DAILY TRADING ADVISORY 16-June-2009

NY Manufacturing Index lower more than expected and Global markets under pressure gave way to a negative opening and a down trend session. Homebuilder Confidence falls.

ECONOMIC DATA

8.30 AM Building Permits

8:30 AM Housing Starts

8:30 AM PPI

8:30 AM Core PPI

9:15 AM Capacity Utilization

9:15 AM Industrial Production

YESTERDAY’S MARKET

After trading sharply lower during the Globex session, the E-mini SP started the day at 930.75 and after bouncing to 931.25 pulled back to test the 927.00 Globex lows. After a feeble bounce to 929.25, the index sold off strongly to 923.00, bounced back to 927.00 and once more failed to recover giving way to a lower low at 918.25. The SP bounced back to 921.50, posted a new marginal low 918.00, my key number, and then at 917.50.After trying to hold near my key number, the index posted a new low at 916.50. The markets found an intraday low and traded in a narrow pattern for the next 90 minutes. After a false break to 916.25 the SP tried to bounce just to fail once more and post a new low at 915.25. During the last hour of the session some short covering action was seen, the SP reached 921.00 and backed off mildly into the close. For the day, the SP lost 21.25 points and settled at 919.50, the Nasdaq gave back 28.25 points closing the day at 1457.25 and the Russell lost 11.80 points ending the day at 510.50. The Dow lost 187 points closing the session at 8612.

MARKET COMMENTARY AND OUTLOOK

Yesterday I wrote: “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. 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.”

Yesterday’s strong sell off and profit taking move came after more than one week where the SP tried hard to hold around the 940.00 area and after the index failed three different times at the highs. Despite tha the current trend is still intact, yesterday’s sell off may get reversed during today’s trading session, that is what it has to happen in order to maintain for the SP the possibility to reach once more the 950.00 area on the SP, what could happen if we have today another negative session? That the pullback may continue and complete a first degree countertrend move, that means it will last today and maybe also tomorrow but it won’t exceed three days IF the trend is still to the upside.

The extension of yesterday’s sell off makes me think that the move was only a one day event, that may have some follow through but not much more downside and then the indexes will rally strong and test or exceed the most recent highs.

Yesterday’s wide range downside session may even have exhausted the profit taking move but a marginal new low around the 913.00 area or maybe 908.50 is possible before a strong bounce come.

The support at high levels that the markets are showing, the trapped shorts at much lower prices, this week futures and option expiration and the end of quarter fund performance, which fund managers will try to come with the best, may give the capability to hold near the most recent highs.

For today’s trading session, it will unusual to see another trend session, so some sideways action may happen and that may push the SP to test yesterday’s early highs around the 931.00 area, if that not happens, hopefully the indexes react good to my support areas, remember that I wrote that I will maintain a bullish bias all the time that the SP holds 918.00 on the close, and despite yesterday’s sell off, my level remains intact.

TODAY’S SESSION

There is strong resistance at 922.50-924.00 on the SP, 1362.00-1364.50 on the Nasdaq and 512.00-513.60 on the Russell, those will have to get exceeded in order to give markets a chance, if that happens, look for the indexes to reach 927.00-929.00 on the SP, 1368.00-1370.00 on the Nasdaq and 515.80-517.50 on the Russell. Those are just below yesterday’s early highs, if the markets are weak the rally may fail around those levels, but if the indexes break higher look for them to reach 932.50-933.75 on the SP, 1479.00-1480.50 on the Nasdaq and 519.80-520.90 on the Russell.

There is support at 917.00-915.00 on the SP, 1452.75-1450.00 on the Nasdaq and 509.10-507.40 on the Russell, if markets post double bottoms at yesterday’s lows around those areas, expect a good short covering rally, if those fails then the selling could gain additional momentum pressing markets down to 913.00-910.50 on the SP, 1446.00-1444.00 on the Nasdaq and 505.20-504.00 on the Russell. If markets can not get reversed from those areas the trend is in troubles and we could have another bloody session whit the last swing support areas at 906.50-905.50 on the SP, 1439.50-1438.00 on the Nasdaq and 502.30-501.20 on the Russell. GOOD LUCK.

TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS

S&P

NASDAQ

RUSSELL

Resistance 4

938.25-940.50

1490.50-1493.00

524.20-526.00

Resistance 3

932.50-933.75

1379.00-1380.50

519.80-520.90

Resistance 2

927.00-929.00

1368.00-1370.00

515.80-517.50

Resistance 1

922.50-924.00

1362.00-1364.50

512.00-513.60

PIVOT

924.50

1361.25

511.90

Support 1

917.00-915.00

1452.75-1450.00

509.10-507.40

Support 2

913.00-910.50

1446.00-1444.00

505.20-504.00

Support 3

906.50-905.50

1439.50-1438.00

502.30-501.20

Support 4

901.00-899-50

1430.50-1428.00

497.80-495.60