DAILY TRADING ADVISORY 1st-June-2009
GDP minus 5.7% for the first quarter, Chicago PMI at 34.9, contracted at a faster pace than forecast this month as orders and employment dropped, Michigan sentiment rose in May but still remains at relatively low levels. Markets rallied during the last hour of the session closing positive for the week.
WEEKLY PIVOTS FOR WEEK ENDING 05-June-2009
R3 958.50
R2 948.00
R1 938.25
PP 907.50
S1 908.50
S2 897.00
S3 885.50
ECONOMIC DATA
8:30 AM Personal Income
8:30 AM Personal Spending
10:00 AM Construction Spending
10:00 AM ISM Index
10:00 AM Pending Home Sales
WEEKLY RECAP
The holiday week was positive for the U.S. markets. Monday, markets were closed in observance of the Memorial Day holiday; Tuesday started with political problems, North Korea a short range missile test ignoring world position. On the economic news, the slump in the housing sector continued, the S&P CaseShiller Home Price index showed a 19.1% decline, and despite concerns about GM, Consumer Confidence data get released showing its highs level since last September giving way to a broad based rally, for the day, the SP added 23.75 points and settled at 908.75, the Nasdaq gained 50.50 points finishing at 1411.25 and the Russell closed up by 22.10 points at 498.10. The Dow added 196 points closing the session at 8473. Easy comes, easy goes, that’s Wednesday’s story. Following the same pattern of trading that we have seen during all the month, after a good rally markets posted a good decline reversing the previous session earnings. GM bondholders rejected an offer to swap bonds for equity, Existing Home Sales rose for the second time in three months to an annual rate of 4.68 millions, and bonds fell on inflation concerns giving way to a failure of an early bounce and the previous session rally. The SP lost 16.75 points and closed at 892.00, the Nasdaq ended lower by 8.25 points at 1402.00 and the Russell gave back 8.00 points and settled at 490.20.The Dow lost 173 points closing at 8300. With the markets showing lack of direction and the SP trading during all the month in a 50 point range, Thursday’s session was a positive one. On the economic news Initial Claims came out lower than expected at 613K, Continuing Claims at its highest level since 1967 and Durable Good Orders was up by 1.9%, New Home Sales also showed some improve, up .3% but less than expected. Markets were under pressure and fluctuated but once the bond auction results were released easing fears that the appetite for U.S. debt would dry up and force the government to pay higher interest rates to attract buyers, markets rallied. The SP added 12.50 points and settled at 905.00, the Nasdaq ended higher by 14.25 points at 1418.25 and the Russell lagged but managed to close in the green at 489.90. The Dow closed higher by 103 points at 8403. Great expectation for Friday’s session as traders waited for the last economic reports of the week, the nightly session was positive and during the night the Nasdaq tested its most recent higher levels, markets opened showing some profit taking but managed to hold during the pre opening and first hour of the session as the data was released, GDP showed a 5.7% decrease for the first quarter, Chicago PMI at 34.9, contracted at a faster pace than forecasted as orders and employment dropped, Michigan sentiment rose in May but still remained at relatively low levels. Markets fluctuated for most of the session but during the last hour soared closing with solid gains, the SP added 13.00 points and settled at 918.00, the Nasdaq added 17.25 points closing the session at 1435.50 and the Russell closed at 501.30, up 11.30 points for the day. The Dow closed the week at 8500. For the week the major indexes gained between 3 and 5%.
FRIDAY’S MARKET
With the world markets trading in positive territory, the E-mini SP started the session at 909.50 and pushed down to 906.00. The SP bounced quickly to 912.25 just to get reversed faster to a new low at 902.75 from where the index bounced to 906.75, pulled back a little bit and reached 908.00.another mild pullback and another test of the 908.00 level, once that level get broke the SP reached 911.25, below the 912.00 early double top. The failure to break higher gave way to a stronger pullback, the SP pulled back to 905.00 bounced to 909.00 and pushed lower tom 904.00, and a feeble bounce resulted in a setback to 903.75 from where the SP bounced but failed once more posting a new marginal low at 903.25. With good support at the lows, the index bounced back to 908.25, then 910.00 and continued to trade in a sideways pattern. Late in the session, markets soared pushing the indexes strongly up on good volume, the SP reached 927.75, but pulled back to 918.00 closing with solid gains for the day. For the session the SP added 13.00 points and settled at 918.00, the Nasdaq added 17.25 points closing the session at 1435.50 and the Russell closed at 501.30, up 11.30 points for the day. The Dow closed the week at 8500 with a 96 points gain during Friday’s session.
