DAILY TRADING ADVISORY 08-June-2009
Jobless rate at 9.4%, the highest since 1983 and Nonfarm payrolls down only by 345K gave way to a strong rally and new highs for the U.S. equity indexes. Oil hits $70 per barrel.
WEEKLY PIVOTS FOR WEEK ENDING 12-June-2009
R3 979.25
R2 959.50
R1 948.00
PP 938.00
S1 929.00
S2 918.50
S3 897.00
ECONOMIC DATA
None
WEEKLY RECAP
Thus was an exciting week for the world and U.S. markets. With everybody following the GM story and once its bankruptcy was declared and the issue was already behind investors concerns, markets rallied strong during Sunday’s night. GM’s bankruptcy was done with a $50 billion aid package coming from the U.S and Canadian governments. Later in the session, Personal Spending came out down by .1%, Personal Income up .5%. Construction Spending climbed .8% and the ISM Index contracted at its slowest pace in eight months coming out at 42.8. Markets reached new highs, the SP added 21.00 points and settled at 939.00, the Nasdaq gained 34.50 points closing at 1470.00 and the Russell gained 16.30 points closing the day at 517.60. The Dow added 221 points closing at 8721. After such a strong surge during Monday’s session, Tuesday was a balancing session, markets consolidated and managed to keep a solid and strong position, the news of the day was Pending Home Sales that jumped 6.7%. On the corporate arena, Morgan Stanley, JP Morgan and American Express announced that they will sell stocks in order to pay back TARP funds, also GM sold the HUMMER brand, volumes were low but for the day, the SP added 3.50 points and settled at 942.50, the Nasdaq gained 8.50 points closing at 1478.50 and the Russell closed higher by 8.60 points at 526.20. The Dow gained 19 points and closed the day at 8740. The rally took a breath during Wednesday’s session; markets opened lower and sold off but managed to close with moderate losses. The ADP employment data which measures the job market in the private sector showed a decrease of another 532K jobs, MBA mortgage application Index dropped 16% on higher rates and the ISM Services Index shrank at a slower pace, Factory orders was up.7% after the March data get revised down to 1.9%. In a speech, Bernanke said that the recovery will be slow, for the close the SP lost VVVV points and settled at 931.75, the Nasdaq lost 1.00 point finishing the session at 1477.50 and the Russell ended at 524.30, minus 1.90 points. The Dow gave back 65 points closing the session at 8675.00. Thursday’s trading session showed some short covering in front of the Friday’s unemployment numbers, the Initial and Continuing Claims were modestly lower. GM said that it is studying more temporary shutdowns and Bonds continue to trade lower pushing long term rates higher. Bernanke told to the House Budget Committee that the pace of economic contraction is slowing and markets closed in the green near the daily highs, the SP added 8.75 points closing the session at 940.50, the Nasdaq ended at 1493.00 with a 15.50points gain and the Russell settled at 531.20, up 6.90 points. The Dow added 74 points closing the day at 8750. Friday was a highly volatile session, with the markets trading with gains during the night, a huge spike that pushed the indexes up to new highs was seen after the job markets numbers get released. The unemployment rate jumped to 9.45, its highest since 1983, but the nonfarm payrolls figures surprised everybody reporting a loss of only 345K jobs, however the new highs were sold and the markets pushed strongly down and even traded lower after the opening, markets recovered and fluctuated during the trading session closing almost unchanged but with solid gains for the week.
