |
523.3 |
|
919.83 |
1512.61 |
508.2 |
|
886.38 |
1458.75 |
483.5 |
|
DAILY PROJECTIONS |
S&P |
NASDAQ |
RUSSELL |
|
AS DAILY HIGH |
998.25 |
1635.50 |
566.70 |
|
AS DAILY LOW |
977.75 |
1602.50 |
551.60 |