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MARKET COMMENTARY AND OUTLOOK
Last Friday I wrote: “The SP has traded in a 50 points range during all the month and during this week higher lows and lower highs have been posted on the daily chart. The sideways pattern that has been formed and that may be printing a triangle formation will have to get resolved during the next 10 sessions, unless there is a clear breakout before that time window. The volatility seen at the highs may be signaling that a sizeable correction is on the cards, and that correction may be able to push the SP lower to the 830.00 level, but this is only a possibility as right now there is not clear evidence that this will happen. On the other side of the coin, the Nasdaq, which has been the leading force of the rally from the March lows is trading near the most recent highs, and if that index starts to press higher, the other markets may follow it. A move like this one, could give way to a new high on the SP and another test of the 8600 area on the Dow. Remember that all the indexes are facing strong resistance levels, SP at 911.00 and 918.00, the NQ at 1430.00-1435.00, the Russell just above 502.00 and 510.00 and the Dow 8500 and 8600, so take into consideration that many stops may be building above those levels. For today’s trading session, if the SP holds the 900.00 area, a new weekly high may get posted and possibly, a new high for the SP, so I will try to be a buyer down there once the selling dries, or I will get long above 902.50 on a reversal from lower prices after the first 90 minutes of the session.”
We started the holiday week looking for support at the 875.00 area on the SP and the market was able to hold that level which has proved to be a key support area. During the past weeks I have been pointing that the sideways pattern seen during all May after the rally from the March lows was due to continue without breaking lower reaching at least 90 days from the lows completing in this way a normal cycle. All the times that the SP approached or traded around the 875.00 area the market held and rally, and all the times that a new high was posted or the markets showed a lower high and a strong daily rally, sellers came in and the move failed, more than buying the rallies were fueled by shorts running to cover. I also pointed that the end of month normally carries a bullish bias, some windows dressing that normally result in higher prices.
Last Friday late spike and the settlement around the “strong resistance levels, SP at 911.00 and 918.00, the NQ at 1430.00-1435.00, the Russell just above 502.00 and 510.00 and the Dow 8500 and 8600”, indicates that the markets may be able to push higher to new highs before they get reversed and correct or even continue to show another upside leg. However the markets did not hold all of their gains and the move needs more evidence.
Markets had many opportunities to break lower, the SP below 875.00, the NQ below 1350.00 and the Dow below the 8500 and showed strong support at those areas, and in the same way that the downtrend, the bear market that started last year was an abnormal move, in the same way this rally could surprise everybody, its clear that the yearly lows and probably the lows for the next couple of years have been posted.
Despite that the volumes were not great during the last months, buying interest is present on any new high creating a phenomenon where traders fear to miss the move, and so no matter if markets will correct 10% from whatever the high is, the trend may be up.
This week is full of corporate and economic reports, GM bankruptcy and the monthly job market reports will rule the markets, there is not too much weight of the GM shares on the Dow, practically if the go to zero nothing happens, but once the issue is out of investors mind, its psychological impact will be over; the monthly job report may surprise and come out not as worst as expected and give way to new highs or to the high of this rally during next Friday trading session.
For today, some wild moves could be seen during the night as investors react in different ways to the expected GM bankruptcy, but markets look solid and may be focused on the economic reports, obviously many shorts remain trapped from last Friday spike, and that may give support to the markets. Many of the past Monday’s markets have sold off and if that happens during the night or during the first 90 minutes of the session, I presume that we could see a strong comeback. My key number in the SP will be the 910.00 area, I will try to be a buyer if the SP trades below it and it get reversed above it, a higher opening, which I am not so sure it will happen probably will find strong resistance at the Friday’s highs, so be careful if you get long at higher levels.
