DAILY TRADING ADVISORY 09-July-2009
Markets fall following lower oil prices and earnings concerns but recovered into the end of the session closing mixed for the day.
ECONOMIC DATA
8:30 AM Initial Claims
10:00 AM Wholesale Inventories
YESTERDAY’S MARKET
While trading quietly during the Globex session, the E-mini SP started the day at 881.25 and after trying to move up it backed off posting a small double bottom at 878.50. From there, the index tested the 882.50 Globex high but failed to trade above it. Another pullback to 878.50 gave way to a bounce that reached 883.25, another pullback to 880.50 resulted in a bounce that posted a new marginal high at 883.50, but once more the move failed and the index tested the 878.00 area, finally it broke lower and reached 870.50, a feeble bounce failed at 873.25 and moved down to 869.50. The index bounced a few points but the short traders continue to press down and the SP reached 866.25, just above my support levels. Leaded by the Nasdaq the SP showed some short covering that pushed the index up to 874.00 where sellers stepped back in pushing the markets back down to a new low at 865.25. The index held and once more tried to bounce. For the day the SP lost 5.50 points and settled at 873.75, the Nasdaq lost 1.00 closing at 1407.00 and the Russell lost 7.80 points finishing the session at 476.50. The Dow reversed early losses closing in the green at 8178.
MARKET COMMENTARY AND OUTLOOK
Yesterday I wrote: “The SP and Dow have formed a head and shoulders pattern and this indicates a down swing to test the 7800 area on the Dow and 838.00 on the SP. Despite the fact that we could see some rebound during today’s trading session, it may be only a one day move just to give some extra opportunity to the sellers to jump in. Take into account that my 878.00-877.00 area held into the close, and the close on the SP500 index was practically at the low, so the may have given short term exhaustion to the recent sell off. The strength of the trend is obvious; the last rally struggled, failed at the price level where the previous setback started, at 925.00, has a six days extension and was strongly reversed in a few sessions, so there is not a reason why the markets wont push lower in the near term. For today’s trading session, we have the Crude Inventories data after the opening, the commodities have retreated following the stock markets indexes, so a bounce on the oil may benefit the SP. An early pullback to yesterday’s lows, if it posts a double bottom, may give way to a rebound, but it will be very difficult for the markets to gain upside momentum, and any rally may turn to be a selling opportunity.”
We came into yesterday’s trading session looking for a rebound or narrow range consolidation, but we also looked for any bounce to turn into a selling opportunity.
Yesterday’s action and new lows and the failure of the markets to bounce, despite the mixed close, indicates the strength of the current downside trend, the markets may see lower prices in the coming days. However, now that the SP reached the end of April low, posting a double bottom at the last negative session of that month, there is a chance that the sideways pattern will continue, so if the direction is to the downside, any rally must not exceed more than three trading sessions and the price level should stay below the 895.00 area. If the SP only consolidates for one day and it fails to push above the 885.00 price level, then the weakness is greater than I thought.
It will be abnormal not to see lower prices, for a low to be in place, much greater volumes have to be seen on a kind of capitulation move.
Last week I mentioned that the VIX posted its lowest level since last year, and I wrote that there was a lot of complacency on the markets at the current price levels, the economic data indicates that the crises is still present, and this can be seen with the reversal on the commodities which indicate lower economic activity, not to mention the housing sectors where home prices continue to push lower.
So, the bear market rally that lasted 90 days from the March lows is over, and if the SP wont hold around the 838.00 area, then it will probably push lower posting a higher low around the 780.00 level, and then, enter a long term sideways patter.
For today’s trading session, early strength may be seen as a selling opportunity all the time that the SP is trading below 883.00-884.00, and weakness may be present and gain down side momentum all the time that the NQ starts to trade back below 1398.00, markets have to consolidate a bit the last move, so look for their reaction at our support and resistance areas.
TODAY’S SESSION
There is good resistance at 877.00-878.50 on the SP, 1411.00-1413.00 on the Nasdaq and 478.00-479.40 on the Russell, those may get exceeded to take the markets out of this extreme weakness, if that happens, the indexes may push up to 883.00-884.00 on the SP, 1417.50-1419.50 on the Nasdaq and 481.60-482.20 on the Russell. Those seems to be great areas to get short, but if the short covering continues and the markets look strong look for the 890.00-892.00 areas on the SP, 1428.00-1430.00 on the Nasdaq and 485.20-485.80 on the Russell to get reached before the day is over.
There is support at 872.00-870.00 on the SP, 1402.00-1400.00 on the Nasdaq and 475.00-473.60on the Russell. Those area very important levels for the SP and Nasdaq, trading below them will place the indexes at the last important support levels before they spill down, those area at 868.00-867.00 on the SP, 1395.00-1394.00 on the Nasdaq and 471.10-469.20 on the Russell. Once those areas fail only a marginal new low below yesterday’s lows at 864.50-863.00 on the SP, 1388.00-1386.50 on the Nasdaq and 466.30-465.60 on the Russell, if they hold, may result in a good short covering rally. GOOD LUCK.
|
TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS |
|||
|
S&P |
NASDAQ |
RUSSELL |
|
|
Resistance 4 |
898.00-899.50 |
1435.00-1436.00 |
490.70-492.40 |
|
Resistance 3 |
890.00-892.00 |
1428.00-1430.00 |
485.20-485.80 |
|
Resistance 2 |
883.00-884.00 |
1417.50-1419.50 |
481.60-482.20 |
|
Resistance 1 |
877.00-878.50 |
1411.00-1413.00 |
478.00-479.40 |
|
PIVOT |
874.25 |
1405.00 |
477.90 |
|
Support 1 |
872.00-870.00 |
1402.00-1400.00 |
475.00-473.60 |
|
Support 2 |
868.00-867.00 |
1395.00-1394.00 |
471.10-469.20 |
|
Support 3 |
864.50-863.00 |
1388.00-1386.50 |
466.30-465.60 |
|
Support 4 |
860.00-858.50 |
1382.00-1380.00 |
461.90-460.60 |
|
S&P |
NASDAQ |
RUSSELL |
|
FIBONACCI |
FIBONACCI |
FIBONACCI |
|
961.06 |
1513.25 |
554.6 |
|
931.28 |
1475.71 |
528.5 |
|
913.03 |
1452.71 |
512.5 |
|
901.75 |
1438.50 |
502.6 |
|
894.78 |
1429.71 |
496.5 |
|
883.50 |
1415.50 |
486.6 |
|
876.53 |
1406.71 |
480.5 |
|
874.38 |
1404.00 |
478.6 |
|
872.22 |
1401.29 |
476.7 |
|
865.25 |
1392.50 |
470.6 |
|
853.97 |
1378.29 |
460.7 |
|
847.00 |
1369.50 |
454.6 |
|
835.72 |
1355.29 |
444.7 |
|
817.47 |
1332.29 |
428.7 |
|
787.69 |
1294.75 |
402.6 |
|
DAILY PROJECTIONS |
S&P |
NASDAQ |
RUSSELL |
|
AS DAILY HIGH |
878.50 |
1411.25 |
481.60 |
|
AS DAILY LOW |
860.25 |
1388.00 |
465.60 |
