DAILY TRADING ADVISORY 07-August-2009

Initial claims down to 550K and CISCO earnings gave way to a weak session.

ECONOMIC DATA

8:30 AM Average workweek

8:30 AM Hourly Earnings

8:30 AM Nonfarm Payrolls

8:30 AM Unemployment rate

2:00 PM Consumer Credit

YESTERDAY’S MARKET

After trading at new highs during the Globex session, the E-mini SP started the day at 1003.00. After bouncing to 1005.75, sellers stepped in and pushed the markets down, the SP fell all the way to 992.75 where the move lost its momentum, just above the double top posted at that level during the last two sessions. Then the index bounced and reached 999.00 from where it backed off to 996.00, after trying to break above 997.00, the index pulled back to 993.00. unable to make a new low, the SP pushed up to 997.75 but didn’t gain the expected momentum to push higher, after pulling back to 994.00 markets finally give up and posted new lows, the SP reached 989.75. The SP held the important 988.00 level and it bounced all the way up to 996.25 just to pullback once more closing with moderate losses. For the day, the SP lost 5.75 points and settled at 995.00, the Nasdaq lost 14.50 points finishing the session at 1600.00 and the Russell closed lower by 8.80 points at 557.10. the Dow lost 24 points and finished the day at 9256.

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MARKET COMMENTARY AND OUTLOOK

Last Friday I wrote: “In the same way that we have seen during the last two weeks, any pullback or sell off attempt has been a buying opportunity, and despite that traders may be cautious or even take some profits in front of next Friday important job market numbers, the trend remains intact and in a strong position, any pullback that manages to hold the 963.00 area on the SP and 9000 on the Dow should be considered a buying opportunity. So taking into account that players may be waiting for next Friday data, and that new money continues to enter into the markets on any pullback, and that trapped shorts are desperate to cover, more sideways trading, another session of consolidation may be seen, however, the key seems to be in the Nasdaq and if that index starts to trade below the 1596.00 area followed by the SP below 986.50, the correction may get a bit more extended in price and time, this we will only know next Friday. For today’s trading session, early weakness has resulted in good short covering rallies, if the CISCO news does not give way to a strong sell off, then, as yesterday, the first hour lows may get bought, but be careful if the SP starts to trade below 988.00 where I may be a buyer with stops just below the 986.50 areas.”

Markets get reversed from their Globex highs just at my resistance areas, 1008.00 on the SP and 1625.00 on the NQ, the rebound attempts failed, but the KEY 988.00 area on the SP and the 1596.00 on the NQ held.

In the same way that the markets have reached strong resistance levels, the support areas have been able to hold consolidating the last two week rally, and at this moment traders holding long positions, or short players may be ready for a strong breakout, which direction? I still think that the SP may be able to reach, during the day, the 1008.00 area, and I still think that it will probably push higher, to the 1038.00 level that I mentioned in one of my past commentaries. However, yesterday’s move where a new low was posted on the NQ indicate the chances for a wide range downside session, only that will indicate that short term top has been posted, any other move, like the ones we saw during the last three days, indicate a lack of buying at these levels but not a turn down in the markets.

Today, the unemployment numbers will get released before the opening, it seems that traders are optimistic as the markets have been able to hold at reasonable high levels, so any good surprise could give way to a strong opening and an uptrend session; on the other side of the coin, if traders do not cheer the report, then a strong profit taking move could be seen. In my opinion, it will be difficult to play the long side if the SP trades below the 988.00 area, but an early sell off that found support around 984.00 could give way to a strong bounce. Take into account that if the NQ does not hold the 1580.00 area, the downside could gain additional momentum pushing that index down to 1560.00

TODAY’S SESSION

There is resistance at 996.50-998.25 on the SP, 1604.00-1605.50 on the Nasdaq and 559.50-561.10 on the Russell. If those get exceeded look for the markets to make an attempt to reach 1001.50-1002.50 on the SP, 1610.00-1612.00 on the Nasdaq and 563.00-565.00 on the Russell, trading above them will indicate a test of the SP intraday highs at 1005.00-1005.50

There is support at 993.00-991.75 on the SP, 1595.50-1594.00 on the Nasdaq and 555.70-554.40 on the Russell, failing there could push the markets down to yesterday’s lows at 989.00-987.50 on the SP, a new low at 1590.50-1588.00 on the Nasdaq and 551.20-549.80 on the Russell. If buyers do not step in at those levels, be careful with any long trade. GOOD LUCK.

TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS

S&P

NASDAQ

RUSSELL

Resistance 4

1009.75-1010.50

1627.50-1630.00

574.60-575.10

Resistance 3

1005.00-1005.50

1617.00-1618.50

568.60-570.40

Resistance 2

1001.50-1002.50

1610.00-1612.00

563.00-565.00

Resistance 1

996.50-998.25

1604.00-1605.50

559.50-561.10

PIVOT

997.50

1606.00

560.20

Support 1

993.00-991.75

1595.50-1594.00

555.70-554.40

Support 2

989.00-987.50

1590.50-1588.00

551.20-549.80

Support 3

984.00-983.00

1582.00-1580.00

547.10.545.40

Support 4

981.00-989.50

1574.00-1572.00

542.90-541.70

S&P

NASDAQ

RUSSELL

FIBONACCI

FIBONACCI

FIBONACCI

1071.31

1754.75

627.3

1046.42

1707.42

605.9

1031.17

1678.42

592.8

1021.75

1660.50

584.7

1015.92

1649.42

579.7

1006.50

1631.50

571.6

1000.67

1620.42

566.6

998.88

1617.00

565.1

997.08

1613.58

563.5

991.25

1602.50

558.5

981.83

1584.58

550.4

976.00

1573.50

545.4

966.58

1555.58

537.3

951.33

1526.58

524.2

926.44

1479.25

502.8

DAILY PROJECTIONS

S&P

NASDAQ

RUSSELL

AS DAILY HIGH

1003.50

1623.00

568.80

AS DAILY LOW

988.00

1594.00

555.70