DAILY TRADING ADVISORY 24-July-2009
ATT, 3M and Ford better than expected results, Initial Claims up to 554K, Continuing Claims lower and Existing Home sales up 3.6%, better than expected gave way to a strong rally. After hours, markets lower on Microsoft weak outlook and Amazon 10% drop in profits.
ECONOMIC DATA
9:55 AM Michigan Sentiment- rev.
YESTERDAY’S MARKET
After trading higher during the Globex session in witch the E-mini SP reached 956.50, the index started the day at 951.50 and pushed up to 954.50. After hesitating a bit to push higher, the SP moved up to 956.00 and just before the economic data get released it broke above resistance and rallied to 960.25. As shorts ran in to the exit, the markets continued to push up strongly, the E-mini SP reached 965.50 and then 968.75. After pulling back to 966.00 the SP rallied to 970.75. With no sellers coming into the markets and shorts getting squeezed, the markets continued to push higher with the SP reaching 973.50. The rally stalled and the markets traded in a narrow sideways pattern. It took a while but the SP pushed higher to 976.25. The SP pulled back to 972.25, held and continued to trade in a sideways pattern near the daily highs. After testing the daily highs, markets pulled back into the end of the day. For the session, the SP added 19.50 points and settled at 969.00, the Nasdaq closed higher by 27.50 pioints at 1584.00 and the Russell closed at 541.60, up 16.90 for the day. The Dow closed with a solid 188 points advance at 9069.
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MARKET COMMENTARY AND OUTLOOK
Yesterday I wrote: “The strength of the rally, the fact that it has not showed more than a first degree pullback and the way the markets have been able to recover every sell off attempt, make me think that this rally have more to go. However, the SP has tested the June highs and a short term top may have been posted. By short term I mean, that every pullback that does not exceed more than three trading sessions may be considered a buying opportunity as the SP may be able to trade above the 963.00 areas and reach, in the mid term, levels above the 1000.00.This is not an excess of bullishness, is the chart which is indicating higher prices that obviously won’t get reached in a few days, the index, even with the higher lows and higher highs on the daily chart has been struggling during the last few days to move strongly higher, so there is the possibility of a wide range downside session. But, lets not predict what the index will do, meanwhile the trend is up and the pullbacks are not more than consolidations of the huge move that keep showing rotation and accumulation for a further advance. For today’s trading session, selling the bounces all the time that the SP does not exceed the 957.00 area may result, but there is not evidence of trending down, so the first decent pullback, particularly, if it holds the 943.00-942.00 area may turn to be another buying opportunity.”
After a few sessions where the market posted higher lows and highs and struggle to make a strong breakout, the markets finally posted another strong upside move, the SP broke the resistance areas and the Dow traded solidly above the 8900 level. What’s next? When does this rally will show some correction? It can happen at any moment, but a pullback that does not exceed more than three trading sessions may be considered a buying opportunity, it seems that the markets will continue to push up and that the rally may last for another 30 to 40 days, not a vertical move, but strong sessions, limited pullbacks and consolidating sessions that get resolved to the upside, that is what I think is the most probable scenario.
So the SP rallied during eight consecutive sessions, then it posted a negative session with limited losses, and then it broke strongly above the obvious 956.50 resistance area, all this came after the index sold off for seven sessions but reversed and broke above the previous high, the high from where the sell off started, only in three trading sessions. All this indicate that the markets may continue to post new highs, the sideways pattern that started in early May and tested the breakout point forming a bottom between July 8th and July 13 has been resolved to the upside, and any coming pullback may be able to hold the 956.00-950.00 areas and get limited to no more than three days, until that pattern of trend gets broken, the rally will continue and probably will exceed the 1000.00 level.
For today’s trading session, it is not normal to see two consecutive trend sessions, so if yesterday’s move will get consolidated, today may be a narrow range session with opportunities on both sides, but with this strength, a wide opening gap may be seen and exhaust temporarily the move, if that happens, selling against the early highs may be a good idea.
As I write my report markets are trading a bit lower, I don’t think we’ll see a strong reversal from yesterday’s rally but some back and forth action may be seen.
TODAY’S SESSION
There is good resistance at 971.00-973.00 on the SP, 1589.00-1591.50 on the Nasdaq and 543.60-545.10 on the Russell, an early bounce that fail there may give way to some profit taking, if those areas get exceeded, look for a test of yesterday’s highs at 976.50-978.00 on the SP, 1597.00-1599.00 on the Nasdaq and 547.70-548.90 on the Russell. I assume that if the markets get there, they will be able to press higher and reach 981.00-982.00 on the SP, 1608.00-1610.00 on the Nasdaq and 552.60-553.10 on the Russell.
There is support at 966.00-964.00 on the SP, 1578.00-1575.50 on the on the Nasdaq and 539.60-537.80 on the Russell. Trading below them will give way to some decent pullback that may push the indexes down to 961.00-959.50 on the SP, 1570.50-1569.50 on the NQ and 534.40-533.10 on the Russell. If those do not hold, many buyers may be ready to jump in at 956.00-955.00 on the SP, 1558.00-1557.00 on the Nasdaq and 529.50-528.50 on the Russell. GOOD LUCK
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TODAY’S SUPPORT, PIVOT AND RESISTANCE LEVELS |
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|
S&P |
NASDAQ |
RUSSELL |
|
|
Resistance 4 |
984.00-986.50 |
1618.25-1620.00 |
555.30-556.90 |
|
Resistance 3 |
981.00-982.00 |
1608.00-1610.00 |
552.60-553.10 |
|
Resistance 2 |
976.50-978.00 |
1597.00-1599.00 |
547.70-548.90 |
|
Resistance 1 |
971.00-973.00 |
1589.00-1591.50 |
543.60-545.10 |
|
PIVOT |
964.75 |
1580.75 |
537.60 |
|
Support 1 |
966.00-964.00 |
1578.00-1575.50 |
539.60-537.80 |
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Support 2 |
961.00-959.50 |
1570.50-1569.50 |
534.40-533.10 |
|
Support 3 |
956.00-955.00 |
1558.00-1557.00 |
529.50-528.50 |
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Support 4 |
953.00-952.50 |
1552.00-1550.50 |
523.60-522.50 |
|
S&P |
NASDAQ |
RUSSELL |
|
FIBONACCI |
FIBONACCI |
FIBONACCI |
|
1094.44 |
1810.94 |
641.1 |
|
1049.15 |
1731.38 |
604.8 |
|
1021.40 |
1682.63 |
582.6 |
|
1004.25 |
1652.50 |
568.9 |
|
993.65 |
1633.88 |
560.4 |
|
976.50 |
1603.75 |
546.7 |
|
965.90 |
1585.13 |
538.2 |
|
962.63 |
1579.38 |
535.6 |
|
959.35 |
1573.62 |
533.0 |
|
948.75 |
1555.00 |
524.5 |
|
931.60 |
1524.87 |
510.8 |
|
921.00 |
1506.25 |
502.3 |
|
903.85 |
1476.12 |
488.6 |
|
876.10 |
1427.37 |
466.4 |
|
830.81 |
1347.81 |
430.2 |
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DAILY PROJECTIONS |
S&P |
NASDAQ |
RUSSELL |
|
AS DAILY HIGH |
986.50 |
1618.25 |
555.30 |
|
AS DAILY LOW |
958.75 |
1569.50 |
533.10 |
