DAILY TRADING ADVISORY 20-August-2009
World markets opened under pressure but managed to turn up on higher Crude oil prices.
ECONOMIC DATA
8:30 AM Initial Claims
10:00 AM Leading Indicators
10:00 AM Philadelphia Fed
YESTERDAY’S MARKET
Markets opened under pressure, the E-mini SP started the session at 978.75 and after posting a bottom at 978.00 it rallied to the 983.00 level. A feeble pullback was bought and the index reached 985.50 and then 988.00 where the short covering rally lost its steam. The SP pulled back to 984.00 but rallied back to 988.75, just below my 989.50 shorting areas. The SP continued to fluctuate forming a triangle pattern that once it get resolved to the upside pushed the SP up to 997.50. Then the index traded in a narrow range pattern that managed to post a new high at 998.75 from where it pulled back a bit forming a round top giving way to a pullback to 991.75. Unable to break lower, markets bounced closing near the daily highs. For the session, the SP added 7.50 points and settled at 997.00, the Nasdaq closed higher by 11.75 points at 1598.75 and the Russell closed at 561.20, up 5.30 points for the day. The Dow closed at 9279, up 61 points.
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MARKET COMMENTARY AND OUTLOOK
Last Friday I wrote: “So we have a top on the SP at the 38.2 Fibonacci level between the all time highs and the March lows, we have the 1632.00 area on the Nasdaq which held during all the past 20 or more days. Then yesterday’s sell off in which the SP broke the recent sideways pattern once it traded below the 992.00 area closing near the daily lows which resulted in a temporal exhaustion of the sell off, and then yesterday, an expected rebound that failed short of that previous support and now resistance area but that closed near the daily highs. So the logical trend pattern is to see the SP failing from the 992.00 area and pushing to a new low during the next coming sessions, maybe around the 963.00-961.00 area, if the trend is down and the markets are due for a continuing correction, a negative session may be seen today, but the typical activity that takes place during the last two weeks of August until Labor Day, and the August option expiration may give way to another narrow range consolidating session. Anyway I have to favor the short side of the markets all the time that the SP does not trade back above the 992.00-993.00 area, the same is true for the Nasdaq at 1594.00-1596.00. On a lower opening I will look for the first rally to get short.”
Ups and downs, the market has been trading in a daily erratic pattern in which the rallies get exhaust by closing at the highs and the sharp sell offs get reversed after closing at the daily lows, it seems that this can continue until Labor Day.
This lack of direction in which the markets are trading after they get reversed from their most recent highs may give an indication of a short term sideways pattern in which the indexes may consolidate before the next important move, lack of activity during the last two weeks of August, next Friday August option expiration and uncertainty about stocks valuation balanced by sidelines money ready to jump in on every pullback make difficult to call the next move.
However, the classic bullishness that comes on most of every option expiration cycle, the rebound after the SP posted a bottom just above the 975.00 area and yesterday’s close above the short term KEY 993.00-992.00 levels may indicate higher prices for the rest of the week, will the indexes trade in an ordered pattern? Let’s see.
For the markets to resume what it appeared to be an urgent correction, the SP will have to break solidly below the 992.00 area, but a close ABOVE MONDAY’S HIGH (998.50) is necessary to resume the uptrend, so those two levels have to be closely watched.
There are a few important reports to get released before and after the opening, so expect more volatility than yesterday. I will try to stay long above the 998.50, but I will go short once the 992.00 area gets violated in particular if the Nasdaq is under performing the SP.
TODAY’S SESSION
There is resistance at 999.00-1001.00 on the SP, 1602.00-1604.00 on the Nasdaq and 562.50-563.90 on the Russell, reaching those early in the session and placing a top up there could give way to a pullback to 993.00 on the SP, but if the trend is up in front of next Friday’s august option expiration, markets may push higher to their next levels at 1003.00-1004.75 on the SP, 1608.50-1611.00 on the Nasdaq and 565.20-566.20 on the Russell. If those can not hold the trend, look for the rally to continue for a test of the 1008.00-1009.00 areas on the SP, and 1617.50-1618.50 and 569.30-571.30 for the Nasdaq and Russell respectively.
There is early support at 995.00-993.00 on the SP, 1594.00-1592.00 on the Nasdaq and 558.50-557.20 on the Russell. Nothing bad happens if the markets open higher and hold the first pullback above those levels that will be a bullish indicator, failing below them will push the markets down to 991.00-989.25 on the SP, 1588.00-1586.50 on the Nasdaq and 554.10-553.10 on the Russell. If those can not hold, expect the markets to continue lower posting a session with a bearish bias as they test 985.00-983.50 on the SP, 1581.50-1579.00 on the Nasdaq and 551.50-549.60 on the Russell. A close below those levels could give way to the resume of the downtrend. GOOD LUCK.
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TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS |
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|
S&P |
NASDAQ |
RUSSELL |
|
Resistance 4 |
1012.75-1014.00 |
1624.00-1625.00 |
577.50-578.00 |
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Resistance 3 |
1008.00-1009.00 |
1617.50-1618.50 |
569.30-571.30 |
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Resistance 2 |
1003.00-1004.75 |
1608.50-1611.00 |
565.20-566.20 |
|
Resistance 1 |
999.00-1001.00 |
1602.00-1604.00 |
562.50-563.90 |
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PIVOT |
990.75 |
1588.00 |
556.60 |
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Support 1 |
995.00-993.00 |
1594.00-1592.00 |
558.50-557.20 |
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Support 2 |
991.00-989.25 |
1588.00-1586.50 |
554.10-553.10 |
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Support 3 |
985.00-983.50 |
1581.50-1579.00 |
551.50-549.60 |
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Support 4 |
978.00-976.50 |
1575.00-1574.00 |
547.20-546.10 |
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S&P |
NASDAQ |
RUSSELL |
|
FIBONACCI |
FIBONACCI |
FIBONACCI |
|
1092.25 |
1753.50 |
624.1 |
|
1056.35 |
1694.75 |
600.1 |
|
1034.35 |
1658.75 |
585.4 |
|
1020.75 |
1636.50 |
576.3 |
|
1012.35 |
1622.75 |
570.7 |
|
998.75 |
1600.50 |
561.6 |
|
990.35 |
1586.75 |
556.0 |
|
987.75 |
1582.50 |
554.3 |
|
985.15 |
1578.25 |
552.5 |
|
976.75 |
1564.50 |
546.9 |
|
963.15 |
1542.25 |
537.8 |
|
954.75 |
1528.50 |
532.2 |
|
941.15 |
1506.25 |
523.1 |
|
919.15 |
1470.25 |
508.4 |
|
883.25 |
1411.50 |
484.4 |
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DAILY PROJECTIONS |
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S&P |
NASDAQ |
RUSSELL |
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AS DAILY HIGH |
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1008.75 |
1617.00 |
568.80 |
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AS DAILY LOW |
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986.50 |
1581.50 |
554.10 |
