DAILY TRADING ADVISORY 23-July-2009
Morgan Stanley wider than expected loss, Wells Fargo bad mortgage loans increased, stocks struggle for direction. Nasdaq extend its rally for the 11th consecutive session but markets closed mixed for the day.
ECONOMIC DATA
8:30 AM Initial Claims
10:00 AM Existing Home Sales
YESTERDAY’S MARKET
Markets fluctuated during the Globex session giving way to a lower opening. The E-mini SP started the day at 945.00 and after testing 944.50, my support area; it bounced to 949.25 and then reached 950.25. As the early short covering continued, the SP reached 952.50. As the Nasdaq continued to lead the uptrend move, the SP traded at 954.50. Unable to trade higher and reach the Globex highs, the SP pulled back all the way down to 947.75 and while keeping the intraday sideways pattern it bounced to 953.00. The index pulled back to 951.00, tested the 953.00 area and backed off to 949.25. Unable to break lower and while keeping a slightly bullish bias, the SP rallied to 955.75, just above the Globex highs, later it broke up and reached 956.75 where the move topped. The index pulled back to 951.50, bounced to 954.25 and pulled back once more, this time to 948.25 from where it traded in a sideways pattern into the end of the day. For the session the SP lost 4.00 points and settled at 949.50, the Nasdaq added 2.50 points closing the session at 1556.50 and the Russell closed almost unchanged at 524.70. The Dow lost 34 points closing the session at 8881.
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MARKET COMMENTARY AND OUTLOOK
Yesterday I wrote: “Another close at the highs and another failed profit taking attempt; the strength of the rally has approached the levels that I mentioned on Monday’s newsletter and once more has the chance to show some pullback. I have mentioned in many occasions that one of the ways in which a move exhaust is by closing on the daily highs, but the extension of the recent rally that finally exceeded the 943.00 area on the SP needs more than a negative session in order top close a short term high, a three days correction and a reversal to a new high will certainly indicated a test of the 1000.00 area on the SP. It is obvious that a correction will happen, a test of the last lows around the 865.00 area may be in the cards during the next coming weeks, but fighting the current trend does not seems to be the best idea, and probably the index will have to break below the 900.00 area to see bulls getting nervous. For today’s trading session, yesterday’s Globex high, 956.50 will have to get exceeded or we could see some consolidation, a sideways pattern and a relatively narrow range, so unless the SP make early lows around 945.00 and get reversed to the upside indicating an uptrend session, trade both sides of the market.”
So markets traded in a sideways pattern, the SP held the 956.50 and the Nasdaq practically reached my 1575.00 upside objective for that market.
The strength of the rally, the fact that it has not showed more than a first degree pullback and the way the markets have been able to recover every sell off attempt, make me think that this rally have more to go. However, the SP has tested the June highs and a short term top may have been posted. By short term I mean, that every pullback that does not exceed more than three trading sessions may be considered a buying opportunity as the SP may be able to trade above the 963.00 areas and reach, in the mid term, levels above the 1000.00.
This is not an excess of bullishness, is the chart which is indicating higher prices that obviously won’t get reached in a few days, the index, even with the higher lows and higher highs on the daily chart has been struggling during the last few days to move strongly higher, so there is the possibility of a wide range downside session.
But, lets not predict what the index will do, meanwhile the trend is up and the pullbacks are not more than consolidations of the huge move that keep showing rotation and accumulation for a further advance. For today’s trading session, selling the bounces all the time that the SP does not exceed the 957.00 area may result, but there is not evidence of trending down, so the first decent pullback, particularly, if it holds the 943.00-942.00 area may turn to be another buying opportunity.
TODAY’S SESSION
There is initial resistance at 952.00-953.00 on the SP, 1561.00-1563.00 on the Nasdaq and 525.70-527.20 on the Russell, an early bounce that fail there may give way to a good pullback, but if those areas get exceeded, look for a test of yesterday’s highs at 956.25-957.00 on the SP, 1570.00-1571.50 on the Nasdaq and 530.30-530.80 on the Russell. A double top up there, may give way to an expected profit taking move, but if the markets are strong look for the indexes to continue higher pushing the SP up to 963.00-964.00.
Initial support is at 947.50-946.00 on the SP, 1551.00-1549.00 on the Nasdaq and 523.10-521.70 on the Russell. Those areas very important during yesterday’s session, holding there will result at least in another test of yesterday’s highs, but if the markets fail to bounce from those areas, look for a test of 943.00-942.00 on the SP, 1543.50-1541.00 on the Nasdaq and 519.20-518.60 on the Russell. If those fail to hold, then we could have a wide range downside session if the markets do not react from 939.75-939.00 on the SP, 1536.00-1534.00 on the Nasdaq and 514.40-513.80 on the Russell. GOOD LUCK
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TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS |
|||
|
S&P |
NASDAQ |
RUSSELL |
|
|
Resistance 4 |
969.50-970.00 |
1584.00-1586.00 |
541.40-543.10 |
|
Resistance 3 |
963.00-964.00 |
1577.00-1578.00 |
536.00-536.70 |
|
Resistance 2 |
956.25-957.00 |
1570.00-1571.50 |
530.30-530.80 |
|
Resistance 1 |
952.00-953.00 |
1561.00-1563.00 |
525.70-527.20 |
|
PIVOT |
950.00 |
1557.50 |
524.90 |
|
Support 1 |
947.50-946.00 |
1551.00-1549.00 |
523.10-521.70 |
|
Support 2 |
943.00-942.00 |
1543.50-1541.00 |
519.20-518.60 |
|
Support 3 |
939.75-939.00 |
1536.00-1534.00 |
514.40-513.80 |
|
Support 4 |
936.50-935.00 |
1532.00-1531.00 |
509.90-508.10 |
|
S&P |
NASDAQ |
RUSSELL |
|
FIBONACCI |
FIBONACCI |
FIBONACCI |
|
1013.06 |
1683.88 |
577.7 |
|
991.44 |
1640.63 |
559.6 |
|
978.19 |
1614.13 |
548.5 |
|
970.00 |
1597.75 |
541.6 |
|
964.94 |
1587.63 |
537.4 |
|
956.75 |
1571.25 |
530.5 |
|
951.69 |
1561.13 |
526.3 |
|
950.13 |
1558.00 |
525.0 |
|
948.56 |
1554.87 |
523.6 |
|
943.50 |
1544.75 |
519.4 |
|
935.31 |
1528.37 |
512.5 |
|
930.25 |
1518.25 |
508.3 |
|
922.06 |
1501.87 |
501.4 |
|
908.81 |
1475.37 |
490.3 |
|
887.19 |
1432.13 |
472.2 |
|
DAILY PROJECTIONS |
S&P |
NASDAQ |
RUSSELL |
|
AS DAILY HIGH |
953.00 |
1577.00 |
530.30 |
|
AS DAILY LOW |
939.75 |
1550.50 |
519.20 |