FRIDAY’S MARKET
While trading in positive territory during the Globex session, markets exploded to the upside once the monthly job figures get released, the action during the nightly session pushed the SP up to 957.50 from where the market sat back to 951.00, bounced to a lower high at 955.50 and backed off once more a few minutes before the opening. The E-mini SP started the session at 950.25 and after bouncing a couple of points traded lower testing the 948.00 area. After another attempt to break above the 952.00 area the SP sold off all the way down to 941.00. Unable to hold the lows, the SP continued to press lower reaching 933.25. Once the index posted the low it bounced back up to 940.25 and then to 946.50. After the rebound from the early sell off, the SP traded in a sideways pattern holding the late highs and the previous settlement price. Later, the SP broke lower testing the daily lows from where the SP bounced back to 937.75, pulled back and rallied to 940.00 pulled back to 937.00 and bounced to 940.50. The trading action was choppy during the last hour of the session with the index between 943.00 and 938.00 closing in the middle of the range almost unchanged for the session. For the day the SP closed unchanged at 940.50, the Nasdaq gained two points closing at 1495.00 and the Russell lost .10 finishing the week at 530.50. The Dow gained 12 points ending at 8763.
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MARKET COMMENTARY AND OUTLOOK
Last Friday I wrote: “There is not too much to add to the recent analysis, the uptrend is intact but the time window and recent posted highs have the markets near its time period and price level where the uptrend is at risk. What happens for the next few sessions if the rally fails? Probably the SP will retreat to the 905.00-903.00 area. Does that indicate a turn down for the next 60 days? Not sure, but with the summer in front of us and the low volumes, the indexes may fluctuate a few weeks on a 50 point range. Bears will have to push the SP below the 875.00 area, closing below it for two consecutive sessions for the downtrend to resume and open the possibilities for much lower prices. Until then and despite that the rally may have found resistance, markets are safe. The other side of the coin, new highs on the SP may push that index up to the 1000.00 area and the Dow just above the 9000; from those levels it will be more logical to see a 10% correction. Tomorrow is the 90 days cycle from the March lows, a good day for a high or for a strong reversal, so try to stay with the trend whatever the direction is. For today’s session, great expectations in front of the unemployment rate and nonfarm payrolls figures may guarantee a volatile opening, obviously the pressure is for the short traders, so if the markets react positive for the data you could expect a strong short covering rally that may push the indexes to new highs. On the low side, disappointing could press the markets down, but the SP may found good support around the 928.00 area.”
Markets rallied strong after the job markets data get released and printed their highs on the charts before the opening. Coinciding with the important time window, the 90 days cycle from the lows, and with the high at the limits of the 940.00-960.00 upside objective that I looked for in this rally, the strong reversal happened posting a possible false break and an end of the rally from the lows.
So we have a chance that the rally has completed its 90 days cycle and that the markets will correct or trade in a wide sideways pattern during the next few weeks before a “summer rally” that push the markets to new highs happens. On the other side of the coin, the daily charts indicate that the uptrend is strong and holding a solid position and that Friday’s sell off is just the normal volatility that sometimes is seen at new highs when traders take profits.
During the last three sessions of the past week, the SP has closed around the same area, the 940.00-943.00 seems to be the level from which the markets will start the next important move, another upside leg to this rally that may reach the 980.00-1000.00 level or a first degree correction that pushes the index down to the 910.00-900.00 band.
If the markets are due to continue to hold near their most recent highs and maintain the uptrend, a pullback may not exceed the three days time period and the move to the downside should be a struggling one, as traders bid the markets at not much lower levels, I am talking about the 918.00 area in order to keep alive the momentum.
On the weekly charts the index finally broke above the consolidation but the close was inside the range and can be qualified if not weak, then with a lost of some momentum as Friday’s new highs may have exhausted temporarily the recent rally.
The clue for what happens next will depend on what the index does during the next two sessions, Monday, normally shows lower volumes, but a lower close that does not get reversed next Tuesday will have bearish implications, on the other side, a close above the 950.00 area will probably give way to new highs during this week. For today’s trading session, the SP will have to break solidly above my first resistance area, and then if it reached 949.00 a pullback will have to get bought, otherwise expect another neutral close.