TODAY’S SESSION
There is resistance just above last Friday settlements at 920.50-922.50 on the SP, 1438.50-1441.00 on the Nasdaq and 502.70-504.10 on the Russell. Trading above them will probably push the markets up to their most recent highs, but first they will found strong resistance at 925.00-927.00 on the SP, 1446.00-1448.50 on the Nasdaq and 506.80-507.80. Good selling was seen there last Friday, so if the rally stalls there look to get short with tight stops, breaking above those areas will push the indexes higher to 929.75-932.00 on the SP, 1453.00-1455.00 on the NQ and 509.60-510.90 on the Russell.
There is some support at 915.50-914.00 on the SP, 1432.00-1430.00 on the Nasdaq and 498.40-497.10 on the Nasdaq. With volatility probably high as the news get released, those may not act as expected, but the key numbers at 911.00-910.00 on the SP, 1425.50-1423.50 on the Nasdaq and 495.10-493.50 may be closely watched; holding there is very bullish, if those do not hold, then a test of 908.00-906.50 on the SP, 1418.00-1416.75 on the Nasdaq and 491.20-490.50 on the Russell may be seen, those areas are above last Friday’s lows, posting a higher lows there maintain the markets in a very strong position. GOOD LUCK.
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TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS |
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|
S&P |
NASDAQ |
RUSSELL |
|
|
Resistance 4 |
936.00-938.50 |
1461.50-1463.00 |
513.20-514.50 |
|
Resistance 3 |
929.75-932.00 |
1453.00-1455.00 |
509.60-510.90 |
|
Resistance 2 |
925.00-927.00 |
1446.00-1448.50 |
506.80-507.80 |
|
Resistance 1 |
920.50-922.50 |
1438.50-1441.00 |
502.70-504.10 |
|
PIVOT |
916.00 |
1429.75 |
498.00 |
|
Support 1 |
915.50-914.00 |
1432.00-1430.00 |
498.40-497.10 |
|
Support 2 |
911.00-910.00 |
1425.50-1423.50 |
495.10-493.50 |
|
Support 3 |
908.00-906.50 |
1418.00-1416.75 |
491.20-490.50 |
|
Support 4 |
904.25-903.00 |
1408.00-1406.50 |
485.80-484.40 |
|
S&P |
NASDAQ |
RUSSELL |
|
FIBONACCI |
FIBONACCI |
FIBONACCI |
|
1036.13 |
1577.69 |
568.1 |
|
994.51 |
1525.87 |
543.4 |
|
969.01 |
1494.12 |
528.3 |
|
953.25 |
1474.50 |
519.0 |
|
943.51 |
1462.37 |
513.2 |
|
927.75 |
1442.75 |
503.9 |
|
918.01 |
1430.62 |
498.1 |
|
915.00 |
1426.88 |
496.4 |
|
911.99 |
1423.13 |
494.6 |
|
902.25 |
1411.00 |
488.8 |
|
886.49 |
1391.38 |
479.5 |
|
876.75 |
1379.25 |
473.7 |
|
860.99 |
1359.63 |
464.4 |
|
835.49 |
1327.88 |
449.3 |
|
793.88 |
1276.06 |
424.6 |
|
DAILY PROJECTIONS |
S&P |
NASDAQ |
RUSSELL |
|
AS DAILY HIGH |
935.00 |
1455.00 |
510.20 |
|
AS DAILY LOW |
910.50 |
1423.25 |
495.10 |
Support, Pivot and Resistance levels courtesy of Arturo Stern. He authors the E-mini Daily trading advisory which gives technical analysis on all the major stock index futures contract. For more of his analysis go to www.theminitrade.com Arturo can be reached at arthur@theminitrade.com
Futures and options trading involve risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. This is neither a solicitation nor an offer to buy or sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this document. The past performance of any trading system or methodology is not necessarily indicative of futures results.
