DAILY TRADING ADVISORY 15-June-2009

Consumer Confidence at its highest level on the last nine months and Dow erases 2009 losses as investors sees the end of the recession, give way to another quite session where stocks fluctuated closing with marginal changes for the day and week.

WEEKLY PIVOTS FOR WEEK ENDING 19-June-2009

R3 986.50

R2 969.75

R1 955.25

PP 938.25

S1 931.00

S2 923.50

S3 906.50

ECONOMIC DATA

8:30 AM NY Empire Manufacturing Index

9:00 AM Net Long-Term TIC Flows

WEEKLY RECAP

Monday’s session markets stood under pressure, but a late rally managed to push the indexes up near unchanged levels keeping the uptrend intact. Concern about valuations and global markets under pressure gave way to a lower opening. Later in the session, the U.S. government announced that some of the nation’s largest banks can repay billions in federal aid. The 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 and Krugman said the economy will probably emerge from recession by September. For the day, the SP lost 2.00 points and closed at 938.50, 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. Tuesday’s trading session saw traders concentrated on the spread between the June and September, an early pullback got bought and the markets closed once more with little changes. On the corporate news, Texas Instruments came with a positive outlook and the government confirmed that ten banks won U.S. Treasury approval to buy back $68 billion of government shares. On the economic news, Wholesale inventories were down 1.4% for the month of April, for the day, the SP closed almost unchanged at 939.50; the Nasdaq added 10.25 points ending the session at 1500.75 and the Russell added .90 points ending at 526.10. The Dow lost 1.00 and finished at 8763. Wednesday’s trading session saw a spike during the Globex session leaded by a rally on the commodities and Global markets, but despite that traders concentrated on the rollover from the June to the September contract markets sold off strongly but bounced into the end posting another neutral close. The U.S. trade deficit widened as exports slumped to its lowest level in three years. Citigroup began exchanging $58 billion of preferred securities into common stock and Home Depot raised its full year earnings expectations. Also, Treasury declined as Russia said it may reduce reserves held in U.S. debt. Ten year treasury bonds hit eight month high and the Fed’s Beige book said that recession may be moderating but weakness in the labor market will persists. For the day, the SP added .75 points closing the session at 940.25, the Nasdaq lost 5.00 points and settled at 1495.50 and the Russell lost 1.40points ending the session at 525.20. The Dow lost 24 points finishing the day at 8739. Thursday session disappointed, after a slightly lower opening markets rally on the release of the economic data. Initial Claims were down to 601K and Continuing Claims posted a new record at 6.82 million. Retail Sales was up by .5%, the first advance in the last three months, later in the session when the bond auction result get released indicating that the collocation was successful, markets rallied and tested the most recent highs, however, the low volumes and concerns about inflation pushed the markets back down into the close for another neutral close, the E-mini SP added 1.75 points closing the session at 938.25; the Nasdaq lost 3.50 points and settled at 1491.00 and the Russell lost 1.40 points closing at 921.30. The Dow added 31 points and closed at 8770. Friday the markets started on the red, despite that the Nasdaq pushed strongly lower, the SP maintained the most recent lows. Consumer confidence reported a slightly increase showing its best level in the last nine months and that give way to a bounce that tested the 940.00 weekly pivot point. The next few hours markets traded in a sideways pattern with ultra light volumes keeping trades away from the action. For the day, the SP added 2.50 points and settled at 940.75, the Nasdaq lost 5.50 points and closed the session at 1485.50 and the Russell added one point ending at 522.30. For the week markets closed with small changes

FRIDAY’S MARKET

After fluctuating during the night, the E-mini SP started the session on the red. The index opened the day at 935.50 and after testing 934.00 it bounced to 936.75 and pulled back once more. The index traded in a narrow pattern waiting for the release of the economic numbers, once the were out and leaded by the weakness on the Nasdaq, the SP pulled back to 931.25. After holding the low, the SP bounced to 937.25, pulled back to 934.00 and rallied to 939.25 where the bounce lost its momentum. With the trading volumes running on the light side the markets entered in a sideways trading pattern between 934.00 on the low and 939.00 on the upper side. Finally once the Russell broke above its resistance area, the SP pushed higher posting a new high at 942.50. The index traded near the highs for half hour but in front of the weekend pushed down once more below the 940.50 area holding near the unchanged area and bounced a bit into the close. For the day, the SP added 2.50 points and settled at 940.75, the Nasdaq lost 5.50 points and closed the session at 1485.50 and the Russell added one point ending at 522.30.

