DAILY TRADING ADVISORY 22-July-2009

Bernanke said FED policy remains focused in economic recovery. CIT: bankruptcy stills a possibility.

ECONOMIC DATA

10:35 AM Crude Inventories

YESTERDAY’S MARKET

After reaching 956.25 during the Globex session, the E-mini SP started the day at 953.00 and pushed lower to 948.00 from where a rebound to 952.00 turned to be a selling opportunity. As traders took some profits in front of Bernanke’s testimony, the SP pressed lower to 945.00, a good bounce from that area reached 951.75 where sellers stepped back in and slowly pushed the markets down. The SP tested the 941.50 level, bounced to 944.00 and pushed lower to 939.50. With not too much momentum the index started a slow recovery move, reached 945.25, pulled a couple of points and continued higher reaching 948.00, after a few attempts to continued higher, the index pushed up to 950.00 and then to 953.50 into the close. For the day, the SP added 4.50 points and settled at 953.50, the Nasdaq closed higher by 14.25 points at 1554.75 and the Russell finished almost unchanged at 524.70. The Dow added 67 points finishing the session at 8915.

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MARKET COMMENTARY AND OUTLOOK

Last Monday I wrote: “The markets advanced during all the week and the SP is testing the June highs; despite that the move could be almost exhausted, it seems that the rally may continue, I mentioned during the week that we could see a test of the 960.00 area on the SP and 9000 on the Dow, I also have to pint that the NQ has the potential to reach the 1575.00 area. So, from where a correction will start? It could start on a failure to break above the 943.00 area on the SP, after a false break, when it reach the 960.00-963.00 level or only later once the 1000.00 level gets tested, with this strength that took all the shorts by surprise, it seems that there is more room to move up. But there is a short term chance that the indexes may have done the entire move, and that a correction will start this week, maybe next Tuesday, after another probable consolidation during the Monday’s session. It will take too much selling to have a wide range downside session on Monday, and obviously, if the correction starts and does not last more than three trading sessions it will turn to be a buying opportunity. Remember that a second degree trend, last between 8-10 sessions, so if we have a consolidation during Monday’s session and Tuesday is not a down day, and then the move will continue and complete another positive week. The key for the SP to hold this strong position is the 924.00 support area, a successful test of that level will surely bring new money into the markets.”

Another close at the highs and another failed profit taking attempt; the strength of the rally has approached the levels that I mentioned on Monday’s newsletter and once more has the chance to show some pullback.

I have mentioned in many occasions that one of the ways in which a move exhaust is by closing on the daily highs, but the extension of the recent rally that finally exceeded the 943.00 area on the SP needs more than a negative session in order top close a short term high, a three days correction and a reversal to a new high will certainly indicated a test of the 1000.00 area on the SP.

It is obvious that a correction will happen, a test of the last lows around the 865.00 area may be in the cards during the next coming weeks, but fighting the current trend does not seems to be the best idea, and probably the index will have to break below the 900.00 area to see bulls getting nervous.

For today’s trading session, yesterday’s Globex high, 956.50 will have to get exceeded or we could see some consolidation, a sideways pattern and a relatively narrow range, so unless the SP make early lows around 945.00 and get reversed to the upside indicating an uptrend session, trade both sides of the market.

TODAY’S SESSION

There is resistance at 955.00-956.50 on the SP, 1556.50-1558.00 on the Nasdaq and 526.10-528.60 on the Russell, an early bounce that fail there may give way to a good profit taking move, but if those areas get exceeded, look for a test of 958.50-960.00 on the SP, 1562.00-1563.25 on the Nasdaq and531.10-532.40 on the Russell. If the markets continue to be strong, just the stops that get elected up there, may give way to a test of the next levels at 962.50-963.25 on the SP, 1567.50-1568.50 on the Nasdaq and 536.70-537.50 on the Russell.

Initial support is at 951.50-950.50 on the SP, 1551.00-1549.00 on the Nasdaq and 522.30-520.80 on the Russell. Trading below them will push the indexes down to 948.00-946.50 on the SP, 1546.50-1545.00 on the NQ and 517.20-516.00 on the Russell. If those hold during the first hour of the session, we could see a trend session, but if they fail look for the index to continue lower testing 944.00-943.25 on the SP, 1541.00-1539.00 on the Nasdaq and 511.60-509.80 on the Russell. Nothing bad happens if those hold, and the SP could bounce back to a neutral close, but trading lower could indicate some profit taking for the rest of the week. GOOD LUCK.

TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS

S&P

NASDAQ

RUSSELL

Resistance 4

966.50-968.00

1572.50-1575.00

543.80-544.60

Resistance 3

962.50-963.25

1567.50-1568.50

536.70-537.50

Resistance 2

958.50-960.00

1562.00-1563.25

531.10-532.40

Resistance 1

955.00-956.50

1556.50-1558.00

526.10-528.60

PIVOT

949.75

1545.75

523.60

Support 1

951.50-950.50

1551.00-1549.00

522.30-520.80

Support 2

948.00-946.50

1546.50-1545.00

517.20-516.00

Support 3

944.00-943.25

1541.00-1539.00

511.60-509.80

Support 4

938.50-936.00

1533.00-1532.00

505.30-503.60

S&P

NASDAQ

RUSSELL

FIBONACCI

FIBONACCI

FIBONACCI

1027.44

1668.69

589.0

1000.10

1625.03

566.3

983.35

1598.28

552.4

973.00

1581.75

543.8

966.60

1571.53

538.5

956.25

1555.00

529.9

949.85

1544.78

524.6

947.88

1541.63

523.0

945.90

1538.47

521.3

939.50

1528.25

516.0

929.15

1511.72

507.4

922.75

1501.50

502.1

912.40

1484.97

493.5

895.65

1458.22

479.6

868.31

1414.56

456.9

DAILY PROJECTIONS

S&P

NASDAQ

RUSSELL

AS DAILY HIGH

963.25

1567.00

534.30

AS DAILY LOW

946.50

1541.00

520.40

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