DAILY TRADING ADVISORY 1st-July-2009

World confidence improving, Home prices continue to drop, but less than expected, as foreclosures rise. Chicago PMI increases to 39.9 during June and Consumer Confidence declines as job outlook looks gloomy

ECONOMIC DATA

8:15 AM ADP Employment

10:00 AM Construction Spending

10:00 AM ISM Index

10:00 AM Pending Home Sales

10:35 AM Crude Inventories

2:00 PM Auto Sales

2:00 PM Truck Sales

YESTERDAY’S MARKET

After trading quietly during the Globex session, the E-mini SP started the session at 922.75 and after testing 922.00 it bounced to 925.00, after holding near that level and once the economic data started to get released, the SP made a new high at 926.25 but backed off to 923.00. The SP rallied back to 925.50 and with the Consumer Confidence data out it sold off to 918.00 an after a failed attempt to break back above the 920.,00 area, the index pushed strongly down to 910.75. The SP bounced back to 913.75, pulled back to test the daily lows and failed giving way to anew low at 908.25. The SP bounced back to 911.50 while sitting for a long time near the lows, another pullback failed to break to a new low and the index held pushing up to 912.75. While the Nasdaq kept lagging, the other indexes showed more support, and with extremely low volumes, the SP bounced to 913.75. After a few attempts to break higher it pulled back to the lows but rebounded during the last part of the session, for the day, the SP lost 5.75 p;oints and settled at 915.50, the Nasdaq lost 5.25 points ending the session at 1476.25 and the Russell ended lower by less than a point at 507.20. The Dow lost 82 points finishing the day at 8447.

MARKET COMMENTARY AND OUTLOOK

Last Friday I wrote: “Markets made their daily lows during the night and the earlier pullback gave way to a solid move that reached my 924.00 area. That is the June 19 high from where the SP, after a narrow range session, saw a sharp sell off that pushed that index below the 890.00 area. If yesterday I mentioned on my newsletter that the SP MUST close above the 924.00 area for that market to give another try to the highs, yesterday’s action just confirms the importance of that level. Take into account that once the end of quarter is gone, a profit taking move that pushed the SP below the 890.00 area may be seen, to negate this scenario, the 924.00-926.00 area may get solidly exceeded and hold for two consecutive closes, or the rally from last week lows may be only a countertrend move in a market that may see lower prices. Another important factor is the VIX, which fell to its lowest levels in the year; it seems that traders are very confident with the market condition, the March to July rally and the economic data. This is a red flag, too much complacency, but that does not mean that the markets can not move higher. For today’s trading session, once the economic numbers get released, go long once the NQ trades in positive territory, but beware of any bullishness if both, the SP and Nasdaq area trading in negative territory as markets could surprise those who overweight the lower VIX thinking that the way is only to the upside.”

Yesterday’s early marginal new highs, just above the 924.00-926.00, obvious resistance areas, from where the markets made a U turn, has probably placed a temporary top after four days where the indexes bounced from their most recent lows. Those levels and the 918.50 and 908.50 areas will continue to play an important role during the next sessions and weeks.

The end of quarter is over and despite the sell off from the early highs, the 908.50 level was well defended and the markets bounced lately in the session, so if they will continue to try and push lower resuming the downtrend, another down session may be seen today; in that case we could call a short term top. There is not confirmation yet that this is the case, and the rest of the week could show more sideways action between the 908.50 and 925.00 areas.

So until the SP trades back above the 925.00 level we can assume that in the best case the markets will continue to build a base and rally later in the summer and in the worst case, once the SP closes below 908.50, a new low below the 890.00 area with possible support around 878.00 may be seen, .

There are a bunch of economic reports to get released during the sessions, and volumes are very light in front of the holiday, so be careful as the markets may show some erratic moves.

For today’s trading session, if yesterday’s sell off was only a one day event, markets MUST rally today, but a second negative session will probably see more downside follow through during the rest of the week. Try to maintain a long position above 918.50 but be careful if the SP starts to trade below it

TODAY’S SESSION

There is resistance at 917.00-918.00 on the SP, 1481.00-1483.00 on the Nasdaq and 508.80-509.60 on the Russell, Nothing good happens all the time that the markets are trading below them, if those get exceeded look for some short covering that may push the markets back up to 920.50-921.25 on the SP, 1490.00-1491.00 on the Nasdaq and 511.90-512.50 on the Russell. Those were the last highs before yesterday’s sell off, so they have to get exceeded with good momentum in order to give another try to 925.00-926.00 on the SP, 1501.00-1503.00 on the Nasdaq and 514.60-516.50 on the Russell

Initial support at 913.00-912.00 on the SP, 1473.00-1471.00 on the Nasdaq and 506.00-504.80 on the Russell. Those areas on the Nasdaq are very important, so if that markets holds there and lead a good rebound, the way will be up, but if those fail, look for some weakness pushing the indexes down to 910.00-908.00 on the SP, 1466.00-1464.00 on the Nasdaq and 502.40-501.20 on the Russell. I don’t have to explain the importance of the 908.00 level on the SP, it is the key to maintain that index in a solid position, so trading below it will probably give control to the bears and push the markets down to 905.00-902.50 on the SP, 1460.50-1358.00 on the Nasdaq and 499.10-497.80 on the Russell. GOOD LUCK.

TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS

S&P

NASDAQ

RUSSELL

Resistance 4

932.00-934.00

1514.00-1516.00

520.60-522.20

Resistance 3

925.00-926.00

1501.00-1503.00

514.60-516.50

Resistance 2

920.50-921.25

1490.00-1491.00

511.90-512.50

Resistance 1

917.00-918.00

1481.00-1483.00

508.80-509.60

PIVOT

916.50

1478.00

507.80

Support 1

913.00-912.00

1473.00-1471.00

506.00-504.80

Support 2

910.00-908.00

1466.00-1464.00

502.40-501.20

Support 3

905.00-902.50

1460.50-1458.00

499.10-497.80

Support 4

898.50-897.00

1452.00-1451.00

492.00-490.40