DAILY TRADING ADVISORY 17-June-2009

Housing starts up 17% from the previous month and Building permits up 4%; PPI up 0.2%, less than expected showing a 5% wholesale prices drop in the last 12 months, the largest annual drop in almost 60 years. Industrial Production reported down 1.1%. Best Buy 1Q profit beat expectations. Markets extend losses on recovery worry.

ECONOMIC DATA

8:30 AM CPI

8:30 AM Core CPI

10:35 AM Crude Inventories

YESTERDAY’S MARKET

With the markets trading slightly higher during the Globex session, the E-mini SP started the day at 923.50 and after testing 924.00 it pulled back to 920.25 and traded in a narrow range between the early high and low. This narrow range sideways action continue for more than two hours, and after failing to push higher, the SP backed off to a new intraday low at 917.75 and then at 916.75. After a feeble bounce to 918.00 and once the index failed to make a new high bears regain control and the index sold off to 908.25. After bouncing to 912.00, the SP pushed to a new low at 907.25 and then to 906.50. The SP tried a few times to cross above the 912.00 previous high and after reaching 913.00 it pulled back to 909.50 and bounced to 913.25. With the Nasdaq failing to push above the late resistance levels, the SP pushed down to test the lows into the close. For the day, the SP ended lower by 11.50 points at 908.00, the Nasdaq lost 13.75 points and settled at 1443.50 and the Russell gave back another 9.00 points finishing the session at 501.50. The Dow lost another 107 points and finished the day at 8504.

MARKET COMMENTARY AND OUTLOOK

Yesterday I wrote: “Despite that 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. 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.”

The SP continued to set back and closed below the 918.00 area. During the last week I mentioned this level as the line in the sand between higher prices and the possibility that the summer high has been posted for the already 100 day old rally. I also mentioned that two consecutive closes below that area is a good indicator of the failure to move higher and will negate my scenario for another visit to the 950.00 or higher before the end of this week.

Anyway, if the markets will continue with the current pullback and not get reversed from a lower opening or from early weakness in today’s Wednesday’s session, the way may be open for a test of the 887.00, that level is a good area to get positioned for those who believe that the uptrend will continue without posting a higher low after the March lows.

We may see a rally from the 900.00 area, obvious support, but if the bulls won’t jump aggressively near that area, then the story for the rally will be over and markets will turn down, selling the rallies will be the way to go.

For today’s trading session, I don’t want to consider a long trade as a position unless the three indexes area trading in positive territory, but if the SP founds early support around the 900.00 area, it could bounce to 912.00 and 918.00.

TODAY’S SESSION

There is resistance at 910.50-913.00 on the SP, 1449.00-1451.50 on the Nasdaq and 502.90-504.30 on the Russell, those held during yesterday’s late rebound attempt, and if the market fail to trade above them with good momentum, more weakness may be seen, however, if the indexes traded above them look for them to test 915.50-916.50 on the SP, 1456.00-1458.00 on the Nasdaq and 506.80-508.50 on the Russell. If those can not hold the rebound, then the next hurdles are at 918.50-919.50 on the SP, 1463.00-1464.00 on the Nasdaq and 510.20-511.80 on the Russell.

There is support above yesterday’s lows at 905.50-903.75 on the SP, 1441.00-1439.00 on the Nasdaq and 500.10-498.60 on the Russell, if markets hold around those areas, expect a good rebound, if those fails then the selling may continue pressing markets down to 900.50-898.00 on the SP, 1434.50-1433.00 on the Nasdaq and 496.70-495.10on the Russell. Bulls mat be waiting in line to get in at those areas, if that does not happen, then 895.00-894.00 on the SP, 1425.00-1424.00 on the Nasdaq and 492.20-490.50 on the Russell may be seen before the session is over. GOOD LUCK.

TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS

S&P

NASDAQ

RUSSELL

Resistance 4

924.00-925.50

1469.50-1472.00

514.30-515.80

Resistance 3

918.50-919.50

1463.00-1464.00

510.20-511.80

Resistance 2

915.50-916.50

1456.00-1458.00

506.80-508.50

Resistance 1

910.50-913.00

1449.00-1451.50

502.90-504.30

PIVOT

913.00

1451.25

505.20

Support 1

905.50-903.75

1441.00-1439.00

500.10-498.60

Support 2

900.50-898.00

1434.50-1433.00

496.70-495.10

Support 3

895.00-894.00

1425.00-1424.00

492.20-490.50

Support 4

889.00-887.50

1418.00-1415.50

486.60-485.40