DAILY TRADING ADVISORY 09-June-2009
Concern about valuations and global markets under pressure gave way to a lower opening. U.S. government announced that some of the nation’s largest banks can repay billions in federal aid. Two year yields reach their highest levels since November on concerns that record issuance of U.S. debt may overwhelm demand as the economy shows signs of strengthening. Markets rallied during the last hour of the session closing with moderate losses. Krugman said the economy will probably emerge from recession by September.
ECONOMIC DATA
10:00 AM Wholesale Inventories
YESTERDAY’S MARKET
With the futures markets trading lower by 1% during the Globex session, the E-mini SP started the day at 934.00 an after pulling back to 933.00 bounced to 935.25. With the bears leading the early trading, the SP sold off to 928.75, just above the Globex lows. A feeble bounce to the 930.75 gave way to a new low at 928.00, Holding near my weekly support area at the 929.00 level resulted in a rebound to 931.50, but unable to trade above my 933.00 area, the index sold off once more printing a new low in the chart at 927.00. Once the selling pressure dried, the SP bounced to 933.50. After a few attempts to break higher the index backed off to the daily lows. Another failed attempt to rebound resulted in a new low at 925.50. With low trading volumes and the activity running slow the SP bounced to 929.00. While struggling to hold the lows the SP tested higher low levels and reached the 930.00 area. The sideways pattern continued to be in play until the last hour when the indexes broke higher, the SP broke above the 933.00 and 935.00 areas giving way to a strong short covering move reaching 941.25. After pulling back to 939.25, the SP rallied to a new high at 945.00 and then 946.25.The markets pulled back, the SP failed to hold near the highs and tested 936.00 from where it bounced into the close. For the day, the SP lost 2.00 points and 938.50 at BBBB, the Nasdaq ended lower by 4.50 points at 1490.50 and the Russell gave back 4.80 points ending the day at 525.70. The Dow closed marginally higher at 8764.
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MARKET COMMENTARY AND OUTLOOK
Yesterday I wrote: “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. 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.”
Markets gapped down on the opening and didn’t turn up for most of the session. The weak opening on all the indexes resulted in a quite and low volume session where markets maintained a downside bias until the last hour of the session. The selling was orderly and without panic, like a normal pullback on a market that keeps trading to the upside. Finally the markets rallied
Last Friday’s high and its reversal appeared to have all the symptoms of a false break, a higher opening, early highs during the first minutes of the session, and the consequent sell off; today, the continuing pattern and weakness, seemed to give the keys to the bears, however the late bounce keep showing strong support on the pullbacks and biding at lower prices.
On yesterday’s newsletter I mentioned the possibility of a three day pullback but also the chance for a neutral close around the 940.00 area which could give way for a test of the 958.50 area that was printed on the last Friday Globex’s session. That scenario is still possible but faces strong resistance around the 949.00 previous high areas; a lower high could give way to a more sizeable pullback.
So the story has not been written yet and the next move is still unsure, but even if the markets are overbought and showing some vulnerability at these levels, they certainly look strong.
For today’s trading session, the economic reports will continue to be very light and the markets may continue to fluctuate, so selling near resistance areas and buying above support may be a good idea, IF the 928.00 area holds.
TODAY’S SESSION
There is initial resistance at 940.50-942.50 on the SP, 1498.00-1499.75 on the Nasdaq and 527.50-528.20. If the markets trade above them, look for a test of yesterday’s intraday highs at 944.00-946.00 on the SP, 1504.00-1506.00 on the Nasdaq and 529.90-531.00 on the Russell. If the session will give way to an other day of consolidation, the bounce may not exceed, but if the session is strong look for new highs around the 949.00-950.50 on the SP, 1510.50-1512.00 on the Nasdaq and 533.10-534.20 on the Russell. If the markets break above them, another wide range upside session may be seen.
There is good support at 934.00-932.00 on the SP, 1486.00-1484.00 on the Nasdaq and 523.10-521.60 on the Russell. If those fail to hold look for the markets to press lower testing yesterday’s pivotal levels at 929.50-927.00 on the SP, 1478.00-1476.00 on the Nasdaq and 518.80-516.20 on the Russell may be in the cards. If those can not hold, look for the selling to gain some momentum reaching 924.50-923.00 on the SP, 1472.00-1470.50 on the Nasdaq and 513.90-512.10 on the Russell. GOOD LUCK.
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TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS |
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|
S&P |
NASDAQ |
RUSSELL |
|
|
Resistance 4 |
953.50-955.50 |
1518.00-1520.00 |
537.60-538.50 |
|
Resistance 3 |
949.00-950.00 |
1510.50-1512.00 |
533.10-534.20 |
|
Resistance 2 |
944.00-946.00 |
1504.00-1506.00 |
529.90-531.00 |
|
Resistance 1 |
940.50-942.50 |
1498.00-1499.75 |
527.50-528.20 |
|
PIVOT |
936.75 |
1486.00 |
525.40 |
|
Support 1 |
934.00-932.00 |
1486.00-1484.00 |
523.10-521.60 |
|
Support 2 |
929.50-927.00 |
1478.00-1476.00 |
518.80-516.20 |
|
Support 3 |
924.50-923.00 |
1472.00-1470.50 |
513.90-512.10 |
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Support 4 |
921.00-918.00 |
1463.00-1461.00 |
510.20-509.50 |
|
S&P |
NASDAQ |
RUSSELL |
|
FIBONACCI |
FIBONACCI |
FIBONACCI |
|
1077.94 |
1704.31 |
619.8 |
|
1027.75 |
1619.04 |
582.5 |
|
997.00 |
1566.79 |
559.6 |
|
978.00 |
1534.50 |
545.4 |
|
966.25 |
1514.54 |
536.7 |
|
947.25 |
1482.25 |
522.5 |
|
935.50 |
1462.29 |
513.8 |
|
931.88 |
1456.13 |
511.1 |
|
928.25 |
1449.96 |
508.3 |
|
916.50 |
1430.00 |
499.6 |
|
897.50 |
1397.71 |
485.4 |
|
885.75 |
1377.75 |
476.7 |
|
866.75 |
1345.46 |
462.5 |
|
836.00 |
1293.21 |
439.6 |
|
785.81 |
1207.94 |
402.3 |
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DAILY PROJECTIONS |
S&P |
NASDAQ |
RUSSELL |
|
AS DAILY HIGH |
958.50 |
1502.00 |
531.50 |
|
AS DAILY LOW |
927.75 |
1450.00 |
508.60 |
