DAILY TRADING ADVISORY 18-June-2009

CPI lower than expected culminating the biggest drop in a 12 month period during the last 60 years, FedEx bearish economic outlook and Goldman Sachs ready to repay $10 billion in government funds, banks get downgraded by S&P, all this gave way to a narrow range session with a mixed close.

ECONOMIC DATA

8:30 AM Initial Claims

10:00 AM Leading Indicators

10:00 AM Philadelphia Fed

YESTERDAY’S MARKET

Markets fluctuated during the Globex session giving way to an almost unchanged opening. The SP started the day at 906.75 and after testing 908.25, it pulled back to 907.00, rallied to 909.25 and pushed down to test the 904.00 area. After a feeble bounce, the SP made a new low at 902.50. The markets held and the index bounced back to 907.50 but with extreme overall weakness it could not gain the necessary momentum to push higher and it retreated to the lows. The SP made a new low at 900.25 bounced to 902.00 and pushed lower to 899.25. The SP held at our support area and pushed up to 904.50, pulled back to 902.00 and continued higher to 907.00 from where it sat back to 903.75 but managed to come back and pushed higher to 911.50. The index pulled back to the previous high at 907.00 and continued to press higher reaching 914.00. Unable to continue higher, the index pulled back, traded in a narrow range below the highs and later pushed down to 905.00, bounced to 909.00 and pulled back into the close. For the day the SP lost 2.75 points and settled at 905.00, the Nasdaq added 8.25 points finishing the day at 1452.50 and the Russell closed modestly higher at 503.10. The Dow lost 7 points closing at 8497.

MARKET COMMENTARY AND OUTLOOK

Yesterday I wrote: “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 are 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.”

As expected, the early weakness found support around the 900.00 area giving way to a good rebound that reached the levels mentioned on yesterday’s newsletter.

The SP pulled back strongly founding support at the “obvious”, and with yesterdays moderately lower close, after a session where prices fluctuated, it completed the parameters for a first degree countertrend move, three sessions. So we have a few possibilities for today before next Friday option expiration, the first one is that the markets show another balancing session with narrow trading ranges that could get expanded slightly above yesterday’s high and reach, maybe, the 918.00 area, or make a marginal new low just to bounce and close on the 905.50-910.00 band.

The second one is that yesterday’s bounce was only a one day recovery attempt and the downtrend will get resumed pressing below the 900.00 area, and the third one, is that guided by the Nasdaq and the Russell which showed good buying at yesterday’s lows, the SP start to reverse this week losses and post a strong session where the upside objective will be the 924.00-925.00 levels.

Obviously, I can not predict what will happen, that analysis is for the astrology experts, so my work may be a bit easier, try to figure which of the previous scenarios has the higher probabilities to happen, we know, we could see balancing, rally and sell off in one session, but we will try to give a chance to the fact that the third negative session was mixed and bullish divergences were seen between the different markets.

So, if the lows, whatever they are, get posted during the first hour of the session, I will be a buyer once the markets turn positive, only a double bottom at yesterday’s lows could signal a rally while markets are trading in the red, but if the markets rallied first and the bounce lost its momentum just below yesterday’s highs look for a double top and increased weakness once the markets turn negative.

TODAY’S SESSION

There is resistance at 908.00-909.00 on the SP, 1455.00-1456.50 on the Nasdaq and 505.60-506.80 on the Russell, if the early action or the turnaround from lower prices is solid, those should get easily exceeded pushing the markets to test yesterday’s highs at 912.00-913.50 on the SP, 1459.00-1461.00 on the Nasdaq and 508.70-510.40 on the Russell. If those can not hold, posting double tops with yesterday’s highs, then look for the move to continue pushing the indexes up to 917.50-918.50 on the SP, 1469.00-1471.50 on the NQ and 513.40-514.20 on the Russell. Trading above them could invite new buying in all the markets.

There is support at 903.50-902.25 on the SP, 1447.00-1445.00 on the Nasdaq and 501.20-499.30 on the Russell, if those can not hold look for a test of yesterday’s lows at 900.50-899.75 on the SP, 1441.00-1439.50 on the Nasdaq and 497.20-495.50 on the Russell. If those hold and the session ends on the green, markets may have completed the pullback, but if new lows get posted on the charts, new sellers may join the move pushing the indexes down to 896.75-894.50 on the SP, 1433.00-1432.00 on the NQ and 492.40-490.90 on the Russell. GOOD LUCK

TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS

S&P

NASDAQ

RUSSELL

Resistance 4

921.00-923.00

1476.00-1478.00

517.50-518.60

Resistance 3

917.50-918.50

1469.00-1471.50

513.40-514.20

Resistance 2

912.00-913.50

1459.00-1461.00

508.70-510.40

Resistance 1

908.00-909.00

1455.00-1456.50

505.60-506.80

PIVOT

906.25

1453.25

503.10

Support 1

903.50-902.25

1447.00-1445.00

501.20-499.30

Support 2

900.50-899.75

1441.00-1439.50

497.20-495.50

Support 3

896.75-894.50

1433.00-1432.00

492.40-490.90

Support 4

891.00-889.50

1426.00-1424.00

485.90-484.10