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MARKET COMMENTARY AND OUTLOOK

Last Friday I wrote: “The fact that the recent lows have not been able to break below the late May’s high indicates strong support. They also maintain the markets in a solid position, but the multiple rejections from the highs that keep acting like a ceiling on the rally attempts show also fear to get trapped near the highs. So uncertainty about the next move and which direction will follow the break out from the June 30.00 point range its all we have in the charts. This trading range won’t last for too many more sessions, and if the breakout won’t happen to the upside, then the ranges will have to get expanded to the lower side of the charts. I have been mentioning the 918.00 area, as a bottom on any pullback to maintain the uptrend intact, so I want to stick to the possibility that the markets will finally break higher all the time that this level holds. For today’s trading session, keeping in mind that is a Friday, everything could happen, but on this market conditions, more sideways trading action may be seen, so sell the rallies once they stall and buy the deeps with tight stops once the selling lost momentum.”

Markets consolidated during the recent week as they traded in a sideways pattern on a 30.00 point range for the SP and got rejected twice from the highs posting a triple top while keeping strong support just below the 930.00 level.

During the past weeks I have maintained a bullish position looking for an upside break that had not happen yet. The longer the SP takes to break to new highs, higher the chances that it won’t happen in the near term. As we enter in the summer period, volumes run normally lower and despite the slightly improvement on the economic indicators, investors are showing a lack of interest at the current price levels.

This does not negate or invalid that the trend is still strong and positive, but a rally without higher volumes won’t add confidence to the move. On the other side of the coin, if the indexes won’t be able to trade higher, holding their gains, then we may see some correction, also with low volumes, but to prices where investors will feel motivated to jump in to a long position.

If that happens, I may consider that the third quarter of the year may see some profit taking or weakness in front of higher prices for the fourth quarter, but there is not evidence that the markets will correct by much and after posting later in the year a new high the indexes may consolidate in a sideways pattern for a long period, obviously breaking below 918.00 opens the possibilities of a test of the 870.00 area.

So, nothing is clear in the short term, current circumstances and the trading pattern could get resolved either side. However, this week triple witching, has the tendency to push higher, to be a bullish week, and the 950.00 area may get visited once more in order to press the shorts and those traders who sold that strike price call.

With less convincement than the previous week, but guided by the recent pattern, I will keep a slightly bullish bias, at least all the time that the SP can maintain the 918.00 area on the close.

Keep in mind that the markets can not continue to trade in this narrow range and as always, the move will come by surprise catching most of the players on the wrong side and giving way to a wide range trading session, so let’s try to stay with the trend keeping a close eye on the weekly 938.25 pivot point on the SP. Also, try to follow the Nasdaq as that index has been an indicator of the daily direction.

TODAY’S SESSION

There is resistance around last Friday highs at 942.00-943.00 on the SP, 1488.00-1490.00 on the Nasdaq and 523.20-524.90 on the Russell. If markets are 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 add some upside momentum and push the markets up to 945.50-947.50 on the SP, 1496.00-1498.50 on the Nasdaq and 526.80-528.20. If those can not hold look for another test of the next resistance areas at 949.75.951.00 on the SP, 1509.00-1511.50 on the Nasdaq and 530.20-532.50 on the Russell. Failing there will probably give way to a 12.00-14.00 point sell off on the SP, but if they finally get broke and the NQ pushes above the 1518.00 level, new buying may be seen.

There is support below Friday’s settlements at 938.50-937.00 on the SP, 1482.00-1480.00 on the Nasdaq and 520.60-519.70 on the Nasdaq. On the rallies from the sell off attempts, those have been acted as pivotal, so if the indexes can hold around there, expect a bullish session, but if there is buying pressure, markets may push lower testing 934.00-933.00 on the SP, 1476.00-1475.00 on the Nasdaq and 517.10-516.70 on the Russell. If the profit taking continues look for a test of the most recent important lows at 929.00-927.00 on the SP, 1470.00-1469.00 on the Nasdaq and 512.30-511.20 on the Russell. Trading below them will place the markets in front of a strong sell off. GOOD LUCK.

TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS

S&P

NASDAQ

RUSSELL

Resistance 4

955.25-956.75

1525.00-1526.00

535.70-536.40

Resistance 3

949.75.951.00

1509.00-1511.50

530.20-532.50

Resistance 2

945.50-947.50

1496.00-1498.50

526.80-528.20

Resistance 1

942.00-943.00

1488.00-1490.00

523.20-524.90

PIVOT

938.25

1483.50

520.70

Support 1

938.50-937.00

1482.00-1480.00

520.60-519.70

Support 2

934.00-933.00

1476.00-1475.00

517.10-516.70

Support 3

929.00-927.00

1470.00-1469.00

512.30-511.20

Support 4

923.50-922.50

1463.00-1461.00

507.20-505.50