TODAY’S SESSION
There is resistance above last Friday late highs at 943.00-945.00 on the SP, 1499.00-1501.00 on the Nasdaq and 532.00-533.20 on the Russell. If markets area weak those may get sold early on the session, and nothing good happens all the time that the indexes are trading below them, but trading above them will probably push the markets up to the previous highs at 947.25-949.00 on the SP, 1506.00-1508.00 on the Nasdaq and 535.30-536.40. Those were rejected already once, so if the rally stalls there, they may offer a good shorting opportunity, but if last Friday sell off from the highs was only a one day event, expect the indexes to continue higher and reach 953.75-954.25 on the SP, 1506.00-1508.00 on the Nasdaq and 539.70-540.40 on the Russell.
There is some support below Friday’s settlements at 938.00-936.00 on the SP, 1490.00-1488.00 on the Nasdaq and 528.60-527.20 on the Nasdaq. Those areas have acted as pivotal, so if the markets break below them they probably continue to push down reaching 933.75-932.50 on the SP, 1484.00-1482.00 on the Nasdaq and 524.60-523.80 on the Russell. If Friday’s highs and lows will act as support and resistance for a couple of sessions where markets will consolidate once more, those may hold, but if the pressure continues look for the indexes to trade lower for a test of 929.00-927.00 on the SP, 1478.00-1476.00 on the Nasdaq and 521.50-519.80 on the Russell. GOOD LUCK.
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TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS |
|||
|
S&P |
NASDAQ |
RUSSELL |
|
|
Resistance 4 |
959.75-961.50 |
1521.00-1522.50 |
547.60-548.80 |
|
Resistance 3 |
953.75-954.25 |
1514.00-1516.00 |
539.70-540.40 |
|
Resistance 2 |
947.25-949.00 |
1506.00-1508.00 |
535.30-536.40 |
|
Resistance 1 |
943.00-945.00 |
1499.00-1501.00 |
532.00-533.20 |
|
PIVOT |
943.75 |
1495.00 |
532.70 |
|
Support 1 |
938.00-936.00 |
1490.00-1488.00 |
528.60-527.20 |
|
Support 2 |
933.75-932.50 |
1484.00-1482.00 |
524.60-523.80 |
|
Support 3 |
929.00-927.00 |
1478.00-1476.00 |
521.50-519.80 |
|
Support 4 |
924.75-923.00 |
1470.00-1468.00 |
516.40-515.30 |
|
S&P |
NASDAQ |
RUSSELL |
|
FIBONACCI |
FIBONACCI |
FIBONACCI |
|
1060.56 |
1659.63 |
611.2 |
|
1020.99 |
1603.32 |
584.6 |
|
996.74 |
1568.82 |
568.3 |
|
981.75 |
1547.50 |
558.2 |
|
972.49 |
1534.32 |
552.0 |
|
957.50 |
1513.00 |
541.9 |
|
948.24 |
1499.82 |
535.7 |
|
945.38 |
1495.75 |
533.8 |
|
942.51 |
1491.68 |
531.8 |
|
933.25 |
1478.50 |
525.6 |
|
918.26 |
1457.18 |
515.5 |
|
909.00 |
1444.00 |
509.3 |
|
894.01 |
1422.68 |
499.2 |
|
869.76 |
1388.18 |
482.9 |
|
830.19 |
1331.88 |
456.3 |
|
DAILY PROJECTIONS |
S&P |
NASDAQ |
RUSSELL |
|
AS DAILY HIGH |
949.00 |
1521.25 |
536.20 |
|
AS DAILY LOW |
924.75 |
1486.75 |
519.90 |
Support, Pivot and Resistance levels courtesy of Arturo Stern. He authors the E-mini Daily trading advisory which gives technical analysis on all the major stock index futures contract. For more of his analysis go to www.theminitrade.com Arturo can be reached at arthur@theminitrade.com
Futures and options trading involve risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. This is neither a solicitation nor an offer to buy or sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this document. The past performance of any trading system or methodology is not necessarily indicative of futures